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UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 1120-iv House of COMMONS MINUTES OF EVIDENCE TAKEN BEFORE TRANSPORT COMMITTEE
LOCAL TRANSPORT PLANNING AND FUNDING
Wednesday 14 June 2006 MR TONY TRAVERS, PROFESSOR STEPHEN POTTER and MR DAVID LOCKE Evidence heard in Public Questions 357 - 408
USE OF THE TRANSCRIPT
Oral Evidence Taken before the Transport Committee on Wednesday 14 June 2006 Members present Mrs Gwyneth Dunwoody, in the Chair Clive Efford Mrs Louise Ellman Mr Robert Goodwill Mr John Leech Mr Eric Martlew Mr Lee Scott Graham Stringer ________________ Memoranda submitted by Open University and 4ps
Examination of Witnesses
Witnesses: Mr Tony Travers, Director of LSE Greater London Group, London School of Economics, Professor Stephen Potter, Transport Strategy, The Open University, and Mr David Locke, Director of Transport, Public Private Partnerships Programme (4ps), gave evidence. Chairman: Good afternoon, gentlemen. We will begin with a bit of housekeeping before we come to the questions. Those members having an interest to declare? Graham Stringer: Member of Amicus. Chairman: Member of Aslef. Mrs Ellman: Member of the Transport and General Workers' Union. Clive Efford: Member of the Transport and General Workers' Union. Q357 Chairman: Gentlemen, you are most warmly welcome. This is a very important inquiry and obviously one that concerns people at every level since there is no love greater than a man's love for his car. We are very grateful to you for the evidence you have already given us. We will undoubtedly have large numbers of questions to ask you. I did wonder whether anybody wanted to begin by making one or two general remarks or whether you are happy to go straight to questions. The answer is no. Can I start off then with you, Mr Travers? Both local authorities and passenger transport executives want more control over the transport decision-making process. How ought those decision-making powers to be allocated between regional, national and local level? Mr Travers: Thank you for inviting me. There is no doubt that in a country as small as Britain, England --- Q358 Chairman: Let us try the United Kingdom. Mr Travers: The United Kingdom (Great Britain, England) being a relatively small, relatively densely crowded or populated place, we have ended up with a number of institutions of government whose remits inevitably, to some extent, overlap because the neat interests of boundary-drawers and economic geographers rarely work as well as they might do. Perhaps particularly in the north of England where there is a Northern Way super region, then the regions, then the passenger transport authorities, and then the metropolitan districts or counties and districts within them, it is a very complex system of government. I have to say that there is no way out of that. Inventing new institutions within this set would be problematic. I think to create another set of bodies with different boundaries without changing or removing one of the others, certainly in the north, would be very difficult. Q359 Chairman: Do you agree with the Government when they say that they really already have enough flexibility when it comes to local transport because they produce their own priorities and they can decide how to invest resources - "they" in this case being the local authorities? Mr Travers: No, I would not, Chairman, because I honestly think that, at the risk of running ahead of what the committee may wish to ask, too many of the decisions about investment in transport, particularly in infrastructure, inevitably are made at the centre and are not made either regionally or in the various versions of locally. The reason for that is that public finance in Britain is so centrally controlled and therefore in transport, where there is a significant number of large projects, it inevitably means that all those decisions have to be made at the centre because that is where the money can be made available. Until and unless there is a capacity for local areas, be they existing authorities or new ones, to make decisions and raise resources locally, there is an inevitable consequence that all decisions, certainly over the larger projects, will fall to Whitehall that will then get a huge number of projects, all bidding for a limited pot. Q360 Chairman: You yourself have said that some of them will be quite large schemes if they are transport schemes. What ought to be the limit on the Department's involvement? Mr Travers: It seems at the moment, if I can answer the question cautiously, most projects, other than the smallest ones, have to be decided centrally. I am not sure I can provide a cut-off number of millions of pounds. What I think would be a better way of achieving local decision making that tied the cost of projects to their local benefit and made more of the decisions locally would be the capacity to decide on significantly larger projects at the local level than is currently the case. For example, to take the much discussed issue of trams and tramways in the major cities, at the moment inevitably the decisions about most of the financing of those projects ends up being made by the Department in London. Historically, our major cities were able to make decisions like this in those cities. It would not be beyond the wit of Government, certainly with Sir Michael Lyons's committee sitting, to imagine repatriating decisions over local taxation in a way that would make it possible for revenue streams from local taxes or from fares to be available to make repayments on debt incurred in funding projects of the kind that we are discussing. Q361 Chairman: There is a nod from alongside you. Would you agree with that? Professor Potter: This is anticipating the sort of work that I have been looking at on the way in which you do have local funding mechanisms existing elsewhere in the world, and sometime British local authorities have had actually used the existing systems to generate local mobility funds. The thrust of the evidence that I have put forward is that we have succeeded in encouraging private/public partnerships of various sorts for the implementation of transport projects. We do not actually have what needs to complement that, which are private/public funding mechanisms. Some countries, the Netherlands in particular and others, have actually put together what they call local mobility funds where there are sources from a number of origins - it can be local taxation or an equivalent of our section 106 planning agreement grants, money from the private sector buying into projects, plus government grants - and that provides the sort of flexibility that is probably needed for more innovative and tailored responses in individual cities and local situations. Q362 Clive Efford: This question follows on from that. What are the advantages and risks in moving away from grant funding towards raising funds locally for transport? I am asking that to all three of you. Professor Potter: The risks are that very often the local sources of funds, depending on what methods of funding you use, can be more erratic; there can be problems if they are linked to, say, property development or income from planning permission because that can vary very much over time; you can assume you are going to get a good income but in fact that drops away. The better examples that I have studied have been where there have been several sources arranged into a package, a bit like an insurance portfolio, and so if something over-performs, then it compensates for something else under-performing. I think there is quite a nice example from Hong Kong on the way in which they use a property portfolio to finance both capital and revenue costs of the Hong Kong Metro by having a wide range in their property portfolio. I think you have to design these mechanisms to minimise risk. There are some bad examples. We had a problem with the Docklands Light Rail for the Becton extension, which was meant to be part-funded out of increases in property values and that did not occur because there was a delay in the development against the costs and of course that would therefore incur very high interest payments. So you do need to sort that out. There is a risk element involved in many of these local funding mechanisms, and you need to design the mobility fund to minimise and spread that risk. To some extent, central government funding is easier and perhaps more reliable and more manageable. Q363 Chairman: And cheaper, of course? Professor Potter: It can be cheaper, but not necessarily. You may able to release more funds by using these local funding mechanisms. Mr Locke: One of the other issues is that this encourages local ownership of the scheme. If you are having to raise the revenues locally for your particular scheme and you making those decisions locally and you do not have this ability to go back and ask for more money if the bids come in higher, you are forced to do much more work up-front to make sure that you have the costs right and that you have the revenues to support that cost, however that is procured. You are forced to make the decision on that basis. If you can raise the money locally through road user charging or a workplace parking levy, or whatever, and then you want to use that for your particular transport infrastructure, you have to get your costs right. If the costs come in higher, you have your own problem and then it is a local problem and you have to deal with it. That is the example with things like trams. If the local authority were to own the fare box risk and the passengers did not use the tram, the local authority has to consider how it can sort out that problem. At the moment, when that is resting with central government, it is very easy for local authorities to come back and ask for more money, if that is an issue. You take that out of the equation. Mr Travers: The security of the income sources would significantly depend inevitably on what those income sources were. Clearly, sources that were linked to a particular development or were a levy on a development would probably by less secure than a straightforward local tax. The possibility of an add-on to the business rate has been discussed, and indeed in the best traditions of these things, that is already in existence for business improvement districts, so it is not as if we are doing something which does not exist. In fact, the yield of business rate is incredibly predictable from year to year. Again, if you go down the list of possible taxes that the Lyons Inquiry might be looking at, some of them are more predictable than others. Clearly a tourist tax is less predictable than a tax on plastic bags or the congestion charge, to pull them out of a hat slightly. The other thing mentioned by my colleagues is that fares potentially, as the Mayor of London has shown, could be used, if they were available in the other metropolitan or non-metropolitan areas, by public authorities as a relatively secure income source to produce a revenue stream to produce the resources to repay prudential borrowing. It depends what the income source is but some could be nearly as secure as Government, and indeed TfL's bond rating is not as good as the national government's but it is not bad. Q364 Clive Efford: What sort of schemes are we talking about here and over how big an area are we talking about redistributing the non-domestic rate or any other sort of income? Can you paint a picture for us what sort of schemes we are looking at or what we are talking about? Mr Travers: Personally, at the risk of invading complicated territory, I would see this for transport purposes as only being feasible at the city region or regional level, which is not to say the city region might not consist of a voluntary collection of existing metropolitan districts, or in the counties, counties and districts, to avoid the need for a full-scale reorganisation of local government. Because transport infrastructure tends to operate, certainly the kind that I think by implication we are discussing, or ought to operate, through an area of bigger than the boundaries of one local authority in most cases, it is probably going to be necessary to have administrative arrangements and resource-raising powers that cover an area bigger than one local authority. It would not be true everywhere but it probably would be true in many places. Professor Potter: I want to provide an example of that. The America equivalent of BID was used to part-finance the BART system for the Bay Area and also for the Red Line Metro system in Los Angeles. As Tony was saying, they actually crossed several local authority areas, so they had to set up a consortium. Chairman: Can I stop you before you go any further? That system certainly crosses boundaries but of course those were the same boundaries as people where being asked to pay. In a sense, you were asking people to contribute to their own system. What Mr Efford had in mind was something slightly different. Q365 Clive Efford: How do you define boundaries? You talked about the Becton scheme, the extension of the DLR. For instance, if you were going for a tax on the benefit in terms of the increase in value of property, where do you define the line where people pay and people do not? Is there a model that we can take? Professor Potter: There is a model used for business assessment districts in the United States. They do use that. They have a model which identified precisely the properties that are affected and they contribute in proportion to the increase in property value associated with the transport investment. There is a procedure that is actually used in America for that. In a way, that is the equivalent of our BID system. They give it the unfortunate acronym of BAD. I think it would be better if we did not adopt that! Q366 Clive Efford: How do you go about preventing local revenue-raising powers, whether it is through property values or taxes, becoming regressive and socially exclusive? Professor Potter: That is the sort of issue I have looked at in the papers that back up this. A major problem with the American schemes is that the collection mechanisms tend to be regressive. They tend to go for consumption taxation; for example one cent on every bottle of beer you buy in Birmingham Alabama goes to fund the buses. It is a hypothecated beer tax, but for poorer people. Beer is the larger proportion of their expenditure than for higher income people. There are different funding mechanisms, for example related to road user charging and fuel duties, which are more progressive in the collection. The main thing is evaluating the distributional impacts of the entire system, which is both the collection and the distribution of the funds element. Q367 Mrs Ellman: Mr Travers, you mentioned in your initial comments the Northern Way project. Do you see within that a structure for taking decisions on transport schemes, say for example trans-Pennine schemes? Mr Travers: There is absolutely no doubt that the Northern Way offers a possibility of dealing with cross-boundary regional issues in parts of the country which can easily be seen as either three regions or one place. You are absolutely right that it must do. The difficulty is that the Northern Way is a relatively modest structure and does not have very much resource. In terms of its capacity to garner resources and raise money, it is in a weaker position than, say, Manchester City Council or Liverpool City Council, simply because they are major authorities with a council tax base to which, at the margin turn, they can turn. There is no doubt that in a country the size of Britain there will always be a need for a national rail infrastructure and national public transport infrastructure nationally determined. Whether we can quite cope with the clutter of institutions represented by the Northern Way and the regions and the former metropolitan counties as PTEs and the metropolitan districts, personally I think that is probably just perhaps one level too many. Q368 Mrs Ellman: Under the proposals that you have all put forward, how would schemes of that nature be facilitated? You said that as things are structured, the Northern Way does not have a direct resource base, and that is true. Under the ideas that you have put forward, how would that or could that be changed? Mr Travers: I have recently been involved with Stephen Glaister in producing a small study for the Local Government Association, which has looked at using the existing passenger transport authorities and executives as a way of building out without a major reform. If those authorities were made more powerful, more capable of raising their own resource, I would hope (this may be a forlorn hope) that those in, as it were, Merseyside, Greater Manchester, West Yorkshire and South Yorkshire at least, when they had greater access to resources, would not purely think in terms of their own internal needs, but would also turn to the trans-Pennine needs as well. If they did not, I fear that national Government or some regional or supra-regional institution would still be necessary. The problem we live with in Britain is that lots of places in the north are in more than one travel-to-work area; as we know, lots of places sit between Merseyside and Greater Manchester or between South and West Yorkshire, or whatever. A clutter of institutions is inevitable. The trouble is that it is very difficult to imagine giving them all the financial power to deliver. At the moment, few of them have the power to deliver. Q369 Mrs Ellman: Underlying the comments that all of you have made up to now is an assumption that nothing much can change of any significance unless there is a major change in financing and the allocation of financial revenues between local, regional and national organisations. Would that be correct? Are you all really saying that no other changes can be made unless there is that radical change? Mr Travers: That would be my personal view, yes. Professor Potter: I think that is broadly my view but I have seen some examples in the UK where local authorities have been able to set up, for example the sort of thing I was talking about, local mobility funds by using what existing powers they have and manipulating them as best as possible. Milton Keynes where I live actually does this through a private/public partnership for providing that fund and hypothecating parking charging and section 106 money into that, and then allocating projects from that. Q370 Chairman: We did want to know about that. How many different sources were there in the Milton Keynes scheme? Could you give us a rough breakdown? What was the biggest bit of it and how many more were there? Professor Potter: It is parking charges, section 106, and a contribution through the local transport plan; i.e. Central Government funding goes partly into that as well because the BID is also included within the local transport plan. My understanding is that those are the three main sources. This is very approximate because I do not have the figures here; the parking income is approximately £1 million a year. The section 106 comes and goes. It could be up to £3 million in one year. Q371 Chairman: It suffers from what we were discussing earlier. Professor Potter: Yes, it suffers from the erratic source. The local transport plan money is regular and the allocation. There are three sources of income there. To that is going to be added the roof tax for the expansion area, which is the £1,200 developer charge per property, which is to finance all infrastructure, some of which will then pass over to transport. That is going to occur in the future. That is the fourth new local source that is coming in, largely due to residual powers with Milton Keynes being a new town. I believe that has been put through. Q372 Chairman: That is not necessarily applicable. Professor Potter: That is not necessarily applicable, but it can occur. My point was that although probably to set up schemes like that more generally would require changes in legislation, it is possible to disseminate best practice and perhaps encourage local authorities to follow that example and a more incremental approach may well be possible. Q373 Mrs Ellman: One of the current issues we are addressing is the £5 million threshold for major schemes and whether that is correct or not. We have had differing evidence on this. We have had local authorities asking for that to be raised, and the minister claiming that if that were raised, it would simply disbar local authorities from getting additional government grants. Do you think there has been a misunderstanding about the nature of these thresholds? Mr Travers: I would guess that the misunderstanding probably derived from the fact that ministers judge (it is difficult for me to speak for them) that if they increased the threshold, most local authorities would probably feel so constrained on their revenue funding, that is the risk of capping, that they would not dare risk projects very big anyway. I suspect that is where the misunderstanding would lie, unless I am misunderstanding the question. Does that sound like a plausible possibility, that most authorities are so risk-averse because of the risks of capping on their council tax that any large project seems pretty daunting? Q374 Chairman: I am going to stop you there. I think the point Mrs Ellman was making is that, from the evidence we took, there is a totally opposed argument with the local authorities saying in effect, "£5 million is not enough, we need more and we need to be able to do this ourselves", and Government saying, "No, this would tip them into a completely different arrangement", or do I misspeak? Mr Locke: One of the issues is that obviously local authorities would like the freedom to be able to do their own major schemes up to a higher number, £10 million or whatever. Then you consider what happens with all those schemes between £5 million and £10 million and where the funding would come for those. If the money saved is then allocated through a formula, that means that the money is spread among all 120, or whatever, transport authorities in England and Wales. That means that they may all get a little bit but not necessarily enough for their own particular major scheme. That may be where there is confusion about what happens with the money saved. If you move decision making to the local authority, which is probably what people want so that they do not have to get individual approval for quite small schemes, will there be the money to do the schemes locally? Q375 Mr Goodwill: Mr Travers, in your opening comments, you mentioned how the present system encourages local authorities to come up with wonderful schemes and submit them. The impression I seem to get is that the vast majority of these are turned down. Do we have any evaluation of the amount of resources and time that have been wasted by local authorities, like Leeds with their tram system and similar systems around the country? Is it the case that doing nothing is going to result in the perpetuation of this unacceptable system? Mr Travers: The honest answer is that I do not have an answer to that but I have a feeling my colleagues here may know more. There must have been a significant investment in several cities in schemes that they seriously thought were going to go ahead and which have not, but I am not aware of anybody adding up all the bidding and equivalent costs. Mr Locke: I cannot answer in terms of the wasted cost of developing schemes. One of the key issues is that this makes it very difficult for anybody to make a decision when the costs come in significantly higher than anticipated. It affects the whole of the decision making. In an ideal world, the idea would be to get to a position where people are asking for the right amount of money right at the beginning and the initial decision is made on that basis, and then the scheme can go ahead, go into procurement and be developed on the basis of the scheme being affordable all the way through the process. Q376 Chairman: Surely, Mr Locke, it is that formula that is always used in ministries? I always added in 60 per cent more than I needed so that when the Treasury knocked off 30 per cent, I was actually well in. Mr Locke: That is why the Treasury has developed optimism bias, which is the new phrase for that process. If the optimism bias and the tendency for people to be optimistic in making those assessments can be encouraged and developed in schemes, then maybe people will bid for the right amount in the first place, and hopefully can go through procurement more smoothly than has been the case in Hampshire, Leeds and other places. Q377 Mr Goodwill: I was interested in these imaginative new ways of raising funds for local transport schemes. Are they really as equitable as they may appear at first glance? For example, raising money from fares obviously helps to pay for a tram system but it may be that the resultant reduction in road congestion which helps the motorist is not being contributed to by the motorist. If you have a system paid through business rates, you may have a business that benefits greatly from people travelling in to shops but maybe another type of business that has no benefit at all. Are these ways of raising revenue quite as fair and equitable as may be at first glance they would appear? Mr Travers: It would depend what they were. In a sense, at least they would be a bit more open than the way the money is raised now, which is of course through national taxation in a way that nobody knows about; it is just, as it were, lost in the general national taxation. There is no link or very little at present between decisions about local projects and the resources that are raised to fund them. If the decisions were made locally more often, then the public authorities could be lobbied in the way you have just described: that it is too much to raise from a congestion charge or road user charge; and it is unfair to raise so much from fares. This would be a debate that would take place locally and that would be a good thing to occur in the context of a decision about whether a tram or a guided bus-way or nothing was the most appropriate way forward. Professor Potter: In my evidence I grouped these local mechanisms under three principles of taxation, one of which is the 'beneficiary pays' principle, which for example is largely behind the French l'versement employer tax, which is that you tax employers in central Paris to refurbish the Metro in central Paris and they will benefit. The second group is essentially consumption taxation, which is not redistributed; in fact it is probably quite a negative form of taxation used quite commonly in the United States where you are basically looking for a useful and reliable funding source of revenue. The third group is the 'polluter pays', which is designed in itself to be redistributed, to redistribute money from polluters to those who do not pollute, from perhaps car users to public transport users. The net redistributive effective that you have is very much about where the mechanisms fall within those three groups. The difficulty is that only some of those are able to raise sufficient funds to finance larger projects, and so quite often you end up with a mixture of all three of those. Q378 Mr Goodwill: Would this not result in the situation that cities like Sheffield, that has its tram or Newcastle its Metro, and that have been financed generally through general taxation, would be at a real advantage compared to other cities that wanted to finance similar schemes? As an investor, I would see the rates being lower in Newcastle or Sheffield than the equivalent charges that would have to be levied in a town that did not have a scheme. Are we not introducing a cut-off point before which people have had a fairly free ride on the taxpayer and, after that, it is the local polluter or the local user that pays? Professor Potter: If you introduce any new scheme with different rules, then you are going to have distributional effects occurring anyway. If the scheme at the moment is that you get no tram at all because the rules have changed, then I would argue that perhaps the effects are even worse. Q379 Graham Stringer: To Professor Travers, you have said that PTAs are an ideal starting point or building block for city regional infrastructure. How important would increasing the democratic input to those bodies be in their success, do you think? Mr Travers: There is no question that the government arrangements for existing PTEs or PTAs would need to be strengthened if they were to have the political credibility for the Government to imagine giving them the greater powers and the potential capacity to raise resources, which in our view would be necessary. I think the governance arrangements would need to be strengthened. We proposed in the paper I referred to that in the first instance the leaders of the existing metropolitan districts ought to become, in my term, a senate of the leaders. I know that in Greater Manchester there has always been an arrangement, but it would be to give that leadership group greater power and authority, not necessarily only over transport but to use it as the basis of greater political authority. Q380 Graham Stringer: But no extra involvement of the electorate in this process? Mr Travers: To be absolutely honest, and you will appreciate this, we were trying to go for a relatively modest and evolutionary proposal. As I am sure you are aware, there are others, including, it is alleged in Government, who would like to go for city regional mayors or other much more revolutionary proposals. I think we took the view that that would be taking on too many dragons or too many fights in on go and we would stop with the modest proposal of a more powerful group of metropolitan district leaders. Q381 Graham Stringer: Can I ask about TIF (Transport Innovation Fund)? Does TIF fit in easily with the local transport plans because its objectives are fundamentally about the national economy and the local transport plans? Their main objectives are: accessibility, congestion, reducing pollution. The economy and regeneration are excluded from that. Do any of you think TIF funding will lead to contradictory results from the local transport plans? Mr Travers: The Transport Innovation Fund is, without doubt, a nationally originated pot of resource, which inevitably carries national expectations with it. However, one would hope that if it was possible to strengthen local transport governance and powers, then possibly a government would be willing to skew the use of TIF in order to encourage that local decision-making and use of resources in a way that, to put it bluntly, when Transport for London was created in London, it was given very substantial resources in its early years. Can I say that whatever the original purpose is for TIF, a good use for it might be to encourage this kind of local responsibility for transport, whatever the original objectives were. Forgive me if that is not a proper answer to your question. Q382 Graham Stringer: You said previously, and I understand this, that you could not sum the abortive costs on the different tram schemes. I think we might almost be able to do that in this committee; we have had the various witnesses before us. Can I approach a similar question: do you have any way of assessing or is there any word on the assessment of the costs of Central Government involvement in all these relatively small transport schemes? If you took Central Government out, would there be more money left to put into putting in crossings or guided bus-ways, or whatever? Is there a real cost and can we quantify it? Mr Travers: At the risk of an unhelpful answer, there must be a cost at the centre. I have no doubt Central Government would say that if it is very modest and tightly drawn, it is millions rather than hundreds of millions of pounds. The honest answer is that I do not know what the cost would be in central resources. The greater cost would be borne back in the cities concerned, which I know is not the question you are asking, not only in terms of the costs that they and the consultants invest and companies involved in these schemes, but also in terms of damaging the potential for growth of the cities concerned and (I do not need to make this point) the disappointment that comes with these things never getting off the ground. Q383 Chairman: There are several major conurbations in northern Germany that touch on one another rather more extensively than there are in northern England, but they collaborate in developing networks of suburban rail and tram schemes, which run across administrative boundaries. Is that a model for us, do you think? Is it sufficiently democratic? Do we know about the tarifbunden? Professor Potter: I will just improvise on this one. I have not come particularly prepared for this. The thought that comes into my mind is that Germany has a formal federal system, as does the United States. In fact, the problem that we have in the United Kingdom is that we do not have a federal system and we do not aspire really to a federal system. Thus, we have a multitude of institutions that are very often overlapping in responsibilities, overlapping in geographical areas. To some extent, I think it does work better in northern Germany. I think that is because there is this formal federal system where there are clearly devolved responsibilities. Perhaps that is the key to the way it does work and provides a clear role for those local authorities and a clear devolved role where they do have devolved responsibilities, without too much federal checking up on them all the time. We are a bit stuck between those two models. Q384 Mr Leech: Local authorities tell us that one of the main barriers to improving local transport is that we do not have control of rail services and buses. Would you go along with that? Professor Potter: The one local authority that does is of course London, which has control certainly over the bus services and over the tube in a somewhat restricted manner. That is where you can introduce very much more integrated ticketing products, and you can have greater control over the quality of services. For the rest of the UK of course, talking about the buses in the first instance, you have the deregulated bus system, excluding London and Northern Ireland. Certainly from the work that I have done, I can see there have been some difficulties of getting enough of an improvement out of quality bus partnerships when you cannot have much control over the fares and over the services that the private operators provide. There are two levels of this, one of which is about where you enter into partnership agreements with private bus operators. They are often very worried about free-loaders and you very often get other operators not joining in, not committing resources, because they feel they can use the infrastructure and free-load. At one level you could incrementally improve the current system, assuming private operators. There is then quite a large jump to when you move towards a more franchised type system. Chairman: I am going to stop you there and be tougher with you. I need sharper answers from our witnesses and sharper questions, too. Q385 Clive Efford: Can I ask Mr Locke: why do you think here is £700 million of private financial initiative money unallocated? Do you think that indicates that PFI has its limitations in public transport? Mr Locke: Certainly not; I think PFI in transport has been very successful. If you look at the highways managements scheme in Portsmouth, at the Nottingham tram, the street lighting schemes that have been delivered, those are big success stories. We get very good feedback from the individual local authorities that have delivered those. Obviously there is a decision-making process that people have to go through and certainly, if we could start to spend the money as quickly and smoothly as possible, we could get more out of the PFI funding that is available, if the right schemes are chosen. It is important for transport and transport authorities that that money is spent, because that will have an impact on Spending Review 2007 and the allocations that are made by the Chancellor through that process. It is important that the allocations sought by the Department on behalf of local government are spent on a timely basis and are then fed into future Spending Review decisions. Q386 Clive Efford: There are currently three areas into which the Government allocates resources for PFI: major schemes, street lighting and highways management. Would you advocate that there should be more areas where PFI could be applied? Mr Locke: I think the major schemes cover a whole multitude of schemes. That includes new road schemes, things like the Doncaster Interchange, integrated transport projects and light rail schemes like Nottingham and potentially it includes guided bus schemes. We are working with various guided bus schemes that may ultimately develop into more of a PFI approach where you have very much a performance-related payment. I think that does include not quite all of the rest but a large chunk of other types of projects. Then you have highways management projects and street lighting projects, which sit as individual programmes within the total PFI programme in the Department for Transport. Q387 Clive Efford: The Nottingham Express Scheme is the only PFI that currently is in existence. Why are there not more? Mr Locke: I do not really know. Obviously other local authorities have chosen to develop their schemes and procure their schemes in other ways. We have not had any other light rail schemes completed since Nottingham. Nottingham is extremely successful; it is doing really well and they have two years of operations now. The passenger numbers are very good; they are in line if not exceeding expectations. One of the big advantages of using PFI, so long as you can get a sensible risk allocation as part of the process, is that you tie in the operator to deliver the service, and the local authority has that tie-in, that obligation, from the service provider to provide things outside the pure fare box. This probably goes back to the earlier question from one of your colleagues, in that many large infrastructure projects will always require some form of public subsidy, whether you pay that through a PFI arrangement or through staged grant payments. By doing it through PFI, you can pay for performance; in Nottingham, you pay for punctuality, reliability and safety, CCTV and cleanliness of the stations, and you pay for the wider benefits. Nottingham City Council and Nottingham Shire County Council have that ability to encourage that all the way through the 25-year life of the contract. Q388 Clive Efford: You have said PFI has brought benefits that normal conventional procurement processes could not. What exactly do you mean by that? Mr Locke: The major benefit of PFI in light rail is the payment for performance, so that you have that ability to continue to pay for things that are outside of the fare box, like cleanliness of the trams and of the stations, which may not purely be a commercial decision. So long as the fare box is there, then Nottingham has those wider benefits. You also have the whole service approach and the due diligence that comes from somebody taking that risk for 25 years, because they really do have to do their work on making sure that the passenger numbers are sustainable through that term of the contract. Q389 Clive Efford: Do PFIs go through the same value-for-money tests that are carried out by the Department for Transport? Mr Locke: Yes, every single transport scheme that is procured through PFI has to complete an appraisal summary table and secure a suitable benefit/cost ratio, whether that is a street lighting scheme, a highways management scheme or a major scheme. Certainly, Nottingham Tram had to go through the same appraisal process as any other transport scheme. Q390 Mr Leech: I think I remember you saying that PFI schemes are good if you pick the right schemes. Could you elaborate on what you would consider to be a right scheme and what would be a wrong scheme for PFI? Mr Locke: Transport schemes appear to have done extremely well compared to many other sectors. Obviously the Treasury has moved the limit to £20 million for smaller schemes. I was probably alluding to those schemes in other sectors that are relatively small. In transport, street lighting has been extremely successful. The highways management scheme in Portsmouth is doing extremely well. It probably is a case of looking at individual schemes that are outside the norm on a scheme-by-scheme basis. Q391 Mrs Ellman: Is there a problem about the supply of well-trained transport planners? Is that an area where the Department should be doing more to encourage more people or encourage training? Is there an issue there? Professor Potter: I am aware of this. I think this is the changing nature of the transport planning profession because we are moving more from a profession based around spreading concrete on the ground to one which is linked to, say, marketing skills and persuasion skills and exalting people to green their travel behaviour. You are now moving to embrace social science type skills. I think that is the crucial element that is occurring about the new skills being required. Q392 Chairman: It would be helpful if we could we see that in some of the train operating companies? Professor Potter: That is very true. I am involved with the Transport Planning Society and with Transport for London in developing new training courses. There is a skills gap, but there is also a training gap. New qualifications are beginning to emerge but they are just starting to follow the shift in the transport planning profession. Q393 Mrs Ellman: Do you have any views on the current workings by regional government officers in relation to transport issues, for example, in assessing priorities, giving advice and making recommendations? Mr Travers: This was probably implied by what I was saying earlier. The Government, has, for good reasons, created a number of different levels of operation for transport - district, in the case of the metropolitan areas; county; then the region; and then the supra-region. On a number of occasions, there is a sense in local government, and not only there, that perhaps government regional offices might be not exactly surplus to requirement but at the far edge of requirement and that very often, and not only in transport to be fair to them, there is a lot of double-checking of things that could either be done by Whitehall or do not need double-checking, or there are regulators, or whatever. As a generality, I think the regional offices are here to stay. I come back to the point I made earlier that perhaps we have slightly too much government, too many layers, too many levels and institutions, particularly in the regions. Q394 Mrs Ellman: Do you think that they should relate more closely to the existing regional assemblies? Mr Travers: Certainly, having regional assemblies and RDAs (regional development agencies) and government regional offices operating with modest budgets within each region and then the Northern Way as well is too much. It is just too much clutter and difficult to understand. Q395 Chairman: You told us that earlier, and we agree with you, but we need to know what the alternatives are? Mr Travers: The alternative would be to fuse the roles of the assembly and the government regional office where that can be done. Presumably if there are resources allocated by the regional office, it is difficult to see why that could not be done by the assembly if the assembly is going to continue to exist. If not, the powers could go the other way. Why have both? Q396 Mrs Ellman: Which of the current ideas on local taxation do you think are most likely to be taken up and be effective here? Mr Travers: It is difficult to second-guess Sir Michael Lyons. Yesterday it was a tax on litter, according to the press. It is unlikely, given the constraints under which we all operate, that a major reform of local government finance is going to occur. I might be wrong. Therefore, the opportunities for the creation of smaller revenues of the kind that have been discussed earlier today to do with congestion charging, tourist taxes, green taxes, add-ons to the business rate, therefore become slightly more likely. From transport's point of view, and certainly from transport infrastructure funding's point of view, may be an accidental benefit of the difficulty because those taxes could be seen as a way of underpinning revenue flows to underpin capital projects, which would be more appealing to the Treasury perhaps than general funding for local government. Q397 Chairman: Is not the problem that regional offices are regarded as gatekeepers rather than facilitators? Mr Travers: Regional offices try to be seen in two ways. They like to be seen as Government's voice downwards, but also the region's voice. Q398 Chairman: You are saying that you should fuse these two bodies. That is the point we are making. I think the difficulty is that instead of being a facilitator for what the local authorities want in terms of transport schemes and looking at it on a different basis, is it not true that they are regarded as the representatives of the departments in the regions with a responsibility to make sure not too much goes astray? Mr Travers: The difficulty is that any big decision will always go back to headquarters. In the end, any major decision will always go to London or to the Treasury. Q399 Chairman: The other thing that worries a lot of us, frankly, if we have these city states, is whether the emphasis, because they must after all have a representative involvement, will be on equal distribution, or will there be a degree of enlightened dictatorship? For example, a city state that encompasses Manchester at the top end and Crewe at the bottom end - I am not an imaginative woman - does seem to me might be mildly unequal. Mr Locke: That certainly is the concern of some authorities outside the main cities: will they get their fair share of any allocation that is made within a city region? You could argue that the city region may have a greater need than some of the other authorities within the wider region, but it is important that there is equal distribution. Q400 Chairman: Mr Travers says that Transport for London is odd because it has virtually no local tax contribution to public transport costs. Are we saying they need those powers? Mr Travers: Personally, I think it would be better if Transport for London and other sub-city regional or regional transport authorities did have such powers. Then they could make decisions about these matters there, and not have them all made in London. Q401 Chairman: You have suggested that the passenger transport authorities would be a good basis, and you have repeated that this afternoon. What democratic mandate have they got? Mr Travers: They would have no less a democratic mandate than they have now. Q402 Chairman: That is not quite what I asked you, Mr Travers. Mr Travers: But it would be enhanced by the fact that we would have strengthened the leadership arrangements, so that the leaders of the existing authorities - and possibly others which would wish to join them, if Crewe and Nantwich did decide to join Greater Manchester or whichever it chose to join - presumably would have one voice with the other leaders. Q403 Chairman: You have emphasised all through your remarks that in fact they should have strong leadership and they should be the leaders of the councils, although you have not said how someone who is leader of a council would find time to devote enough time to these overall planning efforts. What changes in governance are you suggesting? Are you suggesting that we 'evolve towards a system of regional government' simply by beginning to vest more and more powers in these authorities through their existing elected members? Mr Travers: To be absolutely honest, Chairman, we were trying to achieve something that the Government itself appeared to be trying to do - city regional government strengthening transport's government - but without having a full-scale reorganisation of local government. We were trying to be radical whilst evolutionary, if I can be contradictory. Q404 Chairman: That is very New Labour, Mr Travers. Mr Travers: I am sorry to come here and say that. That is why we came up with building out from the existing PTAs. You are right, that for the existing leaders, it would be a major commitment and one possibility is that they could appoint a board to run the PTA, in the way the Mayor of London can appoint a Transport Board to run Transport for London. Q405 Chairman: To be fair, what has happened with Transport for London is something of which most of us would approve. The reality is that large sums of money have been passed into the south-east region and to Transport for London, and they have been given carte blanche. Many of our authorities would welcome that combination of money and freedom of movement. Mr Travers: May I say that one of the purposes of building out from the PTAs was to try to bring the advantages of the London model to the other big cities as a stepping stone. With luck, if the Government was convinced of this, they would give those authorities some resource in the way, I absolutely agree with you, they did spend a lot of money on Transport for London and they are still doing so. Q406 Chairman: Finally, can economic development and productivity be amongst the national shared priorities for local transport plans? Mr Travers: I believe so, yes. Q407 Chairman: What are the types of large, local transport schemes that have the biggest impact on the economic regeneration of an area? Trams? Mr Locke: Trams certainly, and that is evidenced by a whole range of tram schemes, whether it is Manchester or Nottingham. The Doncaster Interchange is a good example of a regeneration scheme that was initiated through a transport interchange, which was a small element of the final scheme. Q408 Chairman: Are you saying that there is no specific specialist group, but just that which is desirable from the point of view of that particular area? Mr Locke: I think so. Transport has to be seen in a much wider context. It is not just necessarily transport; it is regeneration, social inclusion, travel to work, school and health facilities. It has major benefits. Chairman: Mr Locke, on the enunciation of that manifesto, with which most of us would agree, may I thank you all for coming. It has been very helpful. |