Select Committee on Transport Written Evidence


Memorandum submitted by the Association of Greater Manchester Authorities (AGMA) and Greater Manchester Passenger Transport Authority (GMPTA) (TIF 26)

INTRODUCTION

  The following evidence is submitted on behalf of the Association of Greater Manchester Authorities (AGMA) and Greater Manchester Passenger Transport Authority (GMPTA). AGMA and GMPTA are overseeing work towards a potential Transport Innovation Fund (TIF) submission for the city region.

  The following paragraphs set out the approach being taken by AGMA and GMPTA to investigate the potential which a TIF package of measures may offer in delivering a transport strategy for Greater Manchester which will most effectively support the city region's economic growth objectives by mitigating the potential for transport to act as a constraint on this growth.

  To date the Greater Manchester authorities have submitted bids to the DfT for funding under the TIF Pump Priming programme and have been awarded a total of £3.2 million in the financial years 2005-06, 2006-07 and 2007-08. No final decision has been taken on whether or not a bid will definitely be submitted. This will depend ultimately on the views of AGMA Executive and GMPTA based on the advice of the Independent Panel. More information is given on these matters later in this submission.

  The starting point for the work being undertaken on TIF is Greater Manchester's aspirations for the growth of the City Region's economy.

GREATER MANCHESTER'S GROWTH STRATEGY—THE MANCHESTER CITY REGION DEVELOPMENT PROGRAMME (CRDP)

  The Government's "Northern Way" growth strategy highlighted a £30 billion gap in productivity (GVA) rates between the North of England and the UK average and has subsequently identified the vital role of the key northern city regions as the North's foremost economic assets in addressing this gap. The Manchester City Region is seen as being of prime importance due to its unique combination of assets which have helped the city region to grow at a greater rate than anywhere else in the UK outside London—with 45,000 new jobs having been created here in the last five years alone. The Northern Way's Manchester City Region Development Programme (CRDP) sets out a range of high level, public policy, service and investment interventions to support the continuation of recent years' strong economic growth and to deliver the City Region's potential to create up to 210,000 new jobs over the period 2006-21. To achieve this, the CRDP sets out a comprehensive blend of measures to exploit the asset base locally and also address barriers to development in order to generate increasing levels of growth across the entire area whilst ensuring the regeneration and sustainability of deprived communities. A series of action plans are proposed across seven sectors of the City Region economy as a means of delivering this targeted growth. Access to a large, high quality labour market is an increasingly important determinant of business location decisions within the financial and knowledge economy sectors targeted by the CRDP. This makes labour connectivity one of the key drivers of sustained high levels of growth. Access to/from areas of worklessness, deprivation and poor performance is also highlighted as being fundamental to raising GVA levels across the entire city region. Therefore, transport is given a high priority in the CRDP with Metrolink Phase 3 and further investment being regarded as essential in ensuring that transport does not act as a constraint on the delivery of the city region's growth potential.

TRANSPORT CONSTRAINTS TO ECONOMIC GROWTH IN GREATER MANCHESTER: THE "TIPPING POINT"

  In April 2005, AGMA and GMPTA published the Greater Manchester Integrated Transport Strategy (GMITS) to address the transport challenges behind the CRDP growth agenda. GMITS set out a strategy for delivering a step change in the quality and capacity of public transport alternatives to the private car so as to promote modal shift and provide greater access to areas of employment. In particular, GMITS identified that the longer-term economic growth needs of the Manchester City Region would require substantial investment ot be made in the transport network as well as strategy for managing demand across the network. At that stage it was proposed to investigate the impact which different methods of managing demand would have on levels of congestion within Greater Manchester with a view to developing a "tool kit" of measures including both soft and hard measures which could be applied in different congestion scenarios. The intention was that the "tool kit" would build on the range of demand management measures already in use in Greater Manchester.

  To further develop understanding of the constraints that congestion might impose on future economic growth, the Greater Manchester authorities began in autumn, 2005 to work closely with the DfT and commissioned a study which sought to identify the point at which congestion could significantly harm the City Region's economic growth aspirations. The "tipping point" exercise sought in detail to establish whether (and, if so, at what point) congestion could become a serious constraint on future Greater Manchester employment and GVA growth given anticipated public transport funding. It also aimed to identify in broad terms the supporting investment that would be required if a "tipping point" was reached so as to ensure that hard edged demand management would promote rather than constrain growth within and across all parts of Greater Manchester.

  The study showed that:

    —  even with investment in Metrolink Phase 3(a), road and public transport, congestion is likely to become a major constraint on the delivery of the City Region's growth potential early in the next decade to the extent that growth projections could undershoot by as many as 30,000 jobs;

    —  congestion charging alone would be likely to add to rather than ease these constraints;

    —  a combined package including congestion charging and significant investment in public transport has the potential to produce improved growth outcomes compared to a no charging and no investment beyond Phase 3(a) scenario; and

    —  a combined package could potentially avoid transport becoming a constraint on the delivery of CRDP growth.

  Partly as a result of these findings, AGMA and GMPTA decided that an in principle case had been made for congestion charging to become a critical part of the work to be undertaken to underpin a Greater Manchester bid for "congestion TIF" ("C-TIF") funding 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. AGMA and GMPTA agreed that further work on the TIF bid should include a detailed evaluation of congestion charging in the context of a substantial transport investment programme. They also required that the work programme which was put in hand as a result of their decision should be undertaken in complete compliance with the four tests which had been agreed several years earlier as a pre-condition for any form of hard-edged demand management.

THE FOUR AGMA TESTS

  In autumn 2006, AGMA Executive endorsed a programme of work designed to identify a combined package of congestion charging and complementary transport investment to help deliver the growth objectives of Greater Manchester. This work is still underway and, if such a package can be identified, it will form the basis of a bid to DfT for C-TIF resources.In order to provide an objective basis for assessing whether a combined package including congestion charging is the right way forward for Greater Manchester, AGMA has established four tests. Any package will have to pass all four of these tests before it can be taken forward as a bid. The four AGMA tests are:

    —  there must be significant investment in public transport improvements including Metrolink and enhanced capacity must be in place prior to introducing a charging scheme;

    —  measures must complement the competitiveness and inclusion priorities of the sub-region and, not undermine the competitiveness of the regional centre or the town centres in the area;

    —  measures must be accepted, not only by the public but by the business community; and

    —  measures must be relevant to where congestion exists or where it may emerge in the future notwithstanding the advent of public transport improvements.

  In making their decisions, AGMA and GMPTA are advised by an External Review Group which consists of representatives of key stakeholders from across Greater Manchester. The group has an independent chair, a range of senior business leaders and transport academics with relevant skills and experience. Their role is to review and appraise the outputs of the work programme at a series of key stages in the process and then to provide advice to AGMA Executive and GMPTA. Their specific remit is to come to a view about and advise on whether or not the process and outcomes are consistent or not with the four tests discussed above.

  The work programme agreed by AGMA is designed to determine whether or not a package can be developed to meet these tests and at the same time meet the DfT's NATA criteria. A project team of officers and consultants has been established to progress the work programme. This work has been funded with the assistance of £3.2 million from the DfT's TIF Pump Priming programme, awarded in two tranches from the two bidding rounds in 2005 and 2006.

  The work programme is ongoing and consists of a number of linked work packages including:

    —  The development of integrated corridor plans as the key mechanism for ensuring the integration of Greater Manchester's economic, social and environmental objectives.

    —  The development of a transport investment package.

    —  A detailed study of the pattern of congestion and congestion levels across Greater Manchester and the design of a congestion charging scheme appropriate to the findings of the study.

    —  A programme of social and economic research and analysis designed to provide a detailed understanding of the impact of the combined package on different groups of residents and workers and on the Greater Manchester economy.

    —  The development of a behavioural change strategy.

    —  Substantial modelling activity to support all other workstreams.

THE GREATER MANCHESTER "SMART CHARGING" CONCEPT

  Based on the outcomes of the work programme and the advice of the External Review Group to date, it is clear that a flat rate London style all day area charging approach would not be appropriate for Greater Manchester. Such a scheme would be far too inflexible to effectively target the complex pattern of congestion which exists in the City Region. In particular it would not enable those peak hour journeys which contribute most to congestion to be specifically targetted.

  AGMA Executive and GMPTA earlier this year endorsed a series of principles for a new "smart charging" concept which will form the basis of any emerging C-TIF bid proposal. The "smart charging" principles require that a potential Greater Manchester congestion charging scheme must:

    1.  Promote competitiveness from Day One and so cannot simply seek to address the "crowding out" impact of congestion in the long term if this is at the expense of lower growth in the short term.

    2.  Promote social exclusion. The AGMA tests methodology enables us to focus on the accessibility impacts of the overall package on priority areas within the conurbation, supported by household based case studies of potentially vulnerable groups designed to ensure that the needs of sensitive groups are identified and reflected in the design and pricing of the overall package.

    3.  Benefit the environment by promoting modal switch to less carbon intensive transport and improve the fuel efficiency of road use generally, so as to allow carbon, air quality and safety targets to be set from day one.

    4.  Send the right "price signals"—ie it must match and not exceed the costs imposed by road users and their specific journey patterns on the city region's economy.

    5.  Target all journeys that impose significant costs on the City Region's economy consistent with the other principles of smart design—this is necessary if we are to minimise the "crowding out" ratio for all parts of the City Region.

    6.  Be cost effective so as to ensure that the potential of net revenues is maximised.

    7.  Be easy to use and offer road users a choice in terms of the way they interact with the system.

  The above principles reinforce the key message that the Greater Manchester "smart charging" approach is not about enforcing change in behaviour. We recognise that road-based transport and travel will always present the most appropriate solution for many journeys both from the perspective of the individual and the Greater Manchester economy. The essential point behind this approach is that road transport and travel imposes costs on others and that these costs both need to be reflected in the decisions people and businesses take. Hence, the costs should be recovered from road users where this is appropriate and feasible to help us address the harm that would otherwise be done to the local economy and the environment, whilst being sensitive both to the needs of business and the availability of public transport.

TIF SUPPORTING PACKAGE OF INVESTMENT

  The key driver behind the work being undertaken on the development of the transport investment programme is that the package as a whole seeks to deliver to CRDP growth rates and, in so doing, complies with the AGMA tests, including in particular the requirement for it to promote competitiveness and social inclusion from Day One.

  Our analysis to date suggests that any charging scheme will have to be broadly drawn if it is to be consistent with the "Smart" design principles AGMA has established. The key principles here are those that reflect the need to capture all the journeys that impose significant costs on the City Region economy and the importance of sending road users the right price signals in terms of the costs they impose on others.

  This, in turn, means that the programme of supporting investment and other measures will also have to be substantial in terms of both its coverage and the impact it has on the quality of the alternatives to the car being provided. Otherwise the package as a whole will not be consistent with the other smart design principles or the AGMA tests, in particular those that reflect the need to promote both competitiveness and social inclusion from day one.

  Although circumstances will differ between places, it seems likely that similar conclusions apply to other conurbations contemplating the role congestion TIF strategies could have in meeting their future transport needs. Unless the DfT envisages a substantial increase in the scale of funding made available under the C-TIF initiative, currently scaled at £1.4 billon 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.

  The following paragraphs set out our proposed approach in this regard.

USE OF FUTURE CHARGING REVENUES

  Our analysis suggests that the ability of TIF authorities to borrow against future charging revenues to finance a significant proportion of the overall costs of combined packages will be critical to the success of the whole initiative.

  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 require authorities to set aside annually resource funding equivalent to 4% of total borrowings to repay principle from the year after borrowing is taken out (the Minimum Revenue Provision, or MRP, rule) both substantially undermine the ability of TIF authorities to use charging revenues to contribute towards the costs of supporting packages. We believe both of these rules need to be changed if the DfT is to have a realistic prospect of achieving its objectives for C-TIF within anything like the current budget it has announced for the scheme.

  Since the current charging legislation only stipulates 10 years as the minimum period over which revenues can be retained, this issue should be relatively straightforward to address, for example through revised guidance for potential applicants for C-TIF funding.

  The ability to retain and borrow against revenues over a longer period than is currently available in order to finance improvements in public transport will be an important factor in persuading the public that charging is not simply another tax.

  This alone however will not be sufficient and revisions will also be required to the secondary local government finance legislation that sets out the MRP rule. In essence what is required is a regime that allows authorities to use prudential borrowing for project finance. This means providing the flexibility to repay principle in line with the earnings power of the projects and programmes being financed rather than against an arbitrary timetable. In the absence of this kind of reform, lengthening the period over which charging authorities can retain revenues will have only a limited impact on their ability to contribute towards the costs of investment expenditure delivered in advance of charging.

USE OF TIF AS A LONG-TERM RESOURCE

  In addition, we believe more consideration should be given to the development of a long term approach to the leverage of TIF funding. We also believe that we should be exploring longer term funding deals with DfT to PTA's rather than the annual process which does 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 C-TIF would allow the DfT to spread the cost of its share for supporting packages over a longer timeframe.

  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 the DfT would be able to deploy resource as well as capital funding towards the upfront costs securing C-TIF packages and, thereby, make significant progress with its national policy initiatives that sit at the heart of the TIF process.

INSTITUTIONAL REFORMS

  Finally, our work has also identified the need for reform of local transport delivery mechanisms to ensure that the roles and responsibilities of the institutions involved, and the working relationships between the institutions, are fit for purpose. The Government has published proposals in its Putting Passengers First paper, which it intends to incorporate into a Bill to provide additional powers for designated local authorities to exercise more control over bus services within their areas. These proposals are currently being studied in detail but, in general terms, AGMA and GMPTA consider them to represent a welcome step forward in addressing what is now widely seen as a fundamental weakness in securing maximum value from the existing system.

  We have also identified the need to continue to press for powers, which address similar weaknesses in local control/influence over the strategic highway network and local rail services that, in Greater Manchester's case, have significant influence on the resilience and capacity of the overall transport network. Our objective is to develop arrangements, which will enable the management of the City Region transport network in an integrated way and officers are developing detailed proposals for the necessary reforms, which will form the basis of ongoing discussions with DfT Officials and Ministers.

  Our approach seeks to ensure that economic, land use planning and transport strategies are effectively aligned at the sub-regional level. Our innovative corridor partnership approach seeks to bring together all the key public sector agencies with transport operators and major private sector employers to agree a set of targets covering key economic, social and transport outcomes. Through this process we intend to ensure that delivery is improved and all agencies are working to a common set of objectives.

CONCLUSION

  The Greater Manchester authorities recognise the future demands that our city region's economic growth will place upon its local transport network. If not addressed, these demands are likely to increasingly constrain Greater Manchester's growth potential over the coming years.

  We believe that the TIF process holds the potential to enable us to plan and invest in local transport capacity and quality to meet the challenges associated with growth. It is on the basis that we have sought to engage with TIF in a constructive and robust manner. However, as this evidence demonstrates, TIF presents a number of challenges, which must be resolved if the TIF initiative is to achieve its local and national policy objectives.

March 2007





 
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