In May 2012, the Department of Transport expected the tram-train scheme to be completed by Dec 2015. It is now expected to be completed in May 2018.

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The National Audit Office has today published the findings from its investigation into the Sheffield to Rotherham tram-train scheme which is intended to provide the first transport service in the UK to use both the street tramway and national rail network. The programme involves modifying the existing national rail infrastructure, modifying the tram network and depot, and purchasing vehicles capable of operating on both networks. Our report focuses specifically on the works to modify the national rail network, which the Department for Transport (the Department) part-funded and Network Rail managed.

In May 2012, when Ministers approved the programme, the Department expected Network Rail’s modification of the national rail network to cost £18.7 million and the tram-train scheme to be completed by December 2015. By December 2016, the cost of these works had quadrupled to £75.1 million and Network Rail’s project is now expected to be completed in May 2018.

The key findings of the investigation are:

  • The pilot project aimed to test the viability of operating tram-trains in the UK.  The Department’s approval was based on the wider strategic benefits of rolling-out schemes to other cities to reinvigorate under-used rail lines, better penetrate city centre markets and release capacity at mainline railway stations. The Department and Network Rail agreed that a pilot project was the best way to test whether the tramway technology could be extended onto national rail lines, and to develop new industry standards.
  • The Department accepted the project’s wider financial benefits were uncertain. The business case for the proposed scheme was based on the benefits to local transport users, such as reduced journey times. The benefit-cost ratio (BCR) of 1.0 fell into the Department’s ‘low’ value-for-money category. The Department considered the wider benefits of the pilot, such as lower industry costs and economic benefits, to be ‘very uncertain’. In May 2012, HM Treasury approved the project ‘on an exceptional basis’ to allow a more detailed evaluation of the value for money of tram-train schemes.
  • The Department and Network Rail initially agreed a budget of £15 million to modify the national rail infrastructure. In May 2012, Network Rail estimated the project would cost £18.7 million but expected to make efficiency savings. By November 2014, Network Rail established that costs had increased to £44.9 million, an increase of 199% against budget.  In July 2012, the Department announced the national rail line would be electrified after 2019 and asked Network Rail to undertake additional works to adapt the tram-train service.
  • The Department gave approval for the project to continue in order to achieve the pilot’s objectives. On 28 November 2014 the then Permanent Secretary concluded the project’s rationale had not changed and recognised that cancelling the project would cause reputational damage.  The Department agreed to provide cash funding, capped at £45.3 million because Network Rail, now it had been reclassified as a public body, could no longer increase its borrowing to finance cost increases in the tram-train project.
  • In 2015, the Department introduced new arrangements to strengthen its governance of the project following a review that identified concerns with the way the project was set-up and governed. The Department brought the project into line with its revised governance arrangements for overseeing Network Rail projects and appointed a senior responsible owner.
  • In June 2016, Network Rail reported that forecast costs had risen further, by up to £25 million.  Network Rail established that works were more complex than it anticipated at the design stage, that it had incurred additional costs in dealing with the condition of assets and the technical innovations required more time than originally expected.  At the start of the project, Network Rail did not have a full understanding of the costs, and revised its forecasts as it identified the technical challenges involved in testing the technology.
  • In July 2016, the then Permanent Secretary recommended stopping further work on the project. The Department’s Rail Investment Board, with the endorsement of the Permanent Secretary, recommended stopping the project as many of the lessons of using tram-trains in the UK had already been learned. The Board stated that this would release at least £20 million from the Department’s budget but the majority of the £25 million already spent by Network Rail would be lost. The Department did not prepare or request a revised business case at this point.
  • In September 2016 the Minister did not accept the Accounting Officer’s recommendation and asked Network Rail to meet the funding shortfall.  This decision was based on the need for the lessons learned from the completed pilot to be available for the development of further schemes. The Accounting Officer did not seek a ministerial direction. In October 2016, the Department re-calculated the BCR to provide assurance that the decision could be defended on value for money grounds. It calculated that the BCR of the remaining works was 1.49, treating committed expenditure as a sunk cost.  The BCR of the overall programme had fallen to 0.31, in terms of the local public transport case.
  • Network Rail agreed to fund the remainder of the project. It allocated £4.6 million from its renewals budget to address issues with the poor condition of existing assets. It proposed to complete the remaining construction works by re-prioritising funding from its wider enhancement programme and re-allocating approximately £21.9 million to the tram-train project. The Minister endorsed the approach in March 2017.
  • The Department and Network Rail now expect the works to cost £75.1 million, an increase of 401% on the original budget. Network Rail revised its plans in December 2016 and increased its estimate of project costs. It now expects to complete the works in May 2018, allowing the tram-train service to begin in summer 2018. As at June 2017, Network Rail had achieved a number of significant construction milestones, including installing new track, the power supply and a tram-train platform at Rotherham Parkgate. It also changed the way it is managing the project.
  • The Department and Network Rail have learned lessons from the pilot but it is too early to determine whether the project will realise the wider strategic benefits. The Department and Network Rail have begun to capture the operational issues involved in using tram-trains in the UK and have, for example, established new technical standards for the signalling. Network Rail has shared lessons learned with other tram-train promoters. The Department has not yet evaluated the value for money of the pilot project or the extent to which it will reduce the costs of introducing similar schemes in other cities.

4 July 2017


Publication details

Press release

View press release (4 Jul 2017)

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