Analysis: The £30bn question: can our railways ever get back on track?

Strategic Rail Authority report reveals a cash crisis that calls into question the Government's entire 10-year transport programme

John Prescott's brave new world of railways, launched with characteristic bombast in the summer of 2000, has gone distinctly pear-shaped.

The Deputy Prime Minister's 10-year plan, for which he no longer bears responsibility, suffered its most serious setback to date yesterday. While Mr Prescott was concentrating his attentions on the fire service, his erstwhile rail projects were either hacked back, delayed or – to all intents and purposes – abandoned.

Richard Bowker, chairman of the Strategic Rail Authority (SRA), revealed that the flagship east coast main line between London and Edinburgh will no longer receive a £3bn refurbishment and will have to make do with less than £1bn. The Thameslink project aimed at upgrading north-south links through London has gone back to the drawing board so that it is unlikely to see the light of day until 2012 – a delay of four years. The Crossrail scheme to build east-west links cross the capital is still in limbo and even if the Transport Secretary gives the go-ahead, it will not be completed before 2012. Originally the scheme was earmarked for 1999.

Even the vitally important boost to the power supply in southern England to allowbetter, longer trains will not begin to happen until 2005, two years later than envisaged. This means that South West Trains and South Central in particular will not be able to operate bigger trains to relieve overcrowding.

Mr Bowker's vision of a high-speed rail link between London and the North to rival France's Train à Grande Vitesse (TGV), has survived the cull. But this huge project is more futurology than actualité. The date for completion is some time between 2015 and 2020, according to the SRA.

Most damning of all, the authority conceded for the first time that Mr Prescott's target of increasing the number of passengers by 50 per cent by 2011 was no longer realistic. While insisting that the target would not be abandoned, the SRA ventured that on current trends the increase would be nearer 25 to 35 per cent.

Mr Bowker dismissed this as of little significance to passengers, saying: "It might be of interest in an academic conversation down the pub, but it's not relevant to real people."

However, this is not just a mild adjustment to obscure industry projections. This presumably means that people will continue to clog up the motorways in ever-increasing numbers, rendering the promises made by Mr Prescott somewhat hollow.

When he launched the 10-year plan in July 2000 Mr Prescott promised "new ideas, new powers, new resources – a new approach for a new century. This plan will get Britain moving and give the people of this country a transport system they can rely on."

The rail system turned out to be a black hole into which billions of pounds have been poured to no noticeable effect other than the enrichment of private contractors who have bled the industry dry and conspicuously failed to deliver a safe and reliable service.

The Chancellor, Gordon Brown, was so worried about the venality and incompetence of the industry that during the last spending round its budget was slashed by £312m over two years, some £242m of which was removed from the subvention for 2003-2004.

Apart from the need for more government funding, Mr Bowker believes most of the schemes left in the 10-year plan would also require an element of private financing.

So far only one project – the £1.1bn extension of the East London line linking the Underground system to the national rail network – is any- where near to securing private-sector finance.

The Government's original 10-year £60bn rail plan envisaged that £27bn would come from private sources. But uncertainties over whe-ther the state will underwrite the private investment following the administration of Railtrack, has undermined confidence in the City.

Mr Bowker also warned that the rail industry faced the fight of its life to win extra government funding. After a 50 per cent budget increase in the last three years, taking total spending this year to £9bn, Mr Bowker said it was essential that costs came down. "We have to deliver a significant increase in output for a significant decrease in spend," he said.

Yesterday's statement by the SRA, "The Strategy Plan 2003", was not only a far cry from the overblown prognostications of Mr Prescott, it was substantially removed from the last year's predictions laid out by Mr Bowker. Perhaps he was unwise to attach his name to a document which was the legacy of his predecessor Sir Alastair Morton. Unlike Mr Bowker, who believes in "getting a grip" on things, Sir Alastair seemed to behave like an indulgent uncle towards the industry.

Arguably Mr Bowker is simply bringing the network back to down to earth. Stewart Francis, chairman of the Rail Passengers Council, said: "The plan is an honest, realistic and stark picture of the state of the railways."

The SRA's strategy plan showed that rising costs meant the rail industry's operating deficit had risen from £200m in 1999-2000 to £1.5bn in 2002-03. These costs had eroded the value of the £33bn of public money the Government had provided for rail over this decade and led to yesterday's reassessment.

The announcement made depressing reading for anyone who wanted to see the expansion of the network. The best the industry can hope for is that it was a public relations exercise to impress Mr Brown that the industry is capable of getting its house in order. Mr Bowker is preparing the way for a submission to the Chancellor next year. By then he hopes he will have strong evidence that the industry is living within its means and capable of using more government funding to good effect.