Prime minister David Cameron’s £250m pre-election pledge to scrap unpopular Pacer trains in the north could have more costs than benefits and may not be affordable, it has emerged.
The Financial Times reports that the estimated benefit-to-cost ratio (BCR) for the move to replace the Pacers with 120 new vehicles by 2020 is estimated at between 0.12 and 0.35.
Any scheme with a BCR of less than 1 is considered poor value for money and could have greater costs than benefits.
Civil servants have briefed newspapers that the issue is a major ‘headache’ within the Department for Transport (DfT) - an unprotected department that may struggle to afford the cost after the upcoming spending review.
The DfT has already identified and committed itself to making £545m in spending cuts this year, more than any other department. Some have suggested the issue could even affect the Northern Powerhouse agenda, with reports that deeper cuts will have to be found to pay for the Pacer replacement.
Permanent secretary at the Department for Transport (DfT), Philip Rutnam, has argued that there are better ways of achieving vale for money but has been overruled.
He is reported to have emphasised his concern by taking the unusual step of demanding a ministerial ‘direction’ from transport secretary Patrick McLoughlin to go ahead with the deal.
Arriva, Govia and Abellio are all bidding to run the Northern Rail services, with a decision expected by October.
Pacer trains date back to the 1980s and have a top speed of 75mph.
