Memorandum by pteg (Passenger Transport
Executive Group) (LGR 13)
INTRODUCTION
1. This document is a submission to the
Select Committee on the Office of the Deputy Prime Minister, to
be considered as part of the Committee's inquiry into Local Government
Revenue.
2. pteg represents the interests
of the seven Passenger Transport Executives (including Strathclyde
PTE). Together we serve over 13 million people, 22% of the population
of Britain. pteg aims to influence the national public
transport agenda by raising the profile of public transport with
the Government as well as stimulating debate nationally on how
best to promote services.
3. PTEs are grant funded by, and implement
the policies of, the PTAs (Passenger Transport Authorities) made
up of Elected Members, who raise funds through a levy on their
constituent Metropolitan District Councils.
DETAIL
4. The Committee will quite understandably
be concentrating primarily on the funding of local authorities.
However, PTAs and PTEs are largely funded by local government,
so we believe that issues affecting them should form a part of
the Inquiry.
5. We understand that the Government's own
Balance of Funding Review identified a number of factors to be
taken into account, such as Accountability, Fairness and Flexibility.
We believe accountability is especially important.
6. To quote the Layfield report, "the
first requirement of a financial system is accountability: whoever
is responsible for incurring the expenditure should also be responsible
for raising the necessary revenue". We believe that the issue
of accountability is a crucial one for PTAs and PTEs, and is not
reflected in the current arrangements for the funding of local
transport in the Metropolitan areas.
7. PTAs have a concern about the way they
are currently funded. In particular, they believe that their status
as levying bodies, rather than precepting bodies, results in a
lack of transparency and accountability. It is also increasingly
generating tensions between PTAs and their constituent District
Councils, who see PTAs' growing requirements as being in direct
competition with their own directly provided services.
8. This is because Government revenue grant
in respect of public transport (flowing from Formula Funding Shares)
goes to the District Councils while the expenditure rests with
the PTAs, thus resulting in PTA levies being artificially high.
Problems arise because:
— Districts cannot trace how the extra
RSG has fed through to them, because of the complexity involved
in the distribution of RSG (with the exception of finance charges).
— The position can sometimes be further
complicated by the impact of "floors and ceilings".
— Districts have many other competing
demands on their budgets.
9. These difficulties are constraining PTAs'
ability to deliver the Government's transport policies in the
metropolitan areas, and the outcome is that District Councils
invariably pressure PTAs to keep their Levy rises to the minimum.
A "lowest common denominator" effect has tended to operate
where the District(s) with the least favourable annual settlement
have often dictated a low level of PTA levy increase, thus jeopardising
the delivery of agreed policy objectives. All PTAs comprise between
four and 10 Districts, so the combined effect of the lowest common
denominator effect over a period of years can be quite significant.
10. The situation has become exacerbated
as a consequence of the move to Local Transport Plans (LTPs) with
a much greater emphasis on public transport investment in order
to achieve local and national policies. This success has resulted
in a substantial uplift in capital spending by PTAs, much of which
is being funded by borrowing using Department for Transport credit
approvals. Since 1995-96 there has been (roughly) a threefold
increase in the LTP settlements for public transport (excluding
major schemes and maintenance). This has not been matched by anything
like an equivalent increase in revenue resources, and although
the extra debt charges are reflected in District Councils' Revenue
Support Grant, the Districts are generally unwilling or unable
to passport the resources through to PTAs, because of the reasons
outlined above. This could frustrate major aspects of the Government's
plans for integrated transport.
11. PTA's were originally precepting bodies
after the abolition of the Metropolitan Counties, but became levying
bodies in 1990. A return to precepting for PTAs would remove,
or certainly reduce, these problems. However, the problems associated
with such a change are well understood by pteg, and have been
previously discussed with Government officials.
AN ALTERNATIVE
APPROACH
12. There can be no substitute however for
a direct grant relationship between the Government and PTAs in
relation to LTP development. Apart from the passporting issue,
the current recognition of LTP spending is related entirely to
capital expenditure/borrowing, which ignores the ensuing operating
costs of new facilities. It would clearly therefore be in the
best interests of PTAs to receive a specific grant in relation
to LTP projects, as a direct consequence of their programme bids.
Such an arrangement would help both Metropolitan Districts and
PTAs to plan levy increases on a more incremental basis and avoid
the inevitable unevenness in revenue budgets which capital investment
can cause, with serious consequences for the annual settlement
from Districts.
13. Such changes would also be beneficial
to Government. The significant funding of public transport improvements
in metropolitan areas would be emphasised instead of being hidden
from public view.
CONCLUSION
14. In conclusion, therefore, pteg wishes
to emphasis the following points:
— There is a lack of transparency and
accountability in the way that PTAs are funded, which inevitably
generates tensions between PTAs and their constituent District
Councils.
— The flow of Government revenue grant
in respect of public transport results in PTA levies being artificially
high, because Revenue Support Grant is received by the Districts.
— These difficulties are constraining
PTAs' ability to deliver the Government's transport policies in
the metropolitan areas.
— The situation has become exacerbated
as a consequence of the move to Local Transport Plans (LTPs),
where a substantial uplift in capital spending by PTAs has not
been matched by an equivalent increase in revenue resources.
— A specific grant to PTAs in relation
to LTP projects would ease pressures on PTA levies to their constituent
Districts, while at the same time enhancing the implementation
of the Government's public transport objectives in the major conurbations.
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