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Welcome back. It might be useful for members of the public if I introduce myself and the other members of the committee; I am aware that the name-plates are very small. I will start from my far right. The committee members are Gordon Jackson, Margaret Smith, Ted Brocklebank and Christine May. I am Tricia Marwick.
We believe that the Waverley project's time has come and that it will underpin the success of the Edinburgh city region economy and the wider economy. We fear at the moment that an opportunity may be missed because of the lack of a good strategic framework, but we believe that the project will help to bring coherence to that framework.
Thank you. Given the inconvenience and the delays that the committee has experienced due to, for example, notification discrepancies and lateness in receiving the business case—including updated data that we received only in the past two weeks—does the promoter consider that it was fully prepared and ready when it introduced the bill to Parliament in September 2003?
I say emphatically that the promoter and partners did an enormous amount of thorough work in support of our determination to reinstate the Waverley rail project and are profoundly disappointed that the delays around land referencing have delayed the project as a whole. In coming to the project, I have been impressed by the quality of the work that has been generated by the partner agencies and the contracting companies that have been involved in the project. I have also been impressed by the extent of cross-checking and support that has been given laterally across the project, where other agencies have been involved in checking the work in some of the papers that members have before them as evidence.
We have examined the notification discrepancies fairly thoroughly. I also asked you about the business case, which is in your hands rather than the land agent's. We received updated data for the business case only a fortnight ago. Given that there has been a six-month delay in the project because of the notification difficulties, do you consider, regarding the business case in particular, that in September 2003 you were in a position to introduce the bill to Parliament?
The case is extremely complex. It is apparent to anybody who has been looking at the evolution of the business case that new information has been coming to light not only locally, but in terms of awareness of guidance that has been provided by the Scottish Executive. The evidence that you cite refers to a different approach being followed in calculating the net present value. We are aware that it would obviously have been better to have all of that absolutely signed up, but the reality is that new information has been becoming available and we have been working extremely hard to incorporate it into the evolving business case.
Two significant changes have occurred over the past two years and are reflected in the new information that has been provided to the committee. Both reflect the evolving economic landscape upon which the analysis has progressed over the past few years. The first change concerns assumptions regarding housing to be developed in Midlothian and the Borders. We now have far more firm evidence about housing commitments within the corridor over the next 10 years; those commitments have required us to re-estimate the patronage and revenue that would be generated by the railway. In effect, there are now firm proposals for about 10,000 new homes, roughly half of which will be in Midlothian and half of which will be in the Borders, within the catchment of the corridor. That reflects a change, based on which we can be far more firm in our assumptions about the level of commitment to that housing.
I will pick up on two issues that you raised. The first concerns the housing market commentary report by Ryden to Scottish Enterprise Borders, which was dated January 2004, and the letter of 24 September 2004 from Ryden to the promoter. We did not receive that material until last week. Why was it not made available to us sooner?
I am afraid that I do not know the answer to that question. I will need to get back to the committee on that.
I would be grateful if you would. Perhaps, if you cannot answer the next question, you would get back to us on it as well. The committee has now received the tourism impact study, which is dated May 2004 but was made available to the committee only last week. Why was it not made available to us earlier than that?
Tourism is treated as an upside in the economic appraisal, so the benefits from additional tourism are not explicitly captured in the cost-benefit analysis in the headline business case figures that you have before you. Therefore, the late report on tourism does not impact on the net present value of £75.3 million but can be regarded as additional information over and above the principal business case figures. It is not material to the central case, but can be viewed as providing additional peripheral evidence.
However, you did not think that that additional information should be made available to the committee before last week although it was dated May 2004.
I cannot comment on that.
Perhaps Mr Hume could write back to the committee and let us know his views on that matter.
I will ask two questions, one of which is related to something that Dr Brown said regarding the changes to Treasury guidelines—I think he said that those changes were first mooted two or three years ago. What discussions did the promoter have with the Scottish Executive to determine whether the business case for the project was eligible to be treated under the revised guidelines?
We have been having discussions with the Scottish Executive over the past two years, and the guidance from the United Kingdom Treasury and the Scottish Executive has in that time evolved in response to the radical change in Treasury guidelines that reduced the discount rate and required that risk be explicitly costed. During the past 12 months, we ran a number of sensitivity tests, which we shared with the Scottish Executive and produced in various papers that have been circulated to the promoter, but we were not in a firm position to change our central case until we were advised quite strongly by the Scottish Executive that, in its opinion, the revised Treasury guidelines should be explicitly reflected in the central case for the project rather than just as a sensitivity test.
The committee might want to return to the matter, because the delay in getting that determination from the Executive means that the committee has had less time to examine the business case in that light. However, that is a matter for the committee, not for Dr Brown.
Again, Dr Brown can comment on that.
Perhaps colleagues who give evidence later in the meeting will be able to provide a more detailed response. I understand that the 2008 date can still be achieved. From the technical and economic points of view, our assumption remains that if the process follows the timetable that we assume, the asset can be delivered and opened by 2008.
I accept that you will address in writing to the committee some matters that have been raised, but in the light of the evidence that we have heard, are you fully confident that the committee is now in a position to consider and make recommendations on the proposal and that we have all the necessary relevant data and evidence from the promoter?
I would answer your question in the affirmative. You will have seen from the outline business case and background papers that an extraordinarily large amount of work has been undertaken. As Dr Brown indicated, we have kept up to date as the business case has evolved and we have brought together the latest information and guidance that we have. As I said, aspects of our work have been cross-checked throughout the process and it gives the promoter a degree of comfort to know that we are not merely discussing individual papers that have been submitted. The committee is considering an extremely thorough piece of work, which has involved not just the promoter but a number of agencies that advise the promoter. We are convinced that we are making the best possible case to the committee.
Mr Hume outlined the local, regional and national economic benefits that the proposed railway would bring, but what benefits could the railway bring that the existing transport network simply cannot produce?
As you know, we undertook a number of option appraisal exercises during the course of the study, one of which included consideration of other options. From the outset, we made the firm assumption that there is a fracturing and a lack of joined-upness in the economy, certainly within the Borders and Midlothian, given the rapidly changing Edinburgh economy. The analyses that were undertaken—independently by Scottish Borders Council, Midlothian Council and City of Edinburgh Council and through community planning partnerships—suggested that the disparate economic problems and difficulties that the Borders, Midlothian and Edinburgh face would be addressed by a project that had at its heart the making of connections between the three areas. On that basis, and after considering various forms of investment in busways and road developments, we are convinced that development of the railway project is central to the programme for bringing about a much more coherent economic framework and better conditions, which will result in increased jobs and will fit with strategic priorities in the three areas.
Mr Hume outlined key benefits of the project not only to the Borders but to the wider region and to the country. I am looking at a table of the Scottish transport appraisal guidance stage 1 findings on the environment, safety, the economy, integration, and accessibility and social inclusion. The Waverley railway line is shown to have the potential for major benefit in some areas, such as connectivity and integration, as you said. However, the one area in which the line might have a negative impact is the environment. Will you comment on that?
I said in my introduction that the region as a whole and Edinburgh in particular face environmental problems. As supporting statements show, we expect a significant number of bus and car trips to be taken off the A7-A68 corridor, which goes all the way from the central Borders into Edinburgh. As people switch travel modes from cars and long bus journeys to the railway, a significant benefit will occur in the form of a reduction of about 2,000 trips a day on that corridor into Edinburgh.
I am not a witness on environmental matters; an opportunity to discuss environmental issues will arise later. However, I will provide evidence from the traffic assessment, which predicts 777,000 fewer car journeys per year as a result of the scheme in the project's early years. That significant removal of traffic from the highway network will have two benefits. It will help to reduce congestion, particularly through Midlothian and on approaches to Edinburgh, which will create environmental benefits. The safety benefit will be between six and eight fewer road accidents every year. As a wider transport impact, we hope that the railway will link the Borders and Midlothian into the Scottish rail network, which will start to change the transport culture by providing a viable public transport mode to challenge the instinctive response of jumping into a car and driving. In the long term, that also gives us an opportunity to change people's travel behaviour, which would have clear environmental benefits. The environmental science is a subject for a subsequent witness session.
Just for your reference, I picked up those figures in table 14 on page 53 of the promoter's memorandum on the general principles. Paragraph 210 says that the environmental disbenefit is considered to be moderate. Perhaps you will come back to us with a little more information about what you see as the environmental disbenefits. I am happy to accept that somebody from the promoter's side will do that later on.
If the project were not to proceed, the benefits that we set out in the submissions would not be realised—the £250 million to three local authority areas, the £112 million to the Borders, the creation of jobs and the boost to businesses and other projects.
One of the City of Edinburgh Council's keen interests in the project is not just to achieve environmental relief, as was referred to, but to extend the Edinburgh labour market and bring the Borders more firmly within it. Many decisions about inward investment into Edinburgh depend on assurances about the availability of the right sort of labour for the foreseeable future. If we cannot continue to show that the labour market is expanding, those investment decisions will go against us—as some have done recently—and that will represent a net loss to the economy of south-east Scotland and the rest of Scotland.
From the Borders perspective, before we embarked on the work, we were aware from the results of studies that the Scottish Low Pay Unit and other agencies undertook that the Borders could be categorised as being a low-wage area. However, in connection with my wider responsibilities in the Borders, I was shocked to see that the average earnings differential between the Borders and Edinburgh is in the region of £7,000 gross. If we were unable to take the action that we want to take through the establishment of the railway to begin to address inequality and lack of opportunity and to spread the prosperity that exists in Edinburgh and boost the earnings and living conditions of people in the Borders, the promoting authority and I would be profoundly disappointed.
Thank you very much for coming today and for answering our questions.
My statement will deal with the business case and the STAG 1 appraisal.
Many thanks for your statement, Mr Fox. It is now half past 12. I suspend the meeting until quarter past 1, at which point we will come back and the committee will pose questions to you.
Meeting suspended.
On resuming—
Welcome back to the afternoon session of our evidence taking. Before the suspension for lunch, David Fox made a short opening statement.
Good afternoon. The final patronage forecast that was provided in the technical note of 14 February by Halcrow indicates a revised annual patronage growth rate of 5 to 6 per cent, which is considerably greater than the rate previously quoted of about 1.4 per cent. While certain lines—for example Edinburgh to Bathgate—have achieved that level of growth over a short period, how do you justify that level of growth in the case of the Waverley line?
I will pass that question to Mark Brown.
Patronage growth is driven by two things in the model. The first is general economic growth within the east of Scotland region, which increases the rate of trip making among all travellers. That is a fairly common phenomenon, whereby propensity to travel grows in line with growth in the economy. We have assumed that in that region the economy will grow at 2.5 per cent per annum, which is in line with Government projections, even though it is quite likely that within the greater Edinburgh region growth could be well ahead of that rate.
Mr Wood, you seemed to dissent from something that was said earlier. Do you want to comment?
It is a minor point. Dr Brown correctly said that the Government's projected growth rate for the UK national economy is 2.5 per cent. I was merely remembering that the Executive has not set a growth target for Scotland.
You are talking about the Borders economy growing, although we have heard that much of the development is predicated on the need to get people into the Edinburgh labour market from the Borders area. How is the growth in housebuilding for commuters to the Edinburgh area going to achieve growth in the Borders economy?
There are several points to make. There are a number of ways—no doubt we could explore them—in which the railway line offers benefits that could not be obtained by any likely alternative. However, if we look at this specific issue, both in Midlothian and the Borders it has been determined, as a matter of policy, that a substantial increase in housebuilding will be possible and sustainable only if the railway line is produced. We are talking about 900 houses in the Borders and 3,500 in Midlothian, the development of which is contingent upon the transport access that the railway line will provide. Those houses will, largely, accommodate people who will work in and be part of the wider Edinburgh regional economy. If the railway development did not take place, that housing would have to be located elsewhere. It might not be possible to locate it within the Edinburgh region at all, and the opportunity to expand the population would be lost.
I sometimes find it difficult to work out just what is and is not taken into account in these projections. The documents contain a table that illustrates the number of daily journeys to work by car from various locations in the Edinburgh travel-to-work area. Are you suggesting that the railway will be convenient for other Borders towns, such as Peebles, Kelso and Coldstream—places from which travellers would need to detour to Tweedbank or Galashiels? Where does that idea fit in? Does that have a bearing on the figures that you cite for the number of journeys that will be made?
I will pass that question on to Dr Brown. Mr Wood wants to add a brief word on that, too.
The majority of the demand for the railway will come from people who live within around 2.5km of the railway. The further away someone is from the railway, the less likely they are to travel to the railway, park there and take the train. However, the railway is designed with a significant number of park-and-ride stations, the largest being at Tweedbank, which is well sited for people who are travelling from Melrose, Jedburgh and other small towns in the area. We expect a proportion of the demand—this has been quantified—to come from those more distant towns. People will park in the car park that is situated next to the proposed station at Tweedbank and take the train into Edinburgh. However, the majority of the demand will come from people whose journey starts within 2.5km of the stations.
So your projected figures of use or patronage rate are not based entirely on the 2.5km radius. Is the patronage rate a percentage? How does that work?
The model that we use has what is called a gravity component that takes into account the journeys that people are currently making and are likely to make in the future. That information is drawn from a Scotland-wide database of people's daily journeys—where they are travelling from and to. It has a deterrence function that takes into account the cost of making those journeys using different modes. That cost includes fares, petrol, parking charges and the time it takes the person to make the journey. Taking account of the cost of alternative modes and the ability to pay of different travel groups will assign different percentages of travellers from each zone of origin, which will largely relate to the towns and villages in the Borders and Midlothian area. It will assign a proportion of travellers to each mode: some to car, some to bus and some to rail. Clearly, the further the journey's origin is from the railway station, the lower the percentage of travellers from that origin that will be assigned to the railway.
Many train operators receive subsidies, but those are not included in the calculation of passenger yield. For example, First ScotRail receives financial support from the Scottish Executive and Strathclyde Passenger Transport Executive to cover the revenue shortfall difference. What consideration have you given to such subsidies in your calculations?
I will start off and then pass to Dr Brown, who is best qualified to answer. As you will have seen from the outline business case and its recent updates, there has been an analysis of income, or revenue, against operating costs on an on-going basis. Within the first six years, we anticipate that the railway will move from a deficit into a positive situation where it is contributing to the national franchise and, indeed, to the bigger railway picture.
I can add one or two points. We have not considered subsidy at this point. The economic modelling has been done from a purely economic perspective and it considers the costs and benefits to the state and the wider community. Nevertheless, the analysis has included forecasts of revenue and operating costs. Putting those two together, the railway will start to make an annual operating profit in about 2013, which is about five years after opening. For that year, operating revenue will start to exceed annual operating costs. By 2017, there will be a net cumulative operating profit covering the preceding 10 years of operation. From 2017 onwards, the railway project as a whole will be turning an operating profit.
Your technical note discusses the methodology that was used to calculate induced or generated demand. You acknowledge that there has been limited research on the topic, although you quote some. Why did you use the high-speed lines from Madrid to Seville and Paris to Lyon as reasonable comparators for the Waverley route?
There are few examples of railways like the Waverley line opening in the United Kingdom in the past few years. I tried to show that the estimate of induced or generated demand of 10 per cent of patronage is at the lowest end of the scale, given the precedents that we could find.
Seville and Lyon are major cities with significant existing populations. You say that you took a conservative approach, but I press you on why it was appropriate to use the lines to those cities as comparators. I argue that they are in no way similar to the Waverley line.
The main point is that there is little ex post evidence of how much traffic railways generate. There have been relatively few similar railway projects in the United Kingdom. Route modernisations have taken place in the past couple of decades, such as those on the Thameslink line north of London and, to some extent, on the line between Glasgow and Edinburgh, but there is relatively little evidence from the reopening of old lines or the construction of brand new ones. The closest analogy in the UK is the channel tunnel rail link, the first geographical stage of which is similar in length to the Waverley line. Most of the published research on railways comes from high-speed railways. Many such lines have been built in recent years and a lot of money has been spent, mainly by the European Commission, on ex post research into their impact. A main reason for quoting the lines to Lyon and Seville as examples was that not a lot of other evidence was available.
So it would be reasonable for us to bear in mind major caveats in considering those lines as reasonable examples.
Yes. The Robin Hood line is the best comparison.
I thank the witnesses for their evidence. We will write to you with more detailed and technical questions—we would appreciate it if you could respond as quickly as possible.
Yes, indeed. Good afternoon. Thank you for the opportunity to address the committee today.
You clearly outline the difficulties that the Edinburgh economy faces in the housing shortage and the need for workers to travel in, but will you outline the economic benefits of the proposed railway to Galashiels compared with the benefits that might come from investment in the transport infrastructure closer to Edinburgh, where there is perhaps the most immediate potential for housing? What will building a railway as far as Galashiels do that the existing transport system cannot do?
My colleague David Gass from Scottish Enterprise Borders is probably more able than I am to comment on the economic benefits of the line to the Scottish Borders and Galashiels. In my view, the existing transport infrastructure will not be able to cope with continued commuting patterns. Already there are about 12,000 commuter trips through the Sheriffhall roundabout every day. I have mentioned that almost half of the economically active population of Midlothian travels into the city of Edinburgh every day. We have heard about the potential for a significant increase in new house completions in the foreseeable future. That will generate levels of additional traffic on the existing road system that it will be unable to accommodate.
Would taking the railway to Stow not achieve the bulk of what you are arguing for? What is the justification for extending the line to Galashiels?
The extension of the line would allow further penetration into the potential labour market in the central Scottish Borders, bearing in mind the housebuilding that could and would take place there if the line were built. The level of economic activity in the Lothians is at an all-time record high. More than 80 per cent of the working-age population is either in work or in full-time education. Unemployment is at a record low of 2.5 per cent and falling. The structure plan predicts significant growth in employment. The real challenge for those involved in economic development in Edinburgh is to grapple with the question of where the labour market will come from. By extending the reach of the line, we can help to solve that problem.
Where will the people who will come to live here come from, according to your model? If the roads are congested, building a railway will help us to deal with that problem. However, by building more houses here, we will simply replace the people who have been taken off the road. You say that people living here would become the labour market for Edinburgh. Are you talking about people who are born here and will not leave?
There are two aspects to your question. Inward migration to Edinburgh and the Lothians is significant. Edinburgh and the Lothians is one of the few areas in Scotland in which the population is growing. Much of its population comes from the rest of Scotland, the UK and abroad. Obviously, those people require places in which to live. The Edinburgh housing market extends well beyond the city boundaries and Lothian. As I have mentioned, the travel-to-work area for Edinburgh can be demonstrated to cover a geographical area that extends from Fife down into the Scottish Borders and across Strathclyde. There has been a significant increase in commuting in recent years, which will continue. How the extended labour market works and can be made more efficient is a critical factor in sustaining growth in the Edinburgh economy.
Some people say that the proposed formation, route and locations of the stops along the railway could be improved. My colleague Christine May mentioned that Stow has the potential for a stop. Are you content with the proposals, or would there be benefit in increasing the number of stops, for example?
The trade-off between the number of stops and overall journey time must be considered. Stow is a relatively small settlement. I can well understand the wish of its population to have a stop in the village, but the main point in answer to Christine May's earlier question is that we genuinely believe that accessing the current and future labour markets of the Scottish Borders is essential. The line is planned to Galashiels and then to Tweedbank, with extended park-and-ride facilities, which is probably the best option.
Does the projected regionwide and Scotland-wide net economic benefit of the railway represent a good return on a public investment of at least £115 million?
This morning, other witnesses answered questions about the net present value calculations. I believe that the STAG appraisal system fails to capture wider economic benefits that can accrue from major public transport capital investment projects. The point of my evidence is to link the line's reopening to the necessary sustaining of the Edinburgh economy. Connectivity and the availability of labour to service that growth are key constraints that the appraisal methodology has not fully taken into account.
I will return to the assertion in your introduction that the railway would be of major significance in the development of the city region. Can you assess how much of the railway's purported benefit is geared towards the economic and social regeneration of the Borders and Midlothian areas as distinct from Edinburgh's social and economic development?
My colleague David Gass from Scottish Enterprise Borders is probably better placed than I am to deal with the benefits to the Scottish Borders. I have talked about the contribution of the Edinburgh city region to Scotland. From a wider Edinburgh city region perspective, the project is important and relevant.
I can see how the railway would be advantageous to the city of Edinburgh, by pushing its commuter belt further out to Gorebridge and so on, which would relieve some of Edinburgh's transport pressures. You have said that this is not really a matter for you, but although extending the line to Galashiels might be looked on as socially convenient, you consider the real economic benefit to be in extending the Edinburgh city boundary.
Essentially, in economic development terms, it is probably no longer appropriate to distinguish the economy of the Scottish Borders and Midlothian from that of the wider Edinburgh city region as such things are very much interconnected.
You have made an excellent case for having a railway line that extends as far as Shawfair, but we have not heard much from you about the case for extending it to Galashiels and Tweedbank. You have repeatedly said that that is a matter for your colleagues, but we have not heard much from you about the advantages that the line will bring to the Borders.
I apologise if I gave that impression. I said that my colleagues from Scottish Enterprise Borders will be able to explain the economic benefits to the Borders more ably than I can because they are closer to the situation. I have a certain familiarity with those arguments because I spent some time as chief executive of Scottish Enterprise Borders. Indeed, I was based in Scottish Enterprise Borders when the initial feasibility studies for the line were undertaken in the late 1990s.
I thank Mr McFarlane for his evidence. I suspend the meeting for two minutes while the next panel gets into place.
Meeting suspended.
On resuming—
We shall now hear from David Gass, chief executive of Scottish Enterprise Borders, Nigel Watson, director of physical business infrastructure at Scottish Enterprise Borders, and Riddell Graham, former chief executive of Scottish Borders Tourist Board. I understand that David Gass will make a short opening statement.
Good afternoon and thank you for the opportunity to address the committee. Our written evidence to the committee, which was submitted in September 2004, highlights the difficult economic conditions that the Borders area has experienced in recent years. The economy remains fragile and is characterised as low wage with low gross domestic product per head of population; it is still heavily dependent on traditional and primary industries that face considerable restructuring challenges. We have an aging population and significant levels of outmigration of young people from the area, accentuated by the strong feeling that the Borders area remains disconnected from the wider regional and Scottish economy.
Thank you.
Good afternoon, gentlemen. Mr McFarlane has left Mr Gass with a number of questions to answer, and I am sure that he will do his best to deal with them.
First, we believe firmly that the project as it stands will provide the maximum economic benefits for the area. Concern has been expressed that, according to the unemployment statistics, the Borders has a tight labour market. However, about 35 per cent of the area's working population works part time and we believe that the railway project provides the ideal solution with regard to the population's access to higher-paid and value-added jobs in the area and in the Edinburgh city region.
I wanted to explore other negative aspects. For example, increasing tourism will mean a great increase in housebuilding, which might affect scenic aspects. How will you mitigate such effects?
As far as development is concerned, the Scottish Borders already has a reputation for preserving both the integrity and the beauty of its environment and many of its other inherent strengths.
What is your plan B if that does not happen?
Our plan B will have to deal with tremendous problems for the Scottish Borders. I have painted a picture of the economy's current state. We believe that the project will play an immensely powerful role in accelerating the development not just of the region's transport infrastructure but of other strategies, including diversification of the economy, and aspects such as the area's gross domestic product and wage levels. All those strands and strategies remain very relevant to what we do. We also face the added disadvantage of the changes to European funding in 2006, which will bring their own challenges to the region. Without the Waverley rail project, the longer-term growth and sustainability of the economy of the Borders and the wider city region will be adversely affected.
Because of isolation, people in rural areas rely heavily on car transport. If public transport projects such as the rail project are kept away from areas such as the Borders, not only will people have to remain on low incomes but they will face increasing petrol charges, which will make it even more difficult for them to cover the distances that they have to travel. The cost of meeting such expenses will begin to form a larger and larger part of their available income.
The Borders tourism strategy identifies huge overreliance on car-borne visitors. At the moment, 96 per cent of visitors to the area have to come by car, because there is no other easy way of getting here. The Borders does not appear on maps because it is not connected up.
Could the proposed formation and route, and location of stops, be improved? If so, what changes would you make, and why?
I will answer that first and then ask my colleagues if they wish to add anything. Picking up on earlier questions that were put to my colleague Jim McFarlane, I would say that the proposed route is the optimum—in terms of both the net present value that can be seen in the business case and providing a link and route into the central Borders. That is where we see opportunities for population growth and the development of land to maximise the economic benefits of the railway.
I repeat that the railway is not simply a line on the map. Tourism will rely on effective promotion of the route and of everything that people can do once they have arrived in the area. It will also rely heavily on proper visitor reception facilities and on support for transport systems to the other towns in the Borders, which could be effectively accessed for short breaks within a relatively short travel time.
Will the location of the line benefit the development of outdoor tourism, which seems to be a growth area in Scotland?
Absolutely. I referred earlier to the huge investment that Forest Enterprise and the Forestry Commission have made in developing outdoor access facilities in the Tweed valley—not only in the Peebles area, as everyone appears to assume, but all the way down the Tweed valley. Developments in other parts of the Borders are making the area much more accessible to walkers, horse riders and cyclists. Melrose sits right on the southern upland way and is a key entry point to the four abbeys way. It is also the hub for many other outdoor activities. It is therefore ideally placed.
That was a perfect advert for the Borders. Will the projected net economic benefits of the railway—Scotland-wide, regionally and locally—represent a good return on a public investment of at least £115 million?
Yes—both in terms of the positive net present value as seen in the proposal as it stands, and in terms of the longer-term benefits of connecting up the Scottish Borders region. The outline business case has shown the economic benefits. The line would be the ideal catalyst for the spread—successfully and sustainably—of the success of the city region into the Borders.
Most of the evidence that we have heard has concerned commuters coming from the Borders and Midlothian into Edinburgh. Have you considered the number of commuters who might come from Edinburgh into Midlothian and the Borders as a result of the railway? We have the current figures. What is the potential growth in commuting in the opposite direction from that which we have heard about mostly today?
I think that such growth will occur, but it will take place in the longer term and, rightly, as part of a wider city region and a wider labour flow across that city region. Some responses, which the committee may have seen, from companies such as ProStrakan Group Ltd, Peri-dent Ltd and some of the cashmere companies, see the railway providing operating efficiency gains for their staff and beginning to address some of the recruitment issues that they face. Principally, in the short term, the attractiveness of the jobs that are available through Edinburgh is something that we would aspire to see throughout the region. The railway is an important first step in allowing that to happen.
From a tourism point of view, the market specialist study that was conducted and published at the beginning of last year suggests that, based on very moderate assumptions, in the order of 6,000 staying visitors and 3,500 day visitors per annum will be generated. Those are new and additional visitors who would otherwise not come to the area. That is very significant for tourism: those people would all be heading to the Borders rather than away from the area.
Scottish Enterprise Borders has committed £1 million towards the railway. Is that money still available? Does SEB have any plans to make further contributions towards the cost of the project?
As I said, the project sits with Scottish Enterprise Borders as one of our key board priorities. The committee will be well aware of the letter to the clerk from Jack Perry of Scottish Enterprise. A subsequent letter to the promoter confirms the £1 million commitment that sits within the network's five-year strategic investment plan, which covers high-priority infrastructure projects throughout Scotland. Scottish Enterprise does not see itself as the primary funder for transport infrastructure. However, we see the clear economic benefits that the Waverley rail project would bring. As a result of our discussions, principally with the promoter—Scottish Borders Council—we have committed the £1 million that sits within our five-year investment plan. Subject to proper approval, we are also open to considering individual projects that would enhance the economic benefit that we believe the railway will bring.
Is there evidence to suggest that the need to secure developer contributions—I gather that the cost is £1,500 on all new-build homes in the area—could impact negatively on development along the proposed route of the railway?
That is probably unlikely. There has been a rise in land values. Once the market knows that an extra cost is being placed on development, it takes that into account and should therefore offer less for the development land that is available. In real terms, we are talking about reasonably modest sums of money for the housing in question.
Will there not be a particular impact on further extending the Edinburgh housing market into the Borders? I presume that that will have an impact on the affordability of houses for borderers, given that the business case states that average earnings in the Borders are 21 per cent lower than the national average, while Edinburgh house prices are the highest in Scotland.
People in the Edinburgh market who may, for example, be trying to bring up a family in a tenement flat, might get a better choice at a more affordable price in the Borders. That is where some of the demand is likely to come from. The planning authority has taken the effect of that into consideration and is developing policies. I think that the committee will have a follow-up session on that matter, so you would be better to direct such questions to the planning authority at that session. I understand that the planning authority is taking affordable housing into account and making appropriate allocations for it.
One of our priorities is to work closely with Scottish Borders Council on its structure and local plans in respect of the industrial development land that is available and on the key issue of affordable housing. Our belief, which is reinforced by the Ryden report, is that there is currently a very healthy housing market in the Scottish Borders, with a 20 to 30 per cent increase in house prices. In that context we do not see the matter as a constraint on any developers, although I would refer to the council as the experts on the matter.
Availability of affordable housing has been a problem all over the country, but you seem to minimise it. I heard on the radio about all kinds of problems in the Yorkshire dales. However, you do not seem to find it a problem that people who live here will be priced out of the market.
That is an issue for the Scottish Borders as a whole. In a month's time, we will chair a meeting that will involve the business community and our local MSPs and which will deal with the issue of affordable housing. We believe that the council has built policies on affordable housing into its planning and we have continued to inform that process.
I will take up that point elsewhere.
As someone who used to travel on the line into Edinburgh, I can say that it must be one of the most scenic routes in Scotland, which is part of its appeal. Compared with the road journey into Edinburgh, which I now make every morning, I think that the rail journey would prove to be a major attraction; certainly, that is how it would be promoted to visitors.
The issues relating to business are hypothetical, obviously. I am not asking you to tell me things that are confidential, but could you give me any specific examples of businesses that would have established a base in the Borders but for the lack of a rail link? Do you know of any businesses that have indicated that they will establish a base in the area if there is a rail link? Are there specifics available or is there just a vague idea?
I do not think that it will come as a surprise to anyone to learn that one of the key discussions that we have with any potential inward investor relates to the transport links in the area, along with the connectivity, the labour supply and all the other issues that are referred to in the case for the project. For example, we are beginning to see the service sector move into suitable business accommodation that we have developed, such as Ettrick Riverside in Selkirk. The Edinburgh city region is a key market for such businesses.
On inward investment, one important factor is the fact that the Borders is quite a low-cost area in which to operate compared with the overheated Edinburgh market, especially in terms of office accommodation.
You are obviously excited about the ways in which tourism might develop in the Borders, which is a beautiful and scenic area. However, I am interested in specifics. Do you have any evidence of tourism benefits being seen in another region in the United Kingdom simply because a railway line was opened?
I am not aware of any figures with which a comparison could be made.
Some of the occupants of the new housing will be from Edinburgh, and they will attract visiting friends and relatives as a niche in the market. There is also rugby; a professional team is being established in Netherdale and it is hoped that that will mean that visitors and fans from other clubs will come into Edinburgh airport and travel down using the line. It would be too far for people to travel in a short time otherwise.
I want to go back to housing and direct two questions at Scottish Enterprise Borders; perhaps I will return to them later in respect of other witnesses.
When you raised the issue previously, I was going to say that the council's structure plan suggests that most of the new housing will be concentrated in a pretty restricted area, so the damage to the rest of the Borders—if it is in fact damaged—will be relatively slight.
From a tourism aspect, we are aware of the need to preserve the very thing that people are attracted to in the first place. We have been drawn to comment on the tourism aspect of several planning applications that could have a negative impact. The last thing that we want to see is a development that destroys the very fabric of attraction for visitors. However, with the right kind of planning—and if the right kind of environmental impact assessment is done in advance—the impacts could be minimised by restricting development to the least damaging locations in a way that brings the benefit.
I will return to the balance between social and commercial housing, and how the gap will be addressed, at a later stage.
We have heard differing figures on the number of houses that are likely to be attracted by the project. We have heard mention of 700 homes in Midlothian and 1,100 in the Borders. Elsewhere, we have heard mention of something like 10,000 houses in the corridor between Edinburgh and Galashiels. Can you explain those figures and tell us exactly what we are talking about?
I will certainly try. The figure of 1,100 houses in the Borders is made up of 900 houses in the central Borders hub, in reference to the structure plan; 100 houses in the south Roxburgh area; and another 100 houses in the north Roxburgh area, which is really Hawick and Kelso. Those figures relate to the structure plan period that ends in 2012. I would guess that any additional housing would be built beyond the appraisal period for the project—in say, 2030, or something of that nature—but that is a question for one of the later groups of witnesses.
There is a massive difference between the two figures. Twice today, the overall figure of 10,000 houses has been mentioned. Can you take us to where that is coming from?
That is the projection for the longer period to which I am referring. With the reopening of the railway, housing developers would recognise and be interested in the area. There would then be a build-up of housing, over a period of time and subject to all the usual controls, in the next structure plan and so forth, which would lead to other totals. However, that might be a question for the later group of witnesses.
We are happy to come back to the committee with a written response on that.
Perhaps you could clear up another point that is puzzling me. Most of the housing for the Borders area will be in Roxburgh and Hawick. Are you suggesting that the people there will catch the train in Galashiels?
No. The figures to which my colleague referred initially—the 900 houses in the central Borders area, which are dependent on the railway line, and the further 700 houses in Midlothian—were the figures that were originally worked on. The development opportunity for those houses will be primarily within the central corridor of Galashiels, Melrose and St Boswells.
I think that we could do with some clarification. We would be grateful if you could write to us on that point.
Meeting suspended.
On resuming—
I welcome Anne Borthwick, the chairperson of the Campaign for Borders Rail, and Bill Jamieson, who is standing in for Mr Fraser, who has been unable to make it to the meeting so far. I understand that Anne Borthwick wishes to make a short opening statement.
I apologise for the fact that George Fraser is unable to be here. His car broke down and of course he is not able to hop on a train.
Good afternoon and welcome. Despite the plea that you have just given us, I am sure that you accept that there is a counter-argument, which is that enhancement and improvement of existing bus services would address many of the concerns that are outlined in your evidence, such as the number of young people who leave the Borders to study and stay in Edinburgh and the lack of potential for business start-ups.
With all due respect, I find that idea difficult. An enhanced bus service would perhaps improve the situation but I do not think that it would completely resolve it. I am sorry—I am going to hand over to Bill Jamieson as I am completely nervous.
Excuse me. I am just recovering from a cold, so today is not the ideal day for me to appear here.
My sympathies are with you.
Thanks.
On timing, it would take only a 15-minute improvement by the bus service for it to achieve the projected journey time for the railway, which is one hour. We would not be asking for a huge reduction in the journey time of the bus service.
You are putting me in a rather difficult spot, because I am not here to defend the current proposals. I accept your point about the slow journey time—that matter will perhaps be dealt with next week. I do not see where the improvement in the journey time of the bus service will come from.
I will add something now that I am a bit more composed.
In your opening statement, you said that you see the project as the first phase of the reinstatement of the Edinburgh to Carlisle line. Could the proposed formation, route and location of the stops along the railway be improved for the benefit of Borders residents? If so, what changes would you like to be made and why?
I would welcome any railway that came into the Borders, but the line might be better for the purposes of tourism if it went straight to Melrose, which would allow people to hop on the train in Edinburgh, hop off at Melrose and from there go to other Borders towns. I accept that Tweedbank is not far from Melrose, but Melrose would probably be a better stop for the development of the rest of the line.
Have you been told what the difference would be between the cost of terminating the line at Tweedbank and the cost of taking it to Melrose?
No, but I am just a layperson.
So are we.
Most of the track is there. The distance is only one or two miles, I think. Bill Jamieson knows.
It is a mile and half from Tweedbank to Melrose and, as Anne Borthwick said, some of the formation is still there. We may be getting into issues that will be discussed next week, but the Corus report that was done for the Waverley Route Trust came up with a figure of about £4 million or £5 million—I am struggling to remember it exactly—for those one and a half miles, which is roughly in proportion to the cost of the rest of the line. That was pretty much an off-the-top-of-the-head estimate; not a great deal of work was put into it.
Would it be acceptable to ask for written evidence on that point from the promoter as well as from the Campaign for Borders Rail—if it feels able to provide such information?
I can certainly get the Corus figures without any great problem.
We have been told that there would be a park and ride at Tweedbank, where it is proposed that the railway line would terminate. Do you accept that, in effect, that would open up the line to other borderers apart from those who are in the central Borders area?
Yes.
We accept that Tweedbank is a vital part of the scheme. I come from Stow, so I will say no more about that issue.
I thank Mr Jamieson, who has just given me the opening that I need for my next question. I welcome Anne Borthwick and Bill Jamieson and congratulate the campaign on getting as far as it has.
Are you asking about having a park-and-ride facility at Stow?
Yes—or at some other mid-point.
The first point to bear in mind is that not everyone in the Borders has a car. I know that there is a perception that the percentage of car-owning households in the Borders is very high. That is certainly true once one gets into the rural areas, but I think that 32 per cent of households in Galashiels and 37.5 per cent of households in Hawick do not have access to a car. Moreover, we must remember that the bulk of the car-owning households have only one car. The chances are that there are members of those households who do not have access to a car for most of the day. If we were to provide just a park-and-ride facility, we would be far from catering for the majority of the Borders population.
Would that be the case even if the bus service were improved?
As I said before, bus services are not particularly attractive to motorists. About 200 to 250 people a day use the bus service on the A7 corridor. If you compare that with what could be achieved were a railway to be built, it is peanuts. At the moment, about 5,000 vehicles a day use the main roads that go north from the central Borders—the A7 and the A68. The penetration of the bus service into the travel market is pretty low. It is a hard job to get people out of their cars and on to buses.
I have a question about the fare levels. It is proposed that a single journey on the train would cost £6.50. At present, the bus fare is £5. Do you think that price-sensitive customers such as students and those people who are in lower-paid jobs would be prepared to pay the extra £1.50? If so, why?
A single fare of £6.50 sounds quite high; it is certainly high in comparison with the fare levels on comparable lines in central Scotland. It is misleading to refer only to the single fare because, on most Scottish lines, an off-peak day return costs only a fraction more than a single. We do not know what the rail operator would charge if the railway reopened. It would be up to the operator to set fares that it thought would be sustainable and would attract passengers. It may well be that the fare levels that are chosen are nothing like the one that has been mentioned. The peak fare might cost only marginally more than the off-peak fare. I think that that is the case with journeys from Stirling into Edinburgh, for example. Stirling is marginally further from Edinburgh than Galashiels is and the peak fare is something like £8—or at least it was before the recent increases—and the off-peak fare was only a pound less. It is not certain that the Borders will face premium fares on the proposed train service.
Thank you. I might want to return to that question with other witnesses.
Given that the railway was taken away some years ago, how much is the case for a Waverley to the Borders railway line based on emotional as opposed to economic and social grounds?
You make a strong point. The Borders relied heavily on the railway 36 years ago and before. I recognise the argument about facts versus emotion and there is no harm in being emotional about needing the railway back again. All the economists in this room are able to put the facts to you very clearly, but we represent people who are not represented in any other way.
There is no doubt that our membership has a big emotional input into the situation, but we have always stressed issues such as social inclusion, access to job opportunities for young people and access to leisure activities up in the capital. Then there are the really big issues. We have been here for four and a half hours and I have not heard global warming mentioned once, which is rather unusual these days. Anne Borthwick was the first person to mention oil depletion, which is the big issue lurking on the horizon—most people are not yet aware of it, but it is about to explode on an unsuspecting public.
Thank you. Margaret Smith discussed with you earlier how much it would cost to extend the proposed line to Melrose. I am advised that, although that is an interesting question, it is outwith the scope of the bill that we are considering. Therefore, we cannot consider the matter as part of our report.
Meeting suspended.
On resuming—
To aid our consideration of economic development and social regeneration, we shall now hear evidence on our fourth topic of the day, which is housing provision assumptions and developer contributions. Neil McCowan, who is director of Turner and Townsend, does not wish to make an opening statement so we shall move straight to questions.
In September 2002, we submitted to Midlothian Council an outline planning consent application for the Shawfair development and other associated land parcels. At the same time, we made a similar application to the City of Edinburgh Council on the northern part of our overall development. As far as Shawfair and the Waverley route are concerned, the September 2002 application was put before the committee in December 2004 and achieved minded-to-consent status.
The Shawfair development is obviously important. What stage are we at with businesses even expressing an interest in locating or relocating there? What scale of business development are we talking about in terms of the number of jobs? [Interruption.] By the sound of things, we are getting a new airport as well as a new train station.
Within the Shawfair community, there is a business park element of 40,000m2, or approximately 400,000ft2, of class 4 business space. There are some retail developments, including a large-scale 6,000m2 supermarket and units for sundry other high-street commercial units including smaller-scale retail. At present, because we are still some way from securing full consent and getting on site, we are not looking for interest in the developments as such.
Do you assume that you would get interest if you looked for it? I presume that you have a reason for assuming that.
When we move towards securing consent—perhaps in the latter part of this year—we will start to market the business parks. One of the developments close to Shawfair is Todhills business park, which sits on the A7 and is owned by the Duke of Buccleuch. Buccleuch Estates Ltd has a separate planning application for a 25,000m2 business park and is seeking interest from potential occupants.
You do not anticipate that generating interest will be difficult.
No.
I will move on to housing. From where will the expected 12,000 new residents come? Will they be people who move out of Edinburgh and into the area or people who move up from the Borders?
Shawfair Developments, which holds the council land, has approximately 50 per cent of the land. For the other land, we are acting with the joint developers Mactaggart & Mickel Ltd, Morston Assets Ltd and Buccleuch Estates, which are all confident that they can market the 3,500 homes successfully. The interest and a large part of the occupancy will come from the Edinburgh area and peripheral zones in the Lothians.
Will the proposed £1,500-per-house developer contribution for new-build properties in the Borders area have an impact on the potential for the residential development at Shawfair?
If we added all the infrastructure investment for the south-east wedge project, which includes the Danderhall extensions, the total would be in excess of £80 million. We are aware of the need for a contribution from the wider development. The developer contribution is only a small proportion of what is required for ground remediation, utilities, road structures and the like but we have no qualms about that. The money that is required for the Waverley rail project is firmly in our business plan.
If the developer contribution of £1,500 per house became £2,500 because you had to discount 10 per cent of properties for social housing, would that put a different perspective on the matter?
No. We adjust development appraisals to cover social housing. To pile similar proportions on that element would be unsustainable in social housing terms. An adjustment to the appraisal would move emphasis towards the privately owned and conventionally procured direction.
How much does the development of Shawfair depend on the railway's construction? What housing and business development would go ahead were the railway not to proceed?
We started to create the master plan for Shawfair at the same time as the Waverley railway partnership was developing its route alignment. Our master plan has always had the rail route in it, so we never analysed in detail what not having the rail route would mean. In the local plan before the Waverley line came along, Shawfair was always considered to be a sustainable stand-alone development. We just have not analysed the position without the rail route.
If the Shawfair development proceeded without the Waverley railway, what would be the impact on the road network in the south-east wedge? How would it impact on your development's attractiveness?
I do not have the figures with me, but our transportation assessment is that the proportion of trips by rail will not be major, unfortunately, because of the continuing attractiveness of road travel. If predicted rail use shifted on to roads, we would aim to increase public transport rather than the number of car trips. Our plans allow for bus travel into and out of the town centre immediately adjacent to the rail route.
You have not modelled the situation if the railway were not constructed.
No.
I will be blunt. Are you saying that your development does not depend on the railway?
The point is that we see enormous benefit in having the railway.
I understand that answer, but I am asking a blunt question—perhaps you do not want to answer it. If for whatever reason the railway was not reopened, would that affect your development?
We would prefer to have the railway. I know what answer you are looking for.
The question is not very difficult. You can tell me that you will not answer it.
I cannot answer because we have not analysed the matter. We do not know what the difference would be.
I am going to ask the question. Why have you not done an appraisal of the development without the railway?
In getting to where we are today, we have spent in excess of £1.5 million on professional fees and the preparation of planning applications. The level of analysis that would be required to answer that question would mean our spending not far short of that sum again. We have decided that we will follow the Waverley partnership principles for as long as we can. If it comes to pass that a decision is taken not to reinstate the Waverley route, we would revisit the entire scheme.
Thank you.
Thank you, Mr McCowan.
I do not want to make a statement, but Allan Lundmark certainly does.
I would appreciate a short opening statement.
Thank you for agreeing to allow me to make a statement. I did not intend to make one, but in the light of information that has been provided to the committee this morning, I believe that it would be helpful, if not important, to do so.
Thank you for your comments. The committee would appreciate your following them up with a more detailed analysis to be sent to us as soon as possible. In the meantime, we have a few questions for either or both witnesses.
That was a very interesting presentation. Previous witnesses downplayed the importance of the £1,500 developer contribution in building up housing in the corridor. Do you think that it will be a disincentive?
We have to be clear about where the £1,500 will come from. It will come from the landowner who—to use the jargon of industry—is prepared to take the hit. The landowner has to be prepared to forego that amount as part of their capital receipt.
Have you had any notification from prospective developers who may have decided against proceeding with planned developments because of the contribution?
No, I do not know of any developer for whom the possible requirement for such a contribution has been a disincentive. That does not necessarily mean that the contribution is not a disincentive. If the level of the contribution was to threaten the commercial viability of a development, developers would negotiate for the contribution to be set aside by seeking to persuade the planning authority to forego developer contributions either towards the railway line or towards the remediation of other infrastructural deficits. It is possible that the contribution is a disincentive, but it is difficult to be precise as to whether it has been the straw that has broken the camel's back in any specific project. At present, I have no evidence that any project has been put in jeopardy, but that is partly because the contribution has not yet been driven in.
The other side of that argument is that an additional £1,500 on the cost of a home near the railway is not high enough to make any proposed development unviable, given that such a sum represents only 1.3 per cent of the average cost of a house in Scotland.
As I said, it is unlikely that such a contribution would have an impact on house prices, which are determined by other commercial factors such as the operation of the housing market in the surrounding area. The price that can be obtained for a new-build house is dictated not by the cost per unit of building the development but by the price at which similar accommodation is sold in the vicinity. The developer works out what it will cost to build each unit and deducts that amount from the current market value of surrounding properties. If the first sum can be brought below the second sum, the developer will have made a profit. Otherwise, the developer will make a loss. That is how the matter is approached.
I should add that housing developers will also take into account competing locations and the current location of the people who will buy the homes. Given that places in Fife and West Lothian might be available as alternative options—indeed, prospective purchasers of the homes might already be commuters who are looking to move to another area—housing developments in the Borders might be at a price disadvantage compared with those in West Lothian or Fife that would not incur such a contribution.
For the benefit of the committee and our panel members, it might be helpful if I clarify matters by quoting the explanatory notes to the Waverley Railway (Scotland) Bill:
My comments were about only the existing legislation. I am well aware that, if I draw a problem to Parliament's attention, it can solve it for me.
Good afternoon, gentlemen. How important is the location of a railway station for prospective developers and how does a developer factor that into consideration of the economic viability of a housing development? I am thinking of, for example, the campaign to include a station at Stow and the potential for housebuilding there.
If a station can reduce travel-to-work times, it is undoubtedly a marketing tool. People now ask not how far a development is from the local town centre but how long it takes to get there. If a station can reduce journey-to-work times, there is no question about whether that helps to market properties. Midlothian will undoubtedly gain an advantage from having the railway. If we can explain to people that their journey-to-work time from Midlothian to the centre of Edinburgh will be 20 minutes—as opposed to one hour in the car—that will be a positive marketing tool. That case is made for Midlothian.
If that is a negative marketing tool, what would be the positive marketing tools?
One positive tool would be the ability to use the journey time as work time.
What housing development do you think would go ahead if the railway were not to proceed?
At the moment, we are working with Scottish Borders Council on the housing land audit. The preliminary figures suggest that we are building about 200 houses a year in the relevant part of the Borders and there are no current market indications that that rate could be accelerated. I am not convinced that a travel-to-work time of one hour would help us. The journey time will not be a significant marketing tool unless it can be reduced significantly.
If you combine that point with what you said about the construction and technical constraints on building large numbers of houses, is it your view that it is likely that considerably fewer houses will be built than is suggested in the business case?
I have not seen the entire business case. At the moment, however, we are building fewer than 250 houses a year in Midlothian and the relevant part of the Borders. I see no reason to be optimistic about our ability to accelerate that rate. It takes considerable time to secure the necessary consents to build and there are considerable infrastructure difficulties that must be overcome.
We have found your evidence interesting. I want to make sure that I have understood it. A railway to Midlothian would allow people who live in that area and who work in Edinburgh to get to work quickly. Is it correct to say that that would be a marketing tool for you as housebuilders?
Yes.
Therefore, assuming that you were able to get the land, that the infrastructure was in place and that you had the capacity, you would be inclined to increase housebuilding in that area. Is that correct?
Yes.
Do you have the capacity to do that?
Yes.
Would your ability to do so be dependent on getting co-operation on other matters in Midlothian?
The local authorities and Scottish Water would have to grant the necessary consents.
You told us the current rate of housebuilding in Midlothian without a railway. If there was a railway for you to use as a marketing tool, by how much could you increase that rate? Without being overly optimistic, what would be a reasonable ballpark figure?
I said earlier that I would like an opportunity to give more detailed consideration to the impact of the proposed 10,000 additional units. I hope to be able to address that question, but at the moment it is difficult for me to advise you on that.
I turn to address the area that we are in now—the Borders. I presume that a number of units are built each year in the central Borders area, but as a builder you do not think that a railway will make it a more attractive place in which to build houses because of the inability to market a reduced journey time to Edinburgh.
I do not think that that journey time is a positive marketing tool.
An impression that we sometimes get from other people—I speak personally and not for the committee—is that if there is a railway it will suddenly be so much easier to get to Edinburgh that half the world will want to come and live here and lots of houses will be built. You seem to be saying that that is not the case.
People buy houses for many reasons, but the evidence that we have about journey-to-work times raises a question: if people wish to travel into Edinburgh by rail and journey-to-work times matter to them, why would they choose a journey that takes more than an hour when the equivalent train journey from West Lothian, Falkirk or some parts of Fife takes only 20 minutes? I do not agree that the line would allow the Borders to compete effectively with other housing releases around Edinburgh.
I am trying to complete the picture. Are there reasons why a Borders railway would make it more attractive to build houses here? You discounted the factor of people getting to work more quickly because the time is still too great. Are there other reasons or are you saying that a railway would not increase the number of houses that are built in this part of the world?
I would not go that far. As I said, there are other reasons to buy houses in the Borders. If the railway made the journey to Edinburgh more pleasant for shopping or for recreational purposes such as an evening out, that might be a factor. However, journey-to-work times would not be a useful marketing tool in this case. Such journey times are a big issue when we sell houses.
I return to my question about Midlothian. Assuming that for commercial reasons you decided that the Borders railway would make a difference and that you would like to build more houses in the area, can you give us an idea—not necessarily today, but perhaps later—of the level to which housebuilding might increase? How likely is it that the level will increase? Do planning and other local authority constraints make the idea a non-starter?
After this meeting, I will use our internal structures to consult builders who might consider developing in the area and I will give the committee a considered view.
It might be helpful to the committee, and indeed to our witnesses, if I read out a paragraph from the promoter's response to a request for further information on the outline business case. The clerk to the committee requested the information on 2 February. It concerns the 10,000 houses that have been mentioned. The response states:
I am surprised that they drove out such numbers without any reference to us to check the commercial viability of the proposals. I do not know the geographical locations of the proposed housing units. I know nothing about the site constraints or the infrastructure. I am surprised that they did not ask us for a view on the commercial viability of the projects. That is why I said at the beginning that I would welcome an opportunity to go away and look at the proposals in detail, to take advice from my member companies that operate in those areas and to give a considered view. The industry has the capacity to build those units, but the question is whether it is commercially possible to build those units in the timeframe concerned. On the basis of the information that I have, I cannot give you any clearer advice.
Earlier, in response to a comment from Ted Brocklebank, we agreed that we would seek further clarification on the issue of the 10,000 homes. Bearing in mind what Mr Lundmark has said about the councils not consulting the housebuilders, one of the key things that we have to clarify is whether the councils, in setting those committed targets for themselves, have involved Scottish Water and other bodies. We all know the capacity constraints that Scottish Water currently has across the country, so that is a specific matter that we would have to check.
We might be able to put some of those questions to the representatives of the promoter on the next panel. Do other members have questions for Mr Lundmark and Mr Barn?
I have a question for Mr Barn about the capacity of the building trades to cope with any significant increase in the projected number of houses.
The construction industry has a skills gap at present. Any significant increase in housebuilding in the area will pose certain challenges for the industry in dealing with that locally. I can speak only for the small and medium-sized enterprises in the area, which tend to do the training of new apprentices, as well as being the companies that would build the houses on behalf of the volume housebuilders. There is not a great deal of slack in the system. Training is a big issue for the industry and construction courses at most colleges seem to be at capacity. To ramp up the available skills will take some time. The industry is working at it, but I would hate to give the impression that if the scheme were to go ahead, 10,000 new houses could be built tomorrow. I severely doubt that that could be done.
It is important to stress the positive aspects of a development on the scale of 10,000 units. Such a development would be welcomed by the housebuilding and construction industries. It would give the industries long-term certainty and the ability to invest in new products, new processes and training. Therefore, I would not resist the numbers; the question is whether we can produce those numbers in these areas within the proposed timeframes.
I thank Mr Barn and Mr Lundmark for their evidence. Mr Lundmark, we would appreciate it if you would send us more detailed information about the housing. The clerks advise me that we would need that information as quickly as possible. We would be extremely grateful if you could send it by 11 March.
Meeting suspended.
On resuming—
We remain on the subject of economic regeneration. I welcome Bryan McGrath, who is assistant head of economic development at Scottish Borders Council; David Williamson, who is head of planning and strategic services at Midlothian Council; Lesley Martin, who is assistant head of planning and implementation at Scottish Borders Council; John Inman, who is acting strategy manager in the city development department of City of Edinburgh Council; and Peter Wood, who is the managing director of Tribal HCH. I welcome you all to the meeting, and I understand that Bryan McGrath wishes to make a short opening statement.
Yes, thank you. One of the Scottish Executive's principal objectives—set out in "A Framework for Economic Development in Scotland"—is to achieve regional development. Economic growth is highlighted as a prerequisite for all regions so that they can enjoy the same economic opportunities.
Your comment about gross value added is the second time that we have heard about that today. I want to compare the gross value added to the capital cost of the project. How far down the line will that comparison still be positive and where will it become negative?
I ask Peter Wood to comment on that.
I am not sure that I understand the question fully, but I will explain how we see the issue. We have measured what we call the railway's wider economic benefit using the higher income—or the gross value added—that will accrue to the Borders economy as a result of the positive effects, such as the increased population, people commuting to Edinburgh to access higher-earning jobs and others to which we will no doubt return. On our mid-estimate, the gain over the three local authorities will be £171 million—that is a present-value capital equivalent. Our lowest estimate of the value of the total benefit to the three economies from the economic activity that the railway will stimulate is £90 million. That is the way in which we measure the impact.
That is helpful. I anticipate returning to the issue at a later stage in the evidence.
I will explain the issue to do with commuting first. If somebody in the Borders, even if they are currently unemployed, starts to travel to Edinburgh to work, there is a net increase in employment. We expect that quite soon as many as 100 people who are not currently travelling to work will travel to work in Edinburgh by way of the railway. As those 100 jobs will be in Edinburgh rather than in the Borders, they will be recorded in Edinburgh and will have no impact on employment in the Borders. We assume that the jobs that those people vacate—although they may have been unemployed—are backfilled, so what happens in the Borders is a reduction in unemployment rather than an increase in employment. That is that half of the equation.
Paragraph 32 of your written evidence refers to the concentration of small businesses in the Borders and states that that is the basis of its business base. Why do you think that that is a cause for concern?
More than 90 per cent of businesses in the Borders are small businesses, with 10 or fewer employees. That means that the economy is challenged by the lack of strength and employing power of local businesses. Although we have a strong entrepreneurial background, we find it challenging to grow those businesses into medium-sized enterprises that in turn have the ability to draw down additional levels of investment and further increase their growth. Our local economy is definitely held back by the emphasis on smaller business.
Peter Wood may already have answered this question, but I seek further clarification. If I understand what you have said, the benefit across the three economies that we are talking about will be £171 million, yet most of the proposed railway will be in the Borders and most of the stations will be in Midlothian. Which areas do you see benefiting most among the three areas that we are talking about?
The biggest winner is Midlothian. If we take the mid-figure, which is £180 million net benefit, about £97 million of that will accrue to Midlothian, about £66 million to the Borders and the balance to Edinburgh. The reason why Midlothian does so well is that it gets both kinds of benefits. It gains from improved access to Edinburgh, which stimulates housing development—I do not think that anybody disputes that—and, in particular because of the Shawfair development, it is enhanced as a centre for employment.
In your written and oral evidence, you highlight the fact that the Scottish Borders is a lower-wage, lower-added-value economy. How will reopening the railway change that situation? If the aim is mostly to attract people from the Borders to work in Edinburgh, where the higher-paid jobs are, surely it follows that most of the employment arising from new housing and tourism will be service industry jobs, which are traditionally low wage. In percentage terms, by how much will the introduction of the Borders railway line increase wages in the Borders?
One of the key aims of our local economic development strategy is to address the social exclusion issue of low wages and productivity. You rightly point out that part of doing that is to open up opportunities in the Edinburgh job market. However, we also believe that inward investment will create job opportunities in the Borders over the medium to long term.
Apart from your statements of hope and expectation, are you able to provide any evidence that there will be inward investment in the Borders at some time in the future as a result of the Borders railway line? For example, although there is a rail link from Fife to Edinburgh, some parts of Fife are desperate for inward investment, but they are not receiving any. What makes you think that the very existence of the railway and connectivity to the Edinburgh economy will create an overspill of inward investment to the Borders?
As witnesses from Scottish Enterprise Borders have already made clear, people think that the Scottish Borders is an attractive cost location. Undoubtedly, improving transport connections will increase that attraction. However, as you have pointed out, there is limited empirical evidence of prospective inward investors.
In estimating the railway's economic development impact, we considered the possible effect on inward investment. First of all, with the help of staff at Scottish Development International, we examined the pattern of inward investment into Scotland, especially to rural areas. In particular, we examined the average size of projects and their location. With that information, we alighted on a model of a typical inward investment project in one of the more rural parts of Scotland. Such a project would provide about 80 jobs. We then discussed with staff in Scottish Enterprise and the council the likelihood that the railway would add another string to the bow and would represent another factor that could be put on the table to encourage businesses to consider locating in the Borders. Indeed, witnesses from Scottish Enterprise Borders made that point earlier.
Do the two proposed railway stations in the Borders serve the areas of greatest disadvantage or potential growth?
The central location of the two stations makes them best placed to provide an ideal service in delivering transport links to Edinburgh.
I am not sure whether the officials on this panel are the best people to answer my question, which has just occurred to me in the light of previous comments. I will throw the question into the mix and I am sure that the committee will accept further written comments from anyone who wants to respond. We talked earlier about the STAG 2 appraisal and the assumption of a single fare of £6.50 and there was discussion about how the fare compares with the single bus fare of £5. Did the promoter incorporate the impact of concessionary bus travel into its appraisals of likely modal shift on to the railway? The current concessionary travel scheme applies to older people who travel off-peak within council boundaries, but the minister announced in December that from spring 2006 free bus travel will be extended to all areas at all times, in a scheme that will apply to older people, disabled people and young people. Such people represent a significant number of the people whom we understand that the project is trying to reach.
I do not think that the officials on this panel can respond to that, but we can write to the committee.
Thank you. We will return to the subject with another panel. I thank the witnesses for their contribution and I suspend the meeting to allow the next panel of witnesses to take their place.
Meeting suspended.
On resuming—
I thank everyone for their patience. I welcome David Williamson, head of planning in the strategic services division of Midlothian Council; Lesley Martin, assistant head of planning and implementation for Scottish Borders Council; John Inman, acting strategy manager of the city development department of the City of Edinburgh Council; Alison Gorlov, parliamentary agent from John Kennedy & Co; and Dr Mark Robertson, partner and head of consulting at Ryden. I understand that David Williamson wishes to make a short opening statement.
As recognised by the Executive in its review of Scotland's cities, the country's future prosperity in terms of wealth creation is closely linked to the health of its cities. The Lothians has the fastest growing population in Scotland, as borne out by the registrar general for Scotland's most recent projections to 2018.
That is very interesting and repeats what we have heard often, which is that if we have a railway it will stimulate housebuilding big time in the Borders and Midlothian. A previous witness's presentation included the idea of this hugely wonderful labour market in Edinburgh, and the railway would mean that lots of people would want to live here to travel to work in Edinburgh and that lots of houses would be built. The problem that I have is that I have listened to the man who represents the people who build the houses and it is fair to summarise him as saying that he does not buy the assertion that that would happen. You might be right to argue that what you are saying is reasonable, but the people who build the houses say that that is not the case.
That is quite a long question.
I asked lots of questions, but I can go back over them; there is no problem with that.
I will deal with two or three of your points to start with, before passing you on to my colleagues Dr Robertson and Lesley Martin.
I want to pause for a minute to ensure that we are not at cross-purposes. I did not understand Mr Lundmark to be saying that housebuilders could not cope; that was not his main thrust. In some ways, he welcomed the targets, as they would mean lots of work for housebuilders. I thought that his main thrust was that the railway was not the marketing tool that it was made out to be. He disagreed most strongly with your point that folk will be willing to spend an hour on the train to Edinburgh. He said that that was not a selling point.
I will come on to the Scottish Borders in a minute. I take cognisance of that point, though. In reference to Midlothian, he mentioned that there had been only about 240 houses built per annum over the past few years, and I do not dispute that figure; he is right about that. However, the two Midlothian local plans—one for Shawfair and one for the rest of Midlothian—propose a total of 8,500 houses. Both plans were adopted at the end of 2003, and the planning authority is now dealing with the applications that are rolling in from those major developments. The housebuild rate is therefore estimated in the housing audit process to go up to as much as 900 houses per annum by the middle of the period 2010 to 2015.
That is where the issue is, I think.
You have heard already this afternoon from a spokesman for Shawfair Developments Ltd. The housing audit actually shows Shawfair taking about five or six years to get up to the full housebuilding level of about 300 to 400 houses per annum. In fact, the representative told me that, as a developer, Shawfair Developments Ltd is trying to increase that rate because of the initial on-costs for the development, so it is looking for a faster housebuilding rate rather than the one that the authority has suggested.
Before we move away from Shawfair, I want to ask about the suggestion that the housebuilding could be accelerated. That comes back to one of Gordon Jackson's points, which I do not think you have addressed, about Scottish Water. We know of the problems that exist throughout Scotland. If Shawfair is to be accelerated, what discussions have been held with Scottish Water? Can Scottish Water and the infrastructure that needs to be put in place cope with the demands?
That is one point that I failed to touch on. Scottish Water has caused a problem for us. I do not think that it is so much a problem in Shawfair; I understand that Shawfair Development Ltd has been in close touch with Scottish Water over what is required to allow the development to progress. It may be that Scottish Water is able to put in some stand-alone facilities to deal with that. However, I understand that Scottish Water has identified some issues relating to sites in the Gorebridge area, and it may be that they will take a year or two longer to come through.
We move on to Dr Mark Robertson.
The question, I understand, is to do with the market response to the Homes for Scotland view. I would like to split my response into three parts—I hope that that will begin to give us an insight into the issue. I was rather surprised by the evidence that was given, because the first part of my response is based on the Scottish Executive's own research. The comparative data from the 2001 and 1991 censuses demonstrate quite conclusively that there is a whole outer ring of locations that are now part of the Edinburgh city region, travel-to-work, housing market and retail catchment area. Those locations include areas in the Forth valley such as Stirling, parts of the east Strathclyde catchment area, the central Borders, all of East Lothian, the Fife circle towns and a whole ring of places that were not previously in the Edinburgh catchment area. Halcrow is the expert on disincentive and travel, but some of those locations are at least 50 minutes by train from central Edinburgh.
Could you give us those responses? Is that data published? Perhaps we have already been sent the information; we have got so much paper that I do not pretend to have read it all.
I would be happy to point you towards it.
You could have a word with the clerk later to ensure that we have all the information that you are speaking about. I am aware that we have some of the housing projections from Ryden already but I do not know whether we have them all.
I would be pleased to do that.
You say that you did not use those figures but the paragraph that I read out earlier, which was from the response on behalf of the promoter to questions posed by the clerk, said:
It is an iterative process. The work that we did was begun two years ago and involved working out the exact number of houses that would be needed as a result of the railway. The development plan applications supersede that.
That is something that we should return to at a later point.
I want to say a few words about the strategy of the Scottish Borders structure plan. We have aimed to meet Government guidance in trying to locate new development—business development as well as domestic development—where it can meet existing and planned transport provision, including public transport provision. We have had regard to national Government policy and the national planning framework.
How many of the houses proposed in the structure plan are within a 10-mile radius of Galashiels?
When drawing up the structure plan, the council decided that it would locate a substantial proportion of the housing allocations for the central Borders in that very focused Galashiels-Melrose-St Boswells corridor. Again, we are talking about political will. The councillors debated the matter and decided that that was the approach that they would follow. In fact, 90 per cent of the allocations that were made in the local plan on which the consultation has just finished are within a 10-mile radius—and most are within a 2.5km radius—of the proposed stations. We have focused the development on an area that is very close to the proposed stations because the council is absolutely committed to providing the necessary number of people who can help to support the stations.
I want to pick up the concessionary fares question that I put to the previous panel, but I am not sure whether anyone on this panel of witnesses can answer it.
We do not have the relevant experts on this panel, but we will send you a response.
Okay, thank you.
First, the structure plan contains the fall-back position that the councils will have to propose additional sites if they do not deliver the five-year land supply that is required by national policy. If the sites that we have already allocated are not available, developers will propose other sites. I suspect that, increasingly, they will win cases on appeal because of the need to have a five-year land supply at all times. However, there is no evidence of a slow-down in the Lothian housing market.
I have an observation rather than a question, but perhaps the witnesses will comment on it. In his submission, I think that Dr Robertson said that even without the railway, there is a recognisable pressure from Edinburgh down into the central Borders. I am sure that he has figures to back that up.
The absence of a railway is one reason why people do not want to come here, but there are many others. In a way, we have a two-pronged strategy. First, we want to encourage people to stay here because we have lots of evidence that many of our people, particularly the younger ones, are leaving the Borders. That is a trend that we must try to reverse.
Do members have any further points?
No; we just have to take that on board.
I thank everyone for attending today. We will be back here in a fortnight. Next Monday we will be in Newtongrange at 10.30. I look forward to seeing as many people at that meeting as are at this one.
Meeting closed at 16:43.
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