Select Committee on Transport Twelfth Report


3  Capital funding through Local Transport Plans

68. The Local Transport Plans cover both capital and revenue expenditure, but are used primarily to inform central government in its distribution of capital resources for transport.

Increased capital funding

69. There was a large injection of capital funds following the introduction of the Local Transport Plan framework. Between 2001-02 and 2005-06 investment in local transport projects totalled over £8 billion. This represents a 100% increase over the previous five years.[117] The capital settlement includes allocations for the integrated transport block, highways capital maintenance, small schemes, and major schemes. The increase in capital funding and the certainty of funding achieved through the five-year indicative allocations were generally welcomed. The Local Government Association welcomed the additional capital allocations associated with LTPs. Fears by transport interests within and without local government that these funds would not be used on transport projects appeared, they argued, to have been ill founded.[118]

70. Despite the Government making the capital funding available through a Single Capital Pot which local authorities were free to spend on whatever council services they deemed appropriate, most of the minor transport schemes planned were apparently delivered.[119] Several witnesses indicated that it was the Major Schemes funding, for which local authorities continue to bid, that had proved most problematic, for a variety of reasons.[120] The very significant increase in capital funding for transport was much needed by local authorities and is warmly welcomed by this Committee. Having made such a significant investment in the first round of LTPs, we very much hope to see this encouraging level of capital expenditure sustained over the LTP2 period and beyond.

FORMULA GRANT

71. As described earlier, under the second round of Local Transport Plans the Department for Transport decided to distribute capital funding partly based on performance.[121] A formula, which attempts to assess transport need, is being phased-in for the remaining 75% of the Integrated Transport block. The formula is set out in the table below.


Table 3: Integrated Transport Block Formula (Ev 121)
Variable Broad Definition Weighting
Local public transport patronage Bus patronage, light rail patronage and Merseyside Electrics patronage in 2004-05 30%
Road casualties Casualty numbers in 1994-1998 on local authority managed roads—roughly 78% of the 20% for deaths and serious injury numbers and 22% of the 20% for slight injuries 20%
Population weighted by settlement size 2004 Population (with account taken of daytime population and projected growth to 2014) with more weight for population living in settlements of more than 100,000 (and to a lesser extent settlements between 50,000 and 100,000) than smaller settlements 25%
Population in districts with air quality management areas Population of district/unitary council areas that include designated air quality management areas related to local transport as at late 2005 5%
Population weighted by deprivation Population weighted by degree of deprivation and level of car ownership at census area level with most weight for areas with high deprivation and low car ownership 15%
Rural population Population living in settlements of fewer than 25,000 5%

72. In 2004 the Department consulted on the introduction of the formula. The Department told us that major advantages of introducing a formula to inform the distribution of the Integrated Transport block included:

  • It allows allocation decisions to be made consistently between authorities, avoiding inconsistent decisions;
  • There is transparency in funding allocations—important given the competition for resources;
  • It enables need to be considered in funding allocations—the principle underlying the formula already used for the capital maintenance block.[122]

73. There were mixed views among local authorities about the merits of the formula. Those authorities that had performed strongly, such as Devon County Council, were concerned that the approach would effectively reward poor performance, with higher levels of resources being allocated to local transport authorities which were not meeting their targets.[123] More noticeably perhaps, it was those authorities that had not received their full indicative allocation because of the introduction of the formula that took most issue with it. As the Local Government Association told us, introducing new funding formulae inevitably produces reductions in funding levels for some recipients, who will feel that they have lost out. As well as the perception of unfairness, this loss of funding can affect service delivery.[124]

74. Southend-on-Sea Borough Council was one such authority. It identified the following concerns: inaccurate population data, including failure to recognise Southend's increase in daytime population as a tourist destination; failure to reflect the council's status as a Growth Area and the transport improvements needed to produce sustainable communities; a similar failure to reflect its status as a Regeneration Area; and no account taken of the growth in jobs and the likely increase in levels of commuting. [125]

75. The formula seemed to enjoy more support from metropolitan authorities. AGMAPTA in Greater Manchester welcomed the formulaic approach, and suggested it was "fair and produced a reasonable result".[126] The West Midlands CEPOG also described the formula as "generally fair", but went on to suggest that unemployment and job availability statistics should have been included in the formula as these are indicators of economic regeneration needs.[127]

76. A potential advantage of the formula approach is the opportunity to ensure parity between regions, outside London.[128] The Minister indicated that the formula should address some of the regional discrepancies in per capita transport capital expenditure.[129] We welcome the introduction of the new, needs-based capital funding formula, which aims to allocate funds on a fair and well-understood basis.

Capital funding for 'Major Schemes'

77. In addition to the block allocations for Integrated Transport the Department for Transport also provides capital funds for Major Schemes which would not be affordable through the block allocation based on local authorities' bids for individual Schemes. The Department assesses the bids for value for money and deliverability to time and budget.[130] The schemes are appraised by the Department against the preferred economic, environmental, safety, accessibility, and integration criteria.

£5 million threshold

78. During the first Local Transport Plan period the Government would generally not fund schemes below £5 million out of the 'Major Scheme' budget and authorities were not permitted to spend more than £5 million on a scheme without Government approval. The main exception being that where authorities faced difficulties pursuing large schemes costing under £5 million, the Department agreed to provide additional funding in some such cases.[131]

79. The £5 million threshold was heavily criticised during the course of our inquiry by local authorities, Passenger Transport Authorities and other witnesses. One of the main problems with the £5 million limit is that it is seen to take decisions out of local authority hands. As Tony Travers of the London School of Economics told us, local decision making would be better aided by allowing a decision "on significantly larger projects at the local level than is currently the case."[132] In addition, the current £5 million limit means that schemes which are regarded as fairly modest are required to be submitted to central Government for appraisal, which requires a significant amount of preparation work which can, according to Mr Tim Larner, Director of the Passenger Transport Executives' Group, "add years onto the process".[133]

80. One solution to this problem could be the adoption of different appraisal procedures for different sized schemes. This suggestion was put forward by both Merseytravel and the Association of Greater Manchester Authorities.[134] Merseytravel suggested "the introduction of banding e.g. £5m-£20m; £21m-£50m etc; each of which would have a mechanism for qualifying for Government grants which reflected the scale of the funding sought and the lever of risk".[135] Other witnesses wanted to see the threshold raised to £10 million to allow greater local determination.[136]

81. Mr Larner recommended that the threshold should vary depending on the size and budget of the transport authority: "I appreciate that in other parts of the country, where their level of block funding is much lower, there may be grounds for keeping it lower there, but there is a lot more scope for local flexibility and raising that £5 million in the big cities."[137] But not all favoured an increase.[138] Whilst understanding the arguments for an increase, the County Surveyors' Society described the difficulties of raising the threshold within the current system:

In principle, the threshold should be increased in order to restore its value in real terms, however such a move would require a review of the funding regime for majors and those schemes excluded by a higher threshold. On balance, if such a review is not to take place, the threshold should remain at £5 million […][139]

82. The Minister argued that raising the limit would have a negative effect on local authorities because their access to additional central government funding would then be restricted to even larger schemes.[140] Certainly, if the limit was raised to £10 million it would be necessary to increase the capital block allocation to local authorities to enable them to fund major schemes up to £10 million from that budget.[141] But—as Mr David Locke of 4ps (Public Private Partnerships Programme), a local government project delivery specialist, argued—spreading this additional revenue across the country would dilute the funds intended for major schemes. Under this change, local authorities might all get a little bit but not necessarily enough for their own particular Major Scheme.[142]

83. The Department for Transport has proposed a change to the arrangement for Major Schemes in LTP2. Authorities will now be allowed to fund schemes costing more than £5 million from their own resources, and if the local authority is funding the scheme, Department for Transport approval will no longer be required.[143] We welcome the proposal to allow authorities to proceed with Major Schemes without needing Department for Transport approval if they are funded by the authority. This proposal goes some way towards giving local authorities the capacity to determine significantly larger projects at the local level.

84. Nevertheless, many authorities will be unable to afford to fund such schemes from their transport budgets. The proposal will only be a solution in a significant number of cases once local authorities have greater powers to raise more funds locally. One of the key difficulties presented by the £5 million limit was felt to be the burden of preparing schemes for Department for Transport appraisal. We therefore recommend that the Department consider adopting different appraisal processes for schemes of different costs, with the aim of reducing the burden of work on local authorities for lower-cost schemes. A more light-touch approach should be adopted for moderate schemes costing £10-20 million. The threshold should be increased to £10 million.

Bid preparation

85. The Department for Transport cannot afford to fund every major scheme put forward by every local authority, and so authorities compete for funding approval. The Department's Guidance on Major Schemes states that the same appraisal requirements apply to all schemes submitted, but the level of detail required in the appraisal will be proportional to the scale and complexity of the scheme.[144] The Department is reviewing the formal approval stages that apply to major scheme decisions, and what information is required at each stage.[145] There are currently three stages to the approval process for Major Schemes:

  • Stage 1: Programme Entry (formerly known as 'Provisional Approval')—granted after a Major Scheme Business Case has been accepted by the Department. The Business Case includes a value for money appraisal and project management information which shows that the scheme is affordable and deliverable to time and budget, with a likely start date within three years. Programme Entry status confers no guarantee of funding.
  • Stage 2: Conditional Approval—this stage normally occurs once statutory powers have been granted, but before procurement has taken place, and the authority has to update the Major Scheme Business Case to show any changes in design or cost estimates. Conditional Approval signifies a "firm undertaking by the Department that Full Approval will be granted subject to a limited number of conditions,"[146] namely, that the costs and financial risks do not change.
  • Stage 3: Full Approval—granted only where firm prices are available, procurement has been completed, and the balance of risks and liabilities is known and satisfactory. This aims to prevent significant cost increases after Full Approval has been granted. Full Approval signifies that the Department will make funds available and work can commence.

Costs of bidding and preparation

86. The bidding process was heavily criticised by witnesses. The principal concern was the costs involved in designing schemes to the level required for appraisal by the Department for Transport. These concerns were widely held.[147] The Local Government Technical Advisers Group explained: "Preparation of the Major Scheme Business Case is in itself an extensive and expensive process given the associated rigorous appraisal and assessment process […] efficiencies need to be introduced to reduce abortive and wasteful use of resources."[148] Greater Manchester Passenger Transport Executive gave an indication of actual costs incurred through bidding: "Typically GMPTE would need to spend £150,000 to £200,000 in the development of a bus station / Interchange scheme to the level of detail necessary".[149] West Midlands CEPOG stated: "Preparation costs have to be found from other budgets and, thus, diminish the amount of funding available for delivery."[150]

87. The long period taken by the Department to consider bids was also thought to lead to additional cost increases. Merseytravel told us that the second and third steps alone of Merseytram Line 1 took 18 months. These kinds of delays can make it "inevitable that initial costs at scheme development will vary significantly from the costs at the time of market tendering which could be 3-4 years later".[151]

88. This was demonstrated in the example provided by Greater Manchester Passenger Transport Executive of the Leigh-Salford-Manchester busway scheme.[152] The scheme secured Provisional Approval in December 2000, with costs estimated at £26 million (at 1998 prices). An interim decision letter was issued by the Secretary of State in October 2003 but Transport and Works Act powers were not issued until August 2005, by which time the cost had risen to £42.3 million (at 2004 prices).[153] The scheme still retains Provisional Approval but for £26 million as approved in December 2000. In the meantime, the Passenger Transport Executive has made a considerable financial investment in the project. They told us: "To date some £4.3 million has been spent on the scheme but with no certainty that it will progress to Conditional Approval."[154]

89. The costs of scheme preparation are said to be increased in some cases by a tendency of the Department to 'micromanage' the appraisal process.[155] The Local Government Association told us: "Repeatedly submitting revised scheme bids at the request of central Government, only for the entire project to be shelved, is a problem."[156] Ms Quant of Hampshire County Council indicated the scale of costs incurred on the South Hampshire light rapid transit scheme at the Department's request: "We spent […] getting on for three-quarters of a million between our transport funding being withdrawn and the final coup de grâce. That was because the Department made us rework all of the figures."[157]

90. Some local authorities thought that there should be more financial assistance from the Department to help councils meet the costs of developing proposals for appraisal. South Yorkshire LTP Partnership suggested that the Department had passed on to local authorities more of the risks associated with scheme preparation to reduce purely speculative bid submissions.[158] East Sussex County Council thought that 'Programme Entry' status should indicate a commitment to cover the costs of both preparation and construction.[159] Witnesses from Greater Manchester also suggested that Programme Entry status should represent a presumption that funding would be made available, unless there were serious cost escalations.[160] The Minister suggested, however, that it was design changes instigated by local authorities which led to many of the cost increases, and that the Department had decided to make local authorities more responsible for meeting increases in costs from their own budgets.[161]

91. The Local Government Technical Advisers Group indicated that there is a tendency by local authorities to submit a Major Scheme Business Case as soon as possible in order to secure funds, and that this means authorities submit schemes at a preliminary design stage when final costs of the scheme are uncertain. This has impacts later in the process when the Department expects the authority to meet cost increases.[162] The appraisal process and funding system need to be looked at holistically in order that these pressures are resolved properly and not just moved to other stages within the process.

92. The Department for Transport needs to ensure that investment is allocated where it can have the most impact and with as much certainty of successful delivery as possible. In addition, any local authority developing a transport schemes has, for its own purposes, to assess it against various planning criteria to ensure that the scheme design is optimal and value for money. It is important that this is a rigorous process. Nevertheless, the existing bidding and appraisal processes place a tremendous financial burden and risk on local authorities. The process of bidding should not eat into the transport budget to the extent that the funds available for actual delivery are substantially reduced. The Department itself adds to costs when it prolongs the decision-making process and asks for increasingly detailed information to be provided. The Department should make a commitment to streamline the process and move more quickly with its appraisal and decision making. It should set a target to reduce the current time taken by at least 25% in most cases. It must have the necessary expertise available, and must be clear about the information needed early in the process. At 'programme entry' stage the Department should take a greater share of local authorities' scheme development costs. It should stop trying to micro-manage the process.

ABORTED BIDS

93. We had evidence of an unknown—but large—amount of money being wasted by local authorities preparing bids for schemes which never receive full Departmental approval and which are therefore never implemented. These are known as 'aborted bids'. Of 38 scheme bids received by the Department between July 2005 and June 2006, initial approval has been granted to 15 schemes; 13 are still under consideration with outstanding issues to resolve; six are unlikely to be funded within the next 10 years; and four are expected to be funded but significantly later than the promoters' preferred timetables.[163]

94. We were told by the Department that the amount spent annually on scheme preparation was not known because it "does not routinely collect information from authorities on how much they spend on the preparation of schemes or bids, and is not necessarily aware of all such proposals". Further, since the scale of preparation costs varies significantly both by the type of scheme and by how far preparation has been taken forward before a scheme is rejected, they were unable to attempt an overall estimate".[164]

95. Examples of the level of resources that have been invested in the preparation of schemes which have not received funding from the Department are given in the table below. In those cases where figures have been provided, between five and fifteen per cent of total scheme costs are spent without the proposal receiving any guarantee of funding.


Table 4: Examples of expenditure on preparation of schemes which have not (yet) received approval
Project Expenditure to date % of total scheme cost
Merseytram three line tram network Total spend on Merseytram between 2001-02 and 2005-06 was £68.3 million. Total costs of the scheme expected to be £900 million. 7.5
South Hampshire tram scheme Spent slightly over £10 million developing the scheme, which required a total DfT contribution of £170 million. 5.8
Leeds/Salford/Manchester busway scheme Secured provisional approval in December 2000 but still no conditional funding approval. It has so far cost GMPTE £4.3 million, for a scheme that has a capital value of about £45 million. 9.5
Hastings link road For a £50 million project the Council will spend £6-£7 million "without any expectation that when we submit that scheme it will be finally approved." 14
New bridge crossing of the River Wear, Sunderland The scheme is estimated at around £67 million and has incurred costs and development costs to date in the order of £2 million. -
Sunderland scheme Scheme is in the order of £13 million and the development costs to date are of the order of £850,000. 6.5
Kingskerswell Bypass Major Scheme Business Case (likely to be submitted September 2006). Since 1996 Devon County Council and Torbay Council have jointly spent £1.323 million. During 2005/06 £191,000 was spent on scheme preparation, and during the current financial year a further £250,000 is planned to be spent. -
Exeter PUA Infrastructure and East of Exeter Phase 2 Improvements. The schemes are at a relatively early stage of their preparation but £40,000 was spent during 2005-6 on initial option assessment and design. The SW Region has concluded that there is a strong case for their inclusion in the Regional Funding Allocation. -

Sources: Ev 25, 96; Qq 15, 76, 168, 169, 242, 243

96. We were told by some witnesses that the design and preparation work carried out on aborted bids can be valuable to the authority and re-used at a later date.[165] Although there is undoubtedly some value in any preparation of this type, it seems to us that the advantages are not proportionate to the significant costs incurred if the scheme has to be postponed for an unknown and significant period after which time the project will require updating and re-working. As Mr Bob Wilkins, Director of Transport and Environment at East Sussex County Council, told us: "Whilst we would accept that […] you can sometimes get benefits out of the aborted work, in reality you end up a few years later having to almost start the whole process again."[166]

97. The fact that it can cost between five and fifteen per cent of total scheme costs just to get a scheme to a stage where appraisal can take place seems both risky and wasteful. We recommend that the National Audit Office investigate the value for money offered by the appraisal process, including the costs of preparing aborted bids.

98. Rejected bids are likely to increase in number. In the Department's guidance on preparing the second Local Transport Plans, it advised authorities that the competition for funding would be stiff and that evidence of value for money would become increasingly important as "the Department is likely to receive many more major scheme proposals than it can support" for LTP2.[167] Indeed, another guidance document from the Department states that authorities are encouraged to develop their second round LTP targets "on the assumption that there are no new majors [funded by the Department]".[168] The Department lists four main reasons for this: increased capacity within authorities to develop major schemes on their own; increased impetus for strategic planning as a result of recent White Papers and the Multi Modal Studies programme; new proposals generated by the Sustainable Communities Plan; and slow delivery in the first Local Transport Plan period meaning many major schemes are due to start construction in the next few years. The fact that more major schemes are being put forward as a result of strategic plans announced by the Department puts an onus on it to ensure funding is available.

99. It is unacceptable that the Department for Transport has indicated that there will be no new central funding for major transport schemes between 2006 and 2011. This will represent a significant set back in the implementation of major schemes needed to transform the UK's transport networks. Having set the scene for more transport schemes to be initiated, the Department for Transport should make the case more strongly with the Treasury that improved local transport requires proper investment.

Communication about Major Schemes

100. We heard several suggestions about how to reduce the money wasted preparing 'aborted' bids. Some witnesses suggested that authorities might be better able to calculate their chances of success if there was a clearer indication of the total budget available and closer liaison between the Department officials and scheme promoters. Mott Macdonald stated:

the Major Scheme bidding process has been hampered by a lack of transparency (the scale of available funding or the number of expected submissions from year to year has not been clear), consequently there is a tendency to under-estimate costs and risks in order to gain scheme acceptance, and carry out abortive work on scheme business cases that are subsequently not authorised.[169]

101. Greater Manchester Passenger Transport Executive suggested better partnership working between the Department and local authorities once major scheme bids have secured Programme Entry status. It indicated that one option might be "for DfT to have individual officers nominated as project sponsors for specific schemes."[170] A partnership approach between the Department and local authorities may help remove some of the mystery surrounding rejected bids, which have been a cause of major disappointment for some authorities. Several authorities could not understand why schemes which in their view met the Department's value for money criteria and reflected the priorities of the Government' transport strategy had failed to achieve Full Approval. One example was Hampshire County Council's light rail scheme. Ms Quant gave evidence that the Council did not understand why its proposal had been rejected: "We have yet to have an answer from the Government as to what is wrong with our scheme [...] We have yet to understand what 'affordable' means […] We are left not knowing […] what would be the right scheme to submit in order to get funding approved."[171]

102. This situation is unsatisfactory. The Department told us that in 2004 it published details of how it assesses the value for money of schemes, specifically in order to allow promoters to make a considered judgement of the prospects of success at an early stage.[172] Nevertheless, the evidence we received indicated that authorities remain unclear why schemes have been rejected.

103. Disappointment over the Department's decision to revoke funding for some Major Schemes has raised the profile of the relationship between the Department and local authorities in the context of projects such as light rail. There was severe criticism of the Department's decision to reject schemes which local authorities had judged to comply with national transport strategy and priorities, and present good value for money. The Department for Transport claims to have made clear the value for money criteria; but local authorities indicated this was not the case: they still did not know why light rail schemes were rejected, they did not know what they were aiming for, or what would have allowed them to be approved. Our predecessor Committee identified in its report on Light Rail and Modern Trams that the Department's delays and changes of policy added significantly to scheme costs.[173] The Department must ensure that councils get the right advice at the right time to enable sensible decisions on whether to continue with a bid. The Department should publish clear information about the budgets available for Major Schemes in order that local authorities have a better idea of their chances of success.

Regional strategies

104. There was a suggestion from some witnesses that the new regional transport strategies and regional funding allocations would help guide applications for Major Schemes and thereby remove some of the uncertainty associated with the bidding process.[174] The Department has stated that the regional context will provide a more strategic approach and reduce resources currently wasted in bidding.[175] To date, however, there remains a fair amount of confusion about exactly how these systems will interact. AGMAPTA identified the complexities:

Whilst the Regional Funding Allocation exercise has been helpful in providing an identified level of likely resources available to a region, we remain concerned that the NWRA [North West Regional Allocation] is not able to effectively reflect the economic importance of the [...] city regions [...] We also note that this process carries no guarantee of funding, since Government still issues the final approvals. Moreover, we would suggest that there is a spatial mis-match between local transport planning at the sub-regional level and spending prioritisation at the regional level.[176]

105. While there exists confusion about the extent to which regional guidance will influence Department for Transport decisions on Major Schemes, local authorities are likely to continue to submit bids for those schemes they judge to be locally most important.[177] The Department needs to clarify exactly what role the regional transport strategies and Regional Funding Allocations will play in its choice of Major Scheme approval. There must be transparency in how these different layers of decision-making and prioritisation interact.

Private Finance Initiative

106. We were told by local government project delivery specialists, 4ps, that private finance initiative (PFI) is playing an important role in the delivery of the Government's investment plans for public services. PFI is one form of public private partnership. In a PFI transaction, a private sector provider is given responsibility for designing, building, financing and operating assets which deliver a public service, which the local authority then buys. The overriding objective of the PFI is to create a structure in which value for money is optimised over the long-term.[178]

107. Local authorities are eligible to seek central government support ('PFI Credits') towards the costs of PFI projects. The total PFI funding available to local authorities for local transport schemes over the three year period commencing 1 April 2005 is £2.36 billion. In addition, there remained some PFI funding unallocated from earlier years' spending review allocations. To date, PFI has been used by the transport sector to deliver: the Nottingham light rail scheme; Doncaster transport interchange; highways management in Portsmouth; a handful of road schemes;[179] and several street lighting projects.[180] There are other schemes in procurement.

108. 4ps identified some of the advantages of using PFI for transport schemes. It stated: "Properly implemented, PFI helps to ensure that desired service standards are maintained, that new services start on time and facilities are completed on budget, and that the assets built are of sufficient quality to remain of high standard throughout their life."[181] Experience suggests that the PFI is most appropriate where there are major and complex capital projects with significant ongoing maintenance requirements.

109. Despite these supposed advantages, however, there has been less uptake of PFI credits for transport schemes than was expected. The Nottingham Express Transit Line One scheme is the only major local authority public transport scheme to have been procured and delivered through the PFI. In the financial year 2004-05 PFI credits accounted for £121 million of Department for Transport's local transport capital expenditure, out of a total allocation of £1.429 billion.[182] By 5 June 2006, there remained £2.243 billion of PFI funding available for local transport unallocated by the Department.[183] Some of this amount had been committed in principle, but even excluding those 'committed' allocations, some £700 million of the Spending Review 2004 PFI transport funding was unallocated. 4ps urged that new transport projects be brought forward to make full use of the allocation as part of the Spending Review 2007.[184] 4ps also suggested that authorities include in their Local Transport Plans bids for PFI funding for highways management and street lighting schemes. We believe that the lack of enthusiasm shown by local authorities for pursuing PFI funding for transport schemes casts doubt on the applicability or incentives for this type of funding for transport.

110. Although the Department for Transport has promoted PFI as an option for funding major transport schemes it is notable that relatively few transport PFI proposals have been submitted. If the Department is serious about PFI, it should investigate what it needs to do to enable more authorities to benefit from this funding. If PFI is not appropriate to transport, the Department should consider making this funding available through other procurement forms. Given the lack of capital funding expected to be available for Major Schemes through LTP2, this option needs to be explored.

Transport Innovation Fund

111. In the July 2004 White Paper, The Future of Transport, the Secretary of State announced the creation of a Transport Innovation Fund. In Guidance issued in January 2006, the Department clarified that the Transport Innovation Fund would be made available for:

The Department stated that for both categories it would give priority to proposals which are most effective in securing a financial contribution from significant beneficiaries (such as business and users).[185]

112. From the evidence we received it seems that local authorities largely welcomed the advent of the Transport Innovation Fund, mainly for an injection of significant levels of capital funding into the transport sector.[186] The Fund, which will first become available from 2008-09 is forecast to grow from £290 million to over £2 billion by 2014-15. The table below shows the indicative allocations. Mr Nick Vaughan, Greater Manchester Passenger Transport Executive, told us that the Transport Innovation Fund is:

[…] an opportunity to secure levels of investment that we clearly need in our major city regions and I think the levels of investment that are needed in our city regions far exceed the available resources through local transport planning funding allocations at the moment so we would certainly welcome that opportunity to secure additional resources.[187]

Table 5: Capital funding available through Transport Innovation Fund, Local Transport Plan, and Regional Funding Allocations
2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15
TIF

£millions

290 600930 1300 16802100 2550
LTP £millions 547 574603 -- --
RFA £millions 752 767783 799 815830 847

Sources: DfT Final Financial Planning Guidelines for Local Transport Plans (December 2005) this is the finalised planning guidelines for the Integrated Transport block for 2007/08 to 2010/11 and HM Treasury (2005) Regional funding allocations: Guidance on preparing advice

113. Nonetheless there are concerns raised by the introduction of a new funding framework which bypasses the strategies set out in the Local Transport Plan and Regional Funding Priorities, and which at its pinnacle dwarfs the funding available through the LTP process. The Regional Funding Allocations (RFA) are expected to reach £850 million in 2014-15 compared to a Transport Innovation Fund budget of £2.550 billion. The Transport Innovation Fund will be by far the largest source of transport funding available within a decade. This has raised concerns. Academics have suggested that the Transport Innovation Fund will undermine the local transport framework, and the transport planning system more widely.[188] Peter Headicar, of Oxford Brookes University, argued that the Department had worked hard to improve the transport planning framework since 2000,[189] and that this could be at risk from the introduction of a new bidding system which sits outside that framework.

114. The Fund sets aside a significant scale of capital resources for just two of the many priorities within transport: productivity and congestion. It has been suggested that this is another form of central Government micromanagement of local transport planning. As Mr Travers told us: "The Transport Innovation Fund is, without doubt, a nationally originated pot of resource, which inevitably carries national expectations with it."[190] The former head of the Treasury's transport team indicated that there were significant strings attached to the Fund—namely that to secure funding, authorities must pursue these national objectives. He stated: "A transport funding strategy beyond the end of the decade is thus either all about showing best returns against those national objectives or about living within the RFA."[191] In addition, there were concerns that the Transport Innovation Fund adds another layer of funding onto an already complex funding picture.[192] The Institution of Civil Engineers told us: "the array of competitive funding streams now available […] add to the burden, and cost, carried by local authorities, often with little guarantee of funding success."[193]

115. We also have concerns that the 'productivity' category may be open to misinterpretation. Some authorities have stated their aim of pursuing local regeneration priorities through this category.[194] The guidance states that this category of funding is available for national, inter-regional, regional and inter-urban schemes which benefit net national productivity. As one commentator said: "it is not about regeneration: it is about adding to total GDP."[195] It is expected that projects which benefit business users, road hauliers and the supply side of the economy will attract funding; the aim being to remove transport constraints on the most productive parts of the economy. The Department will not be holding a formal bidding process for these schemes, but rather it will identify candidates from the Regional Development Agencies' priorities.[196] It remains to be seen whether schemes aimed at local regeneration will receive funding through this system.

116. The Transport Innovation Fund signals a welcome injection of capital funds into transport: when it comes to fruition it will dwarf the Local Transport Plan budget and Regional Funding Allocations. However, the Fund also represents a major shift away from local transport planning: it is nationally administered and bypasses the strategic frameworks provided by Local Transport Plans and regional transport strategies. Because the Fund is available only for projects which meet two transport priorities identified by central Government, it represents a move away from local determination. It is confounding that, having taken pains to establish a planning, funding and performance management regime through the Local Transport Plan and regional transport strategies, the Department should now seek to undermine this so severely with a separate new fund of the size and type of the Transport Innovation Fund. The Department should set out the rationale for introducing the Fund in such a context; and why the Fund's two priorities should override the four shared transport priorities agreed by the Department and the Local Government Association. The Transport Innovation Fund is not in any way about local choice or local schemes but about central government transferring its risk to local councils for what are schemes of national importance. It is not about innovation; it is about central control.

117. The sudden availability of the Transport Innovation Fund raises the question why this money could not have been made available to transport sooner, and why it is not being made available to deliver the transport priorities identified by the regions in recent advice to government, and the Major Schemes proposed through the Local Transport Plans. We suggest that more of this pot should be made available for local schemes judged to be important by local authorities.



117   Department for Transport Annual Report 2006 (Cm 6817) paragraph 7.7 Back

118   Ev 34; see also Ev 71 Back

119   Ev 36, 34 Back

120   Ev 171, 175, 73, 36, 77, 56 Back

121   See paragraph 23 Back

122   Ev 103 Back

123   Ev 71 Back

124   Ev 34 Back

125   Ev 171 Back

126   Ev 73 Back

127   Ev 12 Back

128   Qq 28, 29, 304 Back

129   Q304 Back

130   Ev 103 Back

131   DfT (2004) Full Guidance on LTPs: Second Edition, page 63 Back

132   Q360 Back

133   Q44; Devon County Council made a similar comment, see Q203 Back

134   Ev 93, 25 Back

135   Ev 25 Back

136   Qq 203, 44, 78, 79, Ev 175, 96, 24 Back

137   Q45 Back

138   Ev 93, 100 Back

139   Ev 100 Back

140   Q268 Back

141   Q142 Back

142   Q374 Back

143   DfT (April 2005) Guidance to Local Authorities seeking DfT funding for transport Major Schemes. This is a draft document for consultation and contains updated guidance for Local Authorities on Major Schemes. Back

144   DfT (2005) Guidance to Local Authorities seeking DfT funding for transport Major Schemes, page 7  Back

145   The DfT's consultation on Major Schemes guidance consultation closed in July 2006  Back

146   DfT (April 2005) Guidance to Local Authorities seeking DfT funding for transport Major Schemes Back

147   Ev 12, 6, 175, 73, 36, 34, 196, 56, 25  Back

148   Ev 36 Back

149   Ev 6 Back

150   Ev 12 Back

151   Ev 25 Back

152   Ev 6 Back

153   The rise in part reflects six years of construction industry price inflation, but also changes in design from the July 2000 submission arising from the TWA public inquiry (Ev 6). Back

154   Ev 6 Back

155   Ev 73, 1, 34, 93 Back

156   Ev 34. See also the former Transport Committee's report 'Integrated transport: the future of light rail and modern trams in the United Kingdom' Session 2004-05 HC 378-I Back

157   Q242 Back

158   Ev 175 Back

159   Ev 77 Back

160   Ev 6, 73 Back

161   Q323 Back

162   Ev 36 Back

163   Ev 128 Back

164   Ibid Back

165   Qq 168, 169, 243 Back

166   Q243 Back

167   DfT (2004) Full Guidance on LTPs: Second Edition, pp 62-63 Back

168   DfT (2005) Guidance to Local Authorities seeking DfT funding for transport Major Schemes, page 2 Back

169   Ev 56 Back

170   Ev 6 Back

171   Q242 Back

172   Ev 103 Back

173   House of Commons Transport Committee 'Integrated Transport: the Future of Light Rail and Modern Trams in the UK' Tenth Report of Session 2004-05 HC 378-I, paragraph 55 Back

174   Ev 71, 6, 73 Back

175   Ev 103 Back

176   Ev 73 Back

177   Ev 6 Back

178   Ev 128 Back

179   Road schemes in Essex, Newport and the Sirhowy Enterprise Way Back

180   Street lighting in Brent, Barnet, Ealing, Enfield, Islington, Lambeth, Leeds, Manchester, Newcastle, North Tyneside, South Tyneside, Staffordshire, Stoke on Trent, Sunderland, Wakefield, Walsall (Ev 128) Back

181   Ev 128 Back

182   Ev 103 Back

183   Ev 128 Back

184   Ibid Back

185   DfT Transport Innovation Fund: Guidance January 2006 Back

186   Ev 12, 175, 73 Back

187   Q48 Back

188   Ev 183, Peter Headicar, Oxford Brookes University speaking at the Waterfront conference 'Funding Transport Infrastructure: Understanding the New Approach' 21 June 2006 Full conference transcript. Back

189   Ibid Back

190   Q381 Back

191   Lewis Atter, of KPMG, speaking at a Waterfront conference 'Funding Transport Infrastructure: Understanding the New Approach' on 21 June 2006. Back

192   Ev 183, 196 Back

193   Ev 196 Back

194   Ev 175, 73 Back

195   Lewis Atter speech at Waterfront conference 21 June 2006 Back

196   DfT Transport Innovation Fund: Guidance January 2006, page 7. There was later a Written Statement to Parliament by Transport Secretary Douglas Alexander regarding successful Productivity TIF proposals on 27 June 2006, see Hansard Col. 6 WS Back


 
previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2006
Prepared 29 October 2006