Select Committee on Transport Ninth Report


THE TRANSPORT INNOVATION FUND

Introduction

146. The Transport Innovation Fund (TIF) was announced in July 2004 as part of the White Paper, The Future of Transport: a network for 2030. The purpose of the fund was provide "incentives to develop and deploy coherent, innovative, local and regional transport strategies".

147. In July 2005 the then Secretary of State announced further details, including a split between the two strands of the fund known as Congestion TIF and Productivity TIF. The Congestion TIF will "support the costs of smarter, innovative local transport packages that combine demand management measures such as road pricing, with modal shift, and better bus services", while Productivity TIF will "support the funding of regional, inter-regional and local schemes that are beneficial to national productivity".[161]

148. Funding will be available from 2008-09 to 2014-15 and in the following amounts:[162]

TIF: monies available 2008-09 to 2014-15
Year
08-09
09-10
10-11
11-12
12-13
13-14
14-15
Funds
£290m
£600m
£930m
£1.3bn
£1.68bn
£2.1bn
£2.55bn


149. The total amount allocated to Congestion TIF is £1.4bn, with an expected distribution rate of around £200m per year from 2008. The Department has indicated that additional funds may be available if a sufficient number of high quality bids emerge. The balance of the fund is due to be allocated through Productivity TIF. Each bid by a local authority, or group of authorities, for funding from Congestion TIF must include two elements: a demand-management scheme aimed at reducing congestion on the road network; and supporting measures to encourage modal shift. The guidance reveals a clear preference for schemes that include local road pricing to act as a pilot for the possible introduction of a national road pricing scheme around 2015.[163]

150. The Department is engaging in a separate £10 million trial of the technology that would be necessary to support a national scheme: "We are asking private sector companies to prove that they can bring together technology and the supporting systems to produce bills that charge people according to where, when and how far they have driven and that are trusted both by those who receive them and those who receive the revenue."[164]

151. The bidding process is largely based on the NATA[165] major scheme model. All schemes seeking funds from TIF will be subject to an assessment of value for money (VFM) which will play a key role in decisions on funding allocations, alongside other considerations such as deliverability.[166] There is a specific VFM guide used by officials when providing advice to Ministers; it aims to ensure "a clear and consistent assessment of the costs and benefits of the scheme".[167]

152. The DfT has stated that the relevant criteria will include:

  • effectiveness at reducing congestion;
  • early implementation;
  • transferability to other areas;
  • breadth of geographic coverage;
  • proportionality of costs;
  • practicality/deliverability;
  • public acceptability;
  • distributional and equity impacts;
  • affordability and financial sustainability; and
  • contribution to central government, local and regional objectives.

153. The sum bid for should "represent the minimum additional funding required to deliver an eligible scheme". The Fund should not be used to "offset pressures on existing budgets but to deliver radical schemes which require some additional funding to be deliverable. Further, schemes should be able to show that, without Transport Innovation Fund resources, they could not and would not be deliverable using either conventional or other funding sources".[168]

154. There is a general requirement that local authorities fund no less than ten per cent of a scheme from local resources. The guidance states: "We will be expecting significant local contributions towards the cost of packages - and the greater the contribution, the greater the authority's chance of success. The local contribution can include private sector contributions, and we will expect authorities to seek as much from the private sector as they can".

155. The guidance on Congestion TIF recognises that development and appraisal of such packages can be a complex and costly process for many authorities. With that in mind, the Department has allocated pump-priming funds in two separate rounds to ten different local authorities, including:

  • a joint package proposed by Bristol City Council, Bath & North East Somerset, North Somerset, and South Gloucestershire Council;
  • Cambridgeshire;
  • Durham County Council (for Durham);
  • Greater Manchester;
  • Shropshire County Council (for Shrewsbury);
  • Tyne and Wear;
  • West Midlands conurbation;
  • Reading (round 2 only);
  • Norfolk (for Norwich) (round 2 only); and
  • Nottingham, Derby, Leicester and surrounding counties (round 2 only)

The funds are intended to cover up to 50 per cent of the cost of developing proposals.

156. The first round of bids are due to be submitted by the end of July 2007 with a final decision on funding allocations expected to be made by the end of the year. We are interested in the way in which Congestion TIF can be used to support the provisions on road pricing in Part 5 of the draft Bill. In the near future we will be holding an inquiry into freight and we will leave our consideration of Productivity TIF until then.

Is Congestion TIF a good thing?

157. The Department's Feasibility Study (July 2004) and the Eddington Study (December 2006) both concluded that a national road pricing scheme could reduce congestion by up to half of the estimated levels in 2020 and 2025 respectively. The estimates contained in the studies on the growth and impact of congestion underline the importance of considering all options, including road pricing.

158. The Minister of State, Dr Stephen Ladyman MP, pointed to the significant increase in the number of vehicles on the road—from 26 million to 33 million in ten years:

159. The Greater Manchester Authorities told us that a package of infrastructure improvements that included local road pricing is likely to increase the average speed of journeys by 14%, compared to an increase of just 3% from a package that excluded road pricing. [170] We were also told that the city would save more than 30,000 jobs by 2021 compared to projected growth in the absence of a road pricing scheme.[171]

160. A key reason for the lack of progress in implementing road pricing schemes has been the limited availability of funds. Transport 2000 told us, "[funding has not been there to enable [local authorities] to put in place the public transport networks which will be essentially needed as part of the package of measures with road charging."[172] The introduction of TIF as a new source of funding to explore solutions to congestion has received broad support, although some have given the fund a slightly more cautious welcome. For instance, Centre for Cities stated, "[we] welcome TIF in principle so long as the mainstream transport funding continues to increase—the additionality point is crucial —and, secondly, TIF is used as it is intended, to tackle congestion on the one hand and enhance productivity on the other. If it is additional and achieves its declared aims then yes, we do welcome it."[173]

161. A lack of funding is not the only issue that has held back the development of local road pricing schemes. As the Deputy Chair of the Association of Greater Manchester Authorities explained, the use of the road-pricing powers by local authorities would also be contingent on s authorities having the necessary powers to provide effective, integrated public transport. He thought that the draft Bill would go "some significant way" to providing that.[174] The lack of strategic control over public transport and the problem of co-ordinating action across different authorities was emphasised by Transport 2000, who pointed to the division between the PTAs' responsibility for public transport and the district councils' responsibility for highways. Cross-boundary issues, for example, relating to out-of-town shopping centres, were also a problem in many areas.[175]

162. We welcome the introduction of the Transport Innovation Fund to help local authorities explore solutions to the growing problem of congestion. But it can only be seen as one part of a much wider approach to tackling congestion. In particular it must be tied to improved local public transport, better co-ordination of neighbouring authorities, and increased strategic control over transport services.

Road pricing restriction

163. Many of those who have submitted evidence have remarked on the restrictive proviso that TIF money will only go to schemes that include road pricing or a workplace parking levy. [176] As Merseytravel put it, "there is little innovation involved - it is funding in return for [road user charging] pilots/schemes".[177] The Centre for Cities agreed:

    local stakeholders in many cities feel that they have no choice but to consider road-user charging and a bid for TIF funding - because it is believed that TIF is the only substantial new money available to fund major schemes. This has undoubtedly resulted in wasted time, effort and staff resource in a number of cities - large and small - which are not yet ready (politically, economically, or technologically) to submit TIF bids.[178]

164. Others, such as Transport 2000, were not persuaded that the offer of additional funding to improve transport infrastructure in support of local road pricing pilots was unfairly twisting the arm of local authorities. They told us

    Local authorities are not being blackmailed, though you will have to ask them whether they feel that … we do not want to see [the TIF] as the only route by which local authorities can get substantial amounts of money.[179]

165. The Deputy Chair of the Association of Greater Manchester Authorities also rejected any suggestion of "blackmail":

    [We] are not being blackmailed. We have identified that congestion is a double problem for Greater Manchester. First of all, unchecked it will slow down economic growth and, secondly, it would add to environmental problems through both carbon usage and deteriorating air quality. We have also identified that congestion charging, as part of an appropriate package, is something we shall need to do in order to address that issue. On top of that we see road pricing as being inevitable if we are serious about the polluter-pays principles.[180]

But the written evidence submitted by the Manchester Authorities did draw a clear link between the decision to consider road pricing and the availability of development funds through TIF. We were told that an "in principle" case was made for congestion charging to become a critical part of the Greater Manchester bid "having regard to Government policy, the need to actively promote the City Region's economic objectives and the very real need to secure the earliest access to significant further investment to develop Greater Manchester's transport infrastructure".[181]

166. The Minister of State told us that authorities were free to decide whether to apply for TIF funding in full knowledge of what the criteria were: "Nobody has been forced to come forward as part of this. They have all been asked to volunteer".[182] He argued that the regional funding allocation and the LTP2 funding would continue to be available and that local authorities had powers of borrowing.[183] He also told us that any bids which proposed a demand management scheme other than road pricing, for instance a workplace parking levy, would be considered on their merits. Although Transport 2000 stated, "The only innovation the Government have been interested in has been looking at innovation on ways of bringing in congestion charging rather than looking at innovation on how to deal with traffic. If you look at some of the documentation around [the draft] Bill, you will see that the Government do not sound at all keen on proceeding with looking at workplace parking levies, for instance, even though, as they point out, nobody has actually done it. One would have thought the Government would be interested in comparing, say, a workplace parking levy scheme with a congestion charging scheme or indeed one which involved wider measures for parking."[184]

167. The Department provided us with various examples of non-road pricing schemes that have been awarded funds to develop local transport infrastructure through the usual regional channels.[185] It contains a number of high value but, on the whole, quite narrowly focused schemes. Given the general level of funding pressure we have doubts whether the regional funding process will be viewed by many authorities as a satisfactory alternative to submitting a bid for funding under TIF if they wish to achieve major public transport improvements that integrate different modes of transport.

168. The draft Bill aims to create greater flexibility for transport authorities to decide whether to introduce charging schemes and what form they should take. On the other hand, access to Transport Innovation Fund money is entirely dependent on those authorities being prepared to introduce charging schemes. Since the fund now represents the only significant additional money that is available outside the regional allocation process, the pressure on local government to bring forward proposals for charging schemes is now very powerful. In the face of severe funding pressure we do not accept that Congestion TIF guidance should, in effect, restrict the availability of funds for much needed improvements in transport infrastructure to only those authorities that will consider local road pricing schemes. This risks blackmailing local authorities to conduct road pricing trials on behalf of Government in advance of a possible national scheme. It is curious that the PSA target for one of the cities (Manchester) bidding for Congestion TIF envisages no increase in congestion but cities whose PSA anticipates large increases in congestion are not being considered.

Supporting Measures

169. The guidance on "supporting measures" emphasises the improvement of bus services, although a range of other measures are mentioned including "road and rail enhancements, better traffic management, smarter choices programmes and, potentially, tram schemes."[186] The draft Bill gives authorities additional powers to improve bus services which in many towns and cities, as in Stockholm, is the only effective way of improving local public transport.

170. There is little additional guidance on the type of supporting measures that should be considered or an explanation of their role in tackling congestion. Sustrans stated that there is "insufficient emphasis in the Guidance on the role of soft measures/smarter choices/demand management. Although these are mentioned their role in producing quick, easy and effective reductions in transport is barely stated, and there needs to be closer synergy with road pricing".[187] Transport 2000 agreed:

    This should not be just about public transport. There are other ways in which we can provide good alternatives to the car quickly through a range of what the department calls, rather badly, smarter choices, but which involve a range of measures to work with employers, schools and others to do individual marketing…[188]

171. The English Regional Development Agencies also agreed that it was essential that congestion TIF packages were targeted at schemes which addressed genuine congestion issues which had an impact on regeneration opportunities, economic activity and productivity, rather than on experimental schemes which might be used by local authorities to access funding which they could not source elsewhere, or trial schemes for Government as a precursor to a national road charging scheme.[189]

172. There has also been concern that the real 'soft' measures that work on the ground will be down-graded and fail to attract funding. For example, the Centre for Cities stated: "Regional cities have also told us that they will be unable to proceed with transport projects to underpin their local economies because these projects are not necessarily aligned with TIF requirements".[190] This leads us to return to the narrow focus of Congestion TIF. For some authorities it will encourage time and money to be wasted exploring road pricing where it is not appropriate; in other areas it is likely to frustrate authorities that are unable to access innovation funds in order to pursue the local solutions to congestion that best address their needs.

173. If the Congestion TIF is to encourage genuine innovation the fund should be open to all authorities, including those for whom road pricing does not represent the best solution to their congestion problems. We recommend that the requirement for TIF bids to include road pricing or a workplace parking levy be dropped. An important role that can be played by "soft" measures, which also need to attract funding in order to be developed more fully.

Road building

174. A considerable amount of the evidence that we have received suggests some authorities might be developing road pricing schemes as an attempt to raise funds for expensive and controversial road building schemes.[191] We are not in a position to comment on specific bids or proposals, but we would be concerned if the Congestion TIF was used to implement extensive road building plans. Large-scale road building schemes would increase car dependency and increase traffic, rather than encourage modal shift. This would run completely counter to the aims of the TIF.[192] Transport 2000 suggested that "linking progressive road pricing schemes to outdated and controversial road schemes … risks making road pricing unnecessarily unpopular and alienates the very people who might ordinarily be supporters".[193] Although there are occasions when limited road building may be an appropriate strategy to reduce congestion, we would generally agree that it is not necessarily "innovative" nor in line with the general thrust of the scheme.

175. The Guidance, however, does not take a detailed approach to the appropriateness of pursuing road building plans as part of a bid for funding. In its written evidence the DfT stated that, "while targeted transport improvements to the transport network will help manage certain congestion problems, the scale of road building needed to support the increased demand forecast would be neither affordable nor environmentally acceptable. Therefore we are looking more closely at demand management".[194] The then Minister of State told us that he was "open-minded" about the use of TIF funds to build roads: "if a piece of road improvement is an essential element of a wider package, then it might well be acceptable" but he "would be surprised if [the DfT was] to consider it to be a good use of this particular funding if the money were only going to be used on building a road".[195]

176. While there may be a place for limited road building as part of an overall package of measures funded from the Congestion TIF, large scale road building has potential to run entirely counter to the objectives of the fund. We recommend that the Department clarify the extent to which road building can form part of a bid and the way in which it will be assessed. We urge the DfT to be vigilant in preventing opportunistic attempts to access Congestion TIF funds to support long-standing, controversial and expensive road building programmes, particularly as it could be linked to, and thereby undermine, support for local road pricing schemes.

Public Transport

177. The TIF Business Case Requirements state that: "bidders may want to distribute their local contributions across the package in ways that allow transport investment to be made in advance of the road pricing scheme".[196] A considerable amount of the evidence we have received expresses concern that public transport improvements must be in place before any road charging scheme begins. For instance, BCC stated, "[it] is absolutely clear that if the Transport Innovation Fund is to work there must be significant upfront investment and new infrastructure in both roads and, importantly, public transport."[197] Many other witnesses agreed.[198] In Stockholm, we saw the impact of a scheme in which public transport improvements were introduced well ahead of road pricing, with a significant amount of additional publicity.

178. The Greater Manchester Authorities also agreed there is a need for up-front investment and suggested that much of this could be achieved through prudential borrowing that could be repaid by road pricing revenues.[199]

179. Depending on the specific needs of the particular area it is clear that different types and degrees of public transport improvements will be required before road pricing is introduced. This was acknowledged by the Minister of State.[200] The Guidance places clear emphasis on the early implementation of schemes: "The speed at which a package, and particularly the road pricing scheme, can be delivered will be an important factor for us". The Minister of State acknowledged that while he was open-minded about the extent of improvements to be made before road pricing is introduced, he had "an expectation that demand management would come in, perhaps not as the first thing that is done but somewhere during the process rather than just right at the end of it."

180. It is important to recognise that public transport improvements go beyond providing an alternative mode of transport to car use; it extends to the whole issue of the public acceptability of road pricing. As the English RDAs told us, "[it] has become clear that in the majority of urban areas, local political support will not materialize unless alternatives to car use have been implemented before a charging system takes place. We would urge the DfT to focus on how this can be achieved".[201] Transport 2000 agreed that "in terms of selling this to the population at large, people will need to see improved public transport and indeed improvements to other choices for them other than car use before they will accept road charging. Anybody who has stood for elected office would understand why councillors might be a little bit reluctant to charge down this road without some guarantees of improvements."[202] The West Midlands reinforced these points in their evidence.[203]

181. Centre for Cities argued that city authorities would welcome a condition in the TIF Guidance that required a defined level of improvements to public transport before the road pricing element could be introduced.[204] Without such a requirement, they argued, the road pricing schemes could be rushed into operation and, as a result, fail to offer suitable alternatives to car use and for this reason fail to attract the support of the public..[205]

182. We recommend that the Guidance include a specific requirement for local authorities to have made sufficient improvements to local transport in order to provide real alternatives to car use well in advance of any road pricing scheme coming into force. The improvements to public transport can then be linked to road pricing by Government and local authorities when engaging the public and local business communities as a way of building the level of public acceptability.

Broader Policies and Objectives

183. The TIF guidance deals with broader policy issues as part of the new approach to appraisal (NATA). The appraisal centres on Government's five key transport objectives:

a)  Environmental: reducing the direct and indirect impacts of transport facilities on the environment of both users and non-users;

b)  Safety: reducing loss of life, injuries and damage to property resulting from transport incidents and crime;

c)  Economy: improving the economic efficiency of transport, and improving reliability and wider economic impacts;

d)  Accessibility: improving the ability with which people can reach different locations and facilities by different modes; and

e)  Integration: ensure that all decisions are taken in the context of the Government's integrated transport policy.

The DfT tells us that in allocating TIF funds it will be looking for "mutually supportive packages that address local congestion problems in a way that supports economic growth, and supports other objectives for environmental protection, safety and social inclusion".[206]

184. Some of the evidence we received points to the issue of climate change as being critical in any appraisal of the aims and benefits of TIF. For example, Transport 2000 argued that

    As a matter of urgency, tackling climate change should be made one of the core objectives of TIF. It is not good enough that tackling climate change should be seen as one of many objectives within general project appraisal. It should be at the front and centre of every DfT policy, and not seen as a 'bolt-on' in the normal NATA appraisal. Schemes awarded funding via TIF should demonstrate that they contribute towards DfT's PSA target to reduce CO2 emissions.[207]

185. A number of local authorities were also concerned by a lack of emphasis on climate change. The Director of Sustainable Development for Cambridgeshire County Council suggested that the climate change issue was "underplayed".[208] The Director of Transport 2000 suggested that the guidance should be changed so as to give priority to schemes which reduce carbon emissions through Congestion and Productivity TIFs.[209]

186. The Minister explained that any scheme's impact on climate change would be considered within a broader assessment of its value for money, but cautioned against trying to make the fund combat the dual issues of congestion and climate change: "people should be focused on its primary purpose, which is to deal with congestion and not try to deal with two issues at the same time. It may be they can do both, but let us solve one problem and then you can maybe lay other problems over it."[210]

187. Climate Change is not the only broad policy issue that has been raised. Sustrans states: "[the TIF guidance] is not properly addressing some of the key issues. We refer…to the desperately urgent issue of Climate Change and the need to make significant and rapid reductions in carbon emissions from Transport. But there are the other crucial issues: Peak Oil/ Energy security, promoting inclusion, better road safety, real accessibility planning, and creating liveable neighbourhoods".[211]

188. The West Midlands Authorities suggested that funding should be available for schemes aiding regeneration and employment not just those that tackle congestion".[212] Greater Manchester Authorities said thought it important that measures complemented the competitiveness and inclusion priorities of the sub-region and did not undermine the competitiveness of the regional centre or the town centres in the area".[213]

189. The Department has issued separate guidance on the social impacts of road pricing.[214] It requires authorities to give particular consideration to the needs of households on a low income (the bottom two quintiles), particularly those who had no choice about when and how to travel."[215] The Minister told us that the Department had made clear that it would not support of any scheme that did not address social inclusion.[216]

190. This message has been received by local authorities. For instance, the Chief Executive of Centro-WMPTA stated, "[The DfT is] interested in social inclusion, which is why the work we do also takes into account the impacts of the proposition, of the package, on social inclusion issues…[217][we] are actually looking at the impact on the economy of the various proposals and packages we are putting forward. So we are looking at public transport, the road pricing proposition and also the impact on the local economy and also in relation to social inclusion."[218]

191. The DfT tells us that in allocating funds it will be looking for "mutually supportive packages that address local congestion problems in a way that supports economic growth, and supports other objectives for environmental protection, safety and social inclusion".[219]

192. The Minister's evidence to us about the need for the TIF to address a wide range of social, economic and environmental issues is at odds with the provisions of the draft Bill which require authorities to have regard specifically to climate change, and nothing else. We believe a balanced approach, taking account of economic and social benefits of congestion-reducing measures is the right one. The Government should look amend the draft Bill so as to make this clear.

Displacement

193. In our 2005 Report Road Pricing: The Next Steps, we concluded that:

We also commented that

    Part of the risk associated with local road pricing schemes is whether an individual city would be able to withstand the economic impact of trade diverting to neighbouring cities that did not have a congestion charge.

194. The evidence that we have received in this inquiry reveals that these concerns have not gone away. A number of environmental campaign groups have expressed concern that road pricing could displace traffic into the countryside and adjacent urban and suburban areas. They also argue that, in the absence of strict planning restrictions, it may lead to the unsustainable development of rural areas. Other witnesses are concerned that market towns and cities inside a charging scheme could lose trade to local conurbations that do not operate road pricing.

195. The BCC is due to conduct a survey on the likely impact on businesses. They would prefer road pricing to be introduced nationally rather than locally due to the risks associated with displacement. The Director General of the BCC told us,

196. We recommend that schemes under the Congestion TIF be used as an opportunity to explore the displacement effects of road pricing; otherwise it will not be possible to fully assess the strengths, weaknesses and potential design of a national scheme.

The Bidding Process

COMPLEXITY AND COST

197. Several witnesses told us that the TIF bidding process is in itself costly and complex, with no promise that it will deliver real improvements to local areas. The English RDAs stated: "As each new funding stream is announced, Local Authorities and other delivery agencies spend time chasing the new funding streams that promise the large funds not available elsewhere… [M]any of these funding streams fail to deliver because of evolving and increasing complex appraisal processes, and also because the criteria for accessing the funding evolves after the fund has been announced and prove unachievable for the majority of project sponsors. The whole exercise therefore raises expectations, incurs project sponsors in cost and time delays and then fails to deliver. The RDAs believe that the Government should identify mechanisms which enable such funding packages to be put together in a way which reduces the risk of failure resulting from the existing processes".[221]

198. The Greater Manchester Authorities project that the cost of their bid will total £9.8 million of which £3.2 million has been received by way of pump-priming funds. The West Midlands Authorities hope to confine the cost of their bid to the pump-priming funds that were awarded - a total of £3.5 million. Cambridgeshire County Council was allocated £1.4 million in pump-priming funds and projects that a further £0.5 million to £1 million will be spent developing a bid.

199. The Tyne and Wear Authorities told us that: "One of the attractive elements of the original TIF concept was that it would allow the investigation of promising but radical ideas such as road pricing in a relatively open and flexible way… Subsequent guidance has imposed a substantially more rigid framework in terms of technical requirements and timescales. Technical issues have added to costs and raised concerns about the extent to which existing appraisal techniques are useful to this type of complex, multi-dimensional project". [222]

200. Kapsch TrafficCom AG, which supplies electronic toll systems, agreed that there were serious cost and resource implications related to applying for the various stages of TIF. This situation, accompanied by a lack of central guidance and general uncertainty, has meant that the smaller local authorities have been put off engaging with the TIF process, despite the fact that they could solve their congestion problems through very simple schemes at a reasonable price.[223] Sustrans remarked on the slow progress of the fund. Local Transport Today has reported that only three out of the ten areas granted pump-priming plan to submit a bid in the first round of TIF proper. Also none of these has yet been out for formal public consultation.

201. Some, for example, Centre for Cities, have argued that a central fund is a wasteful and inappropriate way of distributing resources. They argued that mainstream transport funding should be routed through these new proposed strategic transport authorities, both existing and new.[224] They believed there were disadvantages to a "heavily bidded process" and that more devolved funding through regional strategic bodies would mean the money got closer to where it is needed in the first place rather than bids to central government all the time.[225]

202. Greater Manchester Authorities also believed that the Department should be exploring longer term funding deals with PTAs rather than following an annual process which did not promote stability. The DfT has entered into a long-term funding deal with Transport for London and consistently takes on long-term liabilities in respect of investment in the railways. Replicating this approach in the context of TIF would allow the DfT to spread the cost of its share for supporting packages over a longer timeframe, allowing them to leverage TIF funding. The upfront finance would be provided by the participating authorities through prudential borrowing, much as TfL is already able to do as a result of its long-term funding arrangement. This would mean that DfT would be able to deploy resource as well as capital funding towards the upfront costs securing TIF packages and, thereby, make significant progress with its national policy initiatives that sit at the heart of the TIF process.[226]

203. While there is a need to balance the cost and complexity of making a bid against the need for a rigorous and comprehensive assessment, we urge the Government to consider ways of simplifying the existing arrangements—we fear they may be especially burdensome for smaller authorities. We also urge DfT to consider distributing the funds as part of a longer-term approach that makes use of regional mechanisms with the aim of increasing certainty over funding and reducing the need for such a cost-intensive, and potentially wasteful, bid-orientated approach.

TIMETABLE

204. The Department has invited the first full bids to be submitted in July 2007 with a decision to be taken by the end of the year. The Department has also emphasised that the speed at which a package, and particularly the road pricing scheme, can be delivered will be an important factor. They hope to see a first small scheme implemented around 2010-11 (if it gains the necessary approvals), and a larger scheme following a couple of years later.

205. Several witnesses felt this timetable was too short. The British Chambers of Commerce said that the pressure to have business cases to the Department by July appeared rushed and that bidders felt they were in a "race" for the funds.[227] The Tyne and Wear Authorities thought that more flexibility was needed in the timetable, especially given that some of the technology for large-scale road pricing was still in its infancy.[228] Greater Manchester and Cambridgeshire shared these views.[229]

206. One area where time pressure may be showing is in the lack of public consultation. The BCC told us that, in some areas, initial consultation may be for only four weeks and argued for a mandatory 12-week consultation period.[230] Given the cost of running a consultation exercise, it appears that public consultation is viewed as something that will be undertaken after it becomes apparent whether TIF funding will be made available.

207. The DfT's Director of Regional and Local Transport Delivery accepted that the time and money invested in a bid may be wasted in the event that the consultation revealed local opposition, but argued that this was the right approach as did the Minister of State. We understand the DfT's desire to progress the bids as quickly as possible, but a failure to consult before the funding decision is made may waste the time and money that has been invested in the event that political support is not forthcoming within the local area. We recommend that minimum 12-week consultation before submitting a bid be stipulated in the TIF Guidance; the views of the local population should be fully considered within the bidding process. The Government should not accept bids where local authorities have not adhered to Cabinet Office guidelines on consultation, including the 12-week stipulation.

ALIGNMENT OF THE TIMETABLE

208. Some witnesses have suggested that the TIF funding process should be aligned to the funding processes that relate to other funding sources. In addition to the TIF itself, these include Regional Funding Allocations, Local Transport Plan, the Highways Agency, Network Rail/ SOFA, and various other miscellaneous grants. Most are allocated through the DfT; there is also funding available through other Departments.[231]

209. We urge DfT to explore the possibility of aligning the timetable for seeking funds from TIF to the timetable for seeking funds from other sources, including the Regional Funding Allocation and Local Transport Plan funding.

Funding

SIZE OF THE FUND

210. Major city-regions, such as Newcastle, Birmingham and Bristol, have repeatedly expressed doubts about the adequacy of the total level of funds available under the Congestion TIF. The relatively small scale of Congestion TIF funding—£200 million per annum— is seen by some as a disincentive to proceeding with a road pricing scheme. Greater Manchester is calling for £1bn in up-front investment and the West Midlands asking for £2bn. Although Ministers have expressed doubt about these numbers, they do suggest that £200m a year is not enough to get a large scale road pricing scheme off the ground, let alone two or three.[232]

211. It is perhaps inevitable that demand for funding from Congestion TIF will far exceed the money that is available for distribution, although we are not in a position to assess whether the size of the fund is sufficient to meet its purpose given that final bids have yet to be submitted.

DISTRIBUTION

212. During our inquiry we received comments about the Productivity TIF and the spread of funding across projects that could, nevertheless, be read across to the Congestion TIF. For example, the Centre for Cities states that: "The Government has acknowledged decades of under-investment by steadily increasing overall national spending on transport. This has been re-inforced by the Eddington Transport Study. But with the case for a range of major projects - Crossrail, improved East-West road and rail links in the North, further improvements to the East and West Coast Main Lines, etc - accepted in principle by Government, cities are concerned that TIF resources could be diverted into a small number of national projects that do not address local needs".[233]And the Rail Freight Group said that: "Using [productivity] TIF as the funding source for a single major project (such as Crossrail) removes the usefulness of TIF for other justifiable enhancement schemes; as such we would suggest that part of the budget should be ring fenced for other schemes".[234]

213. The DfT told us that "TIF offers local authorities the resources to make hard demand management a realistic intervention within their local transport strategies". However, the size of the fund may not be sufficient to allow more than a small number of major projects to be progressed at the same time. We are concerned that the scale and cost of the emerging bids in relation to the overall allocation of funds might prevent a broad and varied range of town and city regions from being able to explore comprehensively the best solutions to congestion.

BORROWING

214. The TIF Business Case Guidance states that, as a result of the Local Government Act 1992 and subsequent guidance, local authorities may not securitise revenue streams such as those from road pricing in exchange for a lump sum from the private sector. Should local authorities wish to pursue this type of financing option they should use Prudential Borrowing through the Public Works Loan Board to secure upfront capital on the basis of all their potential revenue streams.

215. It is clear to us that prudential borrowing will form an integral part of the investment that is required to implement and support a road pricing scheme. Greater Manchester Authorities told us: "unless the DfT envisages a substantial increase in the scale of funding made available under C-TIF initiative, currently scaled at £1.4 billion in total, the affordability of such packages is likely to depend upon the local retention and use of charging revenues to fund a substantial proportion of the supporting public transport programme. The challenge placed by any funding limitations would, of course, be intensified if C-TIF is required to satisfy demands across a number of metropolitan areas".[235]

216. Manchester argues that the current rules on retaining revenues locally, which do not guarantee that they will be available beyond the first 10 years, and provisions of the current local government finance regime, which requires authorities to set aside annually resource funding equivalent to 4% of total borrowings to repay principal from the year after borrowing is taken out (the Minimum Revenue Provision rule), both substantially undermine the ability of TIF authorities to use charging revenues to contribute towards the costs of supporting packages..[236] West Midlands Authorities also told us they had concerns over Treasury rules for prudential borrowing which do not allow repayment based on projected cash flows.[237]

217. The then Secretary of State confirmed that "local government funding… is a matter for the DCLG"[238] and "DCLG have already indicated that they are looking at some of those rules anyway, so there may be changes as a result of their reflections on this matter that might make borrowing easier. Certainly, if there is something about the rules which make it difficult to do what would otherwise be exciting schemes, then we would certainly want to look at the rules."[239] We welcome the review of the local government borrowing rules and urge the DfT to treat the issue as a priority.

218. The BCC told us that the borrowing provisions should not be considered without taking into account the issue of supplementary business rates: "what has also been flagged up is the concept of a supplementary business rate and the ability to have a four pence levy on business which would then allow local authorities to use that borrowing power. That may be the mechanism to do it. Just to quote a concern, we would not want to see both a Transport Innovation Fund which extended over a long period of time and in addition another four pence in the pound supplementary business rate. Local authorities are going to have to make a decision which they are going to go for."[240]

219. Centre for Cities agreed: "The supplementary business rate element is critical to all this and I am sure will already be forming part of bids for the Transport Innovation Fund this July. Although from a business perspective that may not be welcome news, a levy of up to four pence on the business rate forms an important part of the overall funding package for local transport schemes."[241]

REVENUE

220. Sustrans made the point that TIF will not help to "solve the acute shortage of revenue funding in Local Transport". Indeed the TIF Business Case Guidance issued by the DfT in February this year says "The TIF can provide revenue resources as well as capital, but only very small amounts are likely to be available". Given the size of the TIF pot, Sustrans finds this "very disappointing". (Ev 354) [I'm not sure whether this was given sufficient attention to be included]

BROADER ROAD PRICING TRIALS

221. Some stakeholders have argued that local road pricing is not a sufficiently broad or ambitious way of testing the merits of road pricing. For instance, Transport 2000 stated "We would disagree that this is the only way in which charging can be rolled out and we would want to see the Government exploring other routes rather than just laying the whole emphasis on local authorities and letting them fight the battles from the front."[242] In particular, Transport 2000 told us, "there are two routes we would want to see the Government specifically proceeding with. One is to go back to looking at road charging for lorries, because that way you could get a national scheme together. That failed last time because they tried to overcomplicate it massively. If we do that it has the benefit of levelling the playing field with hauliers from other countries. It does mean that you could get a national charging scheme up and running in ways that would actually help the haulage industry and bring some real prices into freight. The other is to do in the public sector what the Norwich Union did in the private sector with pay-as-you-drive insurance. They did a trial with 5,000 volunteers and once they had worked out how that worked and what the issues were, Norwich Union offered it more widely. We think that the Government could, as in fact the RAC Foundation have suggested, look at a voluntary-based scheme and also piggy-back on the schemes that Norwich Union and other insurance companies are rolling out. Those are options that the Government could try and we think that the Government should be looking at other ways in which you could get towards national road charging other than just by putting local authorities in the front line, though we think that the local authority route is worth having too." TIF Q13 (Mr Joseph)

222. Our predecessor Committee's report Road Pricing: The Next Steps highlighted the potential for pilot schemes on the strategic road network: "The Government cannot expect local authorities to implement charging schemes, while it refuses to test the potential of road pricing on the strategic road network for which it is responsible. The Secretary of State has told us that he would not introduce charges on roads that have not changed; but if charges were introduced on congested roads, the motorist should gain from a smoother, more reliable journey. The Government must re-think its policy on charging for inter-urban strategic roads, and take responsibility for introducing measures on the congested roads under its control".[243]

223. The then Minister for State did not rule out the possibility of trials on the strategic road network but expressed reluctance to introduce them unless they formed part of a local scheme: "if somebody comes to us with a proposal for their local community and within that local community it is clear that some sort of road pricing, as they have designed it, will necessarily include one of the trunk roads in their area, then we will consider it on its merits. We are not excluding that. The Bill that was published…does not make that any more or less difficult for us to do than it was prior to yesterday. We have always acknowledged that we could include the trunk road network within these local schemes, but we have not gone for a road pricing scheme on the strategic road network because essentially that would be a national road pricing scheme. Our strategy is to try to win the public over, to demonstrate to them that we can meet their concerns about privacy and fairness and that it will be effective and cost-effective before we put to the public the notion that we should have a national scheme"[244].

224. The then Minister also stated that a pilot on a strategic road "would then have wider implications for the communities around that road because there would be certain people who would take journey planning decisions in order to avoid that particular strategic road, whatever road price we had introduced, and then we get into the fact that we would then have to impose some constraints on local councils. We would much rather do it the other way around: we would rather local councils considered the strategic issues and brought them to us so that we had a package we knew was going to work."[245]

225. The Government's policy is to use TIF-funded projects at the local level to explore the impact of road pricing. These projects are supposedly trials and experiments but their costs are extremely high. In the cases of Greater Manchester and the West Midlands, £3 billion and £2 billion respectively, with debts lasting for up to 30 years. The failure of these projects would place a huge burden on the public purse. A range of town and city centre pricing schemes will not tell us a great deal about the impact of road pricing on inter-urban routes and major trunk roads. If the Government proposes to bring forward proposals for a national road-pricing scheme, we recommend that it first conduct pilot studies of the effect of pricing on the strategic road network.



161   TIF Guidance, July 2005, para 1 Back

162   TIF Guidance, July 2005, para 3 Back

163   TIF Guidance, July 2005 Back

164   TIF: business case requirements Back

165   New Approach to Appraisal Back

166   VFM measures the benefits per £1 spent Back

167   http://www.dft.gov.uk/stellent/groups/dft_about/documents/page/dft_about_033477.hcsp Back

168   Transport Innovation Fund; other available resources could include 'national' transport budgets; other central Government spending; local government revenues; local spending; and sources of private finance Back

169   TIF Q185 (Dr Ladyman) Back

170   TIF Q68 (Mr Leather) Back

171   TIF Q69 (Sir Richard Leese) Back

172   TIF Q6 (Mr Joseph) Back

173   TIF Q2 (Mr Finch) Back

174   TIF Q88 (Sir Richard Leese) Back

175   TIF Qq 78-79 (Mr Joseph) Back

176   See, for example, evidence from the British Chambers of Commerce, Ev 319 Back

177   Ev 324 Back

178   Ev 306 Back

179   TIF Q28 (Mr Joseph) Back

180   TIF Q89 (Sir Richard Leese) Back

181   Ev 359 Back

182   TIF Q135 (Dr Ladyman) Back

183   Q187 (Dr Ladyman) Back

184   TIF Q51 (Mr Joseph) Back

185   Ev 352 Back

186   TIF business case guidance, February 2007, para 4.  Back

187   Ev 354 Back

188   TIF Q44 (Mr Joseph) Back

189   Ev 327 Back

190   Ev 306 Back

191   TIF Q18 (Mr Joseph) Back

192   Ev 345 Back

193   Ibid. Back

194   Ev 349, para 13 Back

195   TIF Q189 (Dr Ladyman) Back

196   TIF: Guidance on business case requirements, February 2007, para 26 Back

197   TIF Q43 (Mr Frost) Back

198   See, for example, Ev 333 and 337. Back

199   TIF Q90 (Sir Richard Leese) Back

200   TIF Q175 (Dr Ladyman) Back

201   Ev 327 Back

202   TIF Q8 (Mr Joseph) Back

203   Ev 337 Back

204   TIF Q56 (Mr Finch) Back

205   TIF: Guidance on business case requirements, February 2007, para 26 Back

206   Ev 349 Back

207   Ev 345 Back

208   TIF Q94 (Mr Hughes) Back

209   TIF Q32 (Mr Joseph) Back

210   TIF Q168 (Dr Ladyman) Back

211   Ev 354 Back

212   Ev 337 Back

213   Ev 359 Back

214   Available at http://www.dft.gov.uk/pgr/scienceresearch/social/socialanddistributionimpacts/ (June 2007) Back

215   Available at http://www.dft.gov.uk/pgr/scienceresearch/social/socialanddistributionimpacts/reportoneoverview, at pages 8  Back

216   TIF Q142 (Dr Ladyman) Back

217   TIF Q94 (Mr Inskip) Back

218   TIF Q75 (Mr Inskip) Back

219   Ev 349 Back

220   TIF Q9 (Mr Frost) Back

221   Ev 327 Back

222   Ev 343  Back

223   Ev 347 Back

224   TIF Q12 (Mr Finch) Back

225   TIF Q30 (Mr Finch) Back

226   Ev 359 Back

227   Ev 319 Back

228   Ev 343 Back

229   TIF Qq 79-80 (Mr Hughes) and 125 (Sir Richard Leese) Back

230   Ev 319 Back

231   See Ev 327 Back

232   Ev 306 Back

233   Ev 306 Back

234   Ev 305 Back

235   Ev 359 Back

236   Ibid. Back

237   Ev 337 Back

238   TIF Q196 (Dr Ladyman) Back

239   TIF Q159 (Dr Ladyman) Back

240   TIF Q55 (Mr Frost) Back

241   TIF Q55 (Mr Finch) Back

242   TIF Q12 (Mr Joseph) Back

243   Seventh Report of Session 2004-05 Back

244   TIF Q151 (Dr Ladyman) Back

245   TIF Q152 (Dr Ladyman) Back


 
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