Devolution
The operation of the railway in Wales is a Welsh Government responsibility. However, infrastructure planning and the funding of Network Rail in Wales remains reserved to the UK Parliament. The situation is different in Scotland, where infrastructure planning is also devolved.
Network Rail is a public sector company. It owns, repairs and develops most of the railway infrastructure in Great Britain, and is primarily funded by the UK and Scottish Governments. The Secretary of State for Transport is accountable to Parliament for its activities and performance.
The Welsh Government has responsibility, through Transport for Wales (TfW), for the Core Valley lines infrastructure (also referred to as the South Wales Metro), since this was transferred from Network Rail in 2020. All rail infrastructure in Wales, apart from the Core Valley lines, remains the responsibility of the UK Government Department for Transport as managed through Network Rail.
A 2021 report from Cardiff University’s Wales Governance Centre was critical of this arrangement, describing it as a “misalignment between devolved responsibility for rail operations and more convoluted arrangements for rail infrastructure”, which “becomes a more pressing concern, particularly given the direct implications of current arrangements on funding for rail projects in Wales.”
The UK Government’s 2021 Williams-Shapps Plan for Rail proposed that Network Rail be absorbed into a new public body, Great British Railways (GBR), to own and manage the network as well as setting fares and drawing up timetables. The precise implications for Wales of this plan are not yet clear, but the UK Government has said that the devolved Government in Wales would continue to exercise its powers in relation to rail.
Rail infrastructure funding
The UK Government generally combines rail infrastructure spending for both England and Wales in its reporting, making it difficult to disaggregate what spending goes only to Wales. However, the Welsh Affairs Committee – in their 2021 inquiry into railway infrastructure in Wales [PDF] – heard that historical funding was “disproportionately low whether measured against the total UK budget, track length or population share.” A 2018 report by Professor Mark Barry [PDF], carried out for the Welsh Government, estimated that the Wales route, which covers 11% of the UK network, received just over 1% of the enhancement budget for the 2011-2016 period.
The Welsh Affairs Committee report recommended that further devolution of rail infrastructure should be considered only if there were “clear benefits for both passengers and freight users”, which currently have not been identified. The report noted that there are great economies of scale available via the existing management structure which benefited Wales and limited the Welsh Government’s financial liabilities. The UK Government agreed with this recommendation and said that – apart from the Core Valley lines – most rail services in Wales operate on a cross-border basis and so it makes sense for enhancements to be planned on a holistic route and network-level basis.
In contrast, Cardiff University’s submission to the Welsh Affairs suggested that under a fully devolved system, Wales could have received an extra £514m investment in its rail infrastructure between 2011-12 and 2019-20.
HS2 and Northern Powerhouse Rail
HS2
High Speed 2 (HS2) is the UK Government’s plan for a high speed-rail project to link major cities in England including London, Birmingham and Manchester.
The UK Government has suggested that HS2 will improve connectivity to Wales, even though HS2 services will not stop there. As part of the Crewe to Manchester leg, the Government is planning to introduce a junction north of Crewe (the Crewe northern connection) between HS2 and the west coast main line, which is due to reduce journey times to North Wales.
Unlike Scotland and Northern Ireland, Wales doesn’t receive Barnett consequentials (additional funding given to devolved Governments as a consequence of additional spending by the UK Government) from spending on HS2, because national rail infrastructure in England and Wales is reserved to the UK Government. For this reason, HM Treasury has assessed HS2 as a ‘national project’ which benefits both countries.
Although the Welsh Government does not receive Barnett consequentials directly from spending on HS2, it does receive them indirectly from increases in the DfT’s budget that stem from spending on HS2. This amounted to £755 million between 2015-2019. The Welsh Affairs Committee in July 2021 recommended:
HS2 should be reclassified as an England only project. Using the Barnett formula, Wales’ funding settlement should be recalculated to apply an additional allocation based on the funding for HS2 in England. This would help to ensure that Welsh rail passengers receive the same advantage from investment in HS2 as those in Scotland and Northern Ireland.
The Government’s official response stated HS2’s classification as an England and Wales project is consistent other UK Government reserved responsibilities. The Government added that it invests in rail infrastructure in Wales and that the Welsh Government has received a “significant uplift in its Barnett-based funding due to UK Government spending on HS2.”
Northern Powerhouse Rail
Northern Powerhouse Rail (NPR), sometimes referred to unofficially as High Speed 3, is a proposed major rail programme designed to better connect major cities in the North of England. The Government Integrated Rail Plan (IRP) for the North and Midlands, published in November 2021, sets out its NPR plans in detail. As with HS2, the Government has confirmed that NRP is an England and Wales project and therefore the Welsh Government will not receive Barnett consequentials.
According to a recent article in WalesOnline, the classification of NPR as an England and Wales project means that the Welsh Government will ‘lose’ £1 billion of Barnett funding. The article notes that Labour leader Sir Keir Starmer has also given no guarantee that a Labour Government in Westminster would match this funding.