Operation of the Betuwe Line
Report on the audit of budget chapter XV
In 2006 the Dutch central government had high hopes for the Betuwe freight railway line. It would be of benefit to both public finances and the environment. We have audited what has become of those hopes and whether parliament has been properly informed.
Conclusions
The operation of the Betuwe line between 2006 and 2014 did not generate the revenue the government had been expecting. Furthermore, it is not known what environmental benefits the freight-only line has had during this period. We base these conclusions on the following findings of our audit.
Disappointing operating revenue
The operation of the Betuwe line has been a financial setback for the government. With revenue lower than expected, the line has been unable to cover its costs, as intended, never mind earn a profit. From the very beginning the government has had to contribute more than foreseen to make up for the operating losses.
Government expenditure to date more than twice as high as expected
Government expenditure on the operation of the Betuwe line has turned out to be considerably higher than the Minister of Infrastructure and the Environment (I&M) had initially informed parliament. He had set a maximum grant of €76 million for the period from 2006 to 2013. The actual cost to the government has proved to be more than twice as high: €170 million. Since then, the Minister of I&M had to contribute a further €153 million to keep the Betuwe line running to the end of 2015. This additional expenditure is on top of the financial setbacks in the 1990s during the construction of the line. Against government expectations, private investors at the time showed no interest in co-financing the railway.
Additional cost of major maintenance in the near future
A study commissioned by the Ministry of I&M found that the Betuwe line would have to undergo major maintenance in the near future. Sections of the line would also have to be replaced. The minister has probably underestimated the cost of this work.
Environmental benefits never studied
In 1995 when decisions were taken on the Betuwe line’s construction, the line was seen as the only means to reduce the volume of freight carried by polluting diesel goods vehicles. Goods would be carried by rail wherever possible. This modal shift would benefit the environment. The Minister of I&M intended to carry out a study of the modal shift and thus of the intended environmental gains but never commissioned one. It is therefore not known whether the railway is actually of benefit to the environment.
Shortcomings in the information provided to the House of Representatives
The Ministry knew as early as 2008 that the cost to the government would be higher than projected, but she did not inform the House of Representatives by letter of the Betuwe line’s losses until 2011. She wrote at the time that there were ‘significantly higher operating expenses’ for the government but did not provide any precise figures. The precise information was hidden in an annexe to the letter. She also provided only a limited insight into the actual additional costs incurred to the end of 2009. The House was not informed of the projections of the ultimate additional costs (€160 million) that were already known to the Ministry.
Recommendations
We recommend that the Minister of I&M:
- have the promised study of the shift from road freight to rail freight (the modal shift) carried out to determine what reduction in CO2 emissions is possible;
- assess whether the Betuwe line can still meet the strategic considerations that underlay the decision to construct it (environmental benefits, stronger position of the Netherlands as a transport and distribution hub); and
- on the basis of the findings prepare a plan for the future operation of the Betuwe line.
Response of the Minister of I&M
The Minister of I&M acknowledged that the commercial operation of the Betuwe line had failed to live up to expectations over the years. Looking back, she thought this conclusion could have been drawn earlier than in 2011, when she had informed the House of Representatives. We note in our afterword that the Minister of I&M had informed the House in 2011 about the disappointing operating projections but she had omitted to explain that the information related to the additional expenditure incurred to the end of 2009. Projections known to the Ministry regarding the likely additional expenditure to the end of 2013 (€160 million) had not been shared with the House.
The Minister will not act on our recommendation to commission a study into the modal shift. She thought it would no longer have any added value in the light of the government’s current role as a facilitator.
The Minister accepts our recommendation that she assess the Betuwe line’s contribution to improving the environment and strengthening the Netherlands’ position as a transport and distribution nation. However, she will not use the findings to prepare a plan for the future operation of the line. By not preparing such a plan, we note in our afterword, the Minister is ignoring opportunities to improve the operation of the Betuwe line in both financial and environmental terms.