House of Commons - Transport - Written Evidence

Select Committee on Transport Written Evidence

Memorandum from the Department for Transport (DAR 01)

Thank you for your letter dated 2 August 2007. Enclosed, the list of responses which were requested by the Transport Select Committee and concerned the 2007 DfT Annual Report which are arranged under the following headings:

(1) General Matters;

(2) Financial Performance;

(3) PSA Targets; and

(4) The Efficiency Programme.

Also included are supplemental questions relating to Metronet and the Shared Services Programme which you raised in a letter dated 8 August 2007.

1. GENERAL MATTERS

A. Network Rail Breach of Licence

1. In the 2006 Annual Report (p 100) the department reported that the Office for Rail Regulation (ORR) had concluded in March 2006 that Network Rail (NR) had breached its licence by failing to provide accurate information to its customers and Funders. However, there is no reference in the 2007 Annual Report of any follow-up actions being taken by the Department. What follow-up actions has the Department taken to ensure that NR will improve the accuracy of its information to customers?

— Although Network Rail (NR) operates under a network license which is issued by the Secretary of State, the license is enforced and amended by the Office of Rail Regulation (ORR).

— ORR has a range of statutory powers under the Railways Act 1993. Using these powers, it sets the contractual and financial framework within which NR operates the network, ensuring that the company carries out its activities efficiently and well, and that it is appropriately funded. The framework is designed to provide effective incentives so that the company is rewarded for doing a good job. If necessary however, ORR may enforce compliance with the network licence if the network operator fails to fulfil its obligations, andit may also impose monetary penalties.

— ORR initially imposed anotice on NR under section 55(6) of the Act in lieu of enforcement action in respect of the accuracy of published information. This notice was not complied with. Consequently ORR imposed a penalty of £250,000 on Network Rail Infrastructure Limited in respect of the accuracy of published information on infrastructure capability (Condition 7 of the Network Licence, 2006). Since then the issue has been kept under review by ORR but it considers NR is now meeting its license conditions andhas not deemed it necessary to issue a further notice to NR.

B. Cycle Lanes

2. The 2007 Annual Report gives different figures to the 2006 Annual Report for the number of cycle lanes delivered by local authorities for the years 2004-05 and 2005-06 (the 2007 Annual Report, p 119 and 2006 Annual Report p 132). The other lines of data (eg for kilometres of cycle track) agree. No explanation is given for this inconsistency. How has this inconsistency arisen?

(a) Why has the data for cycle tracks and lanes for the year 2006-07 not been provided in the 2007 Annual Report?

— The Committee asked two questions about the data on cycle lanes and cycle tracks. Why was there an inconsistency in the figures for the 2006 and 2007 annual reports for the number of cycle lanes delivered by local authorities? And why were no figures for 2006-07 supplied in the 2007 report?

— The data come from returns from local authorities in England (outside London), which are provided each Summer. The information provided in July 2007—which was not available until after the publication of the 2007 Departmental Annual Report—covers 2005-06 and provisional estimates for 2006-07. The results are:

	2005-06	2006-07 (Estimated)
Cycle Track (km)	515	457
Cycle Track Number	460	593
Cycle Lane (km)	234	140
Cycle Lane Number	267	253

— The figures for 2005-06 in both the 2006 and 2007 annual reports, and the figure for 2004-05 in the 2006 annual report, should all have been described as "estimates". We apologise for the omission. Each year, there are new returns from local authorities and the figures in the Departmental report reflect that.

— The Committee may still be wondering why we had provisional estimates for 2005-06 in one annual report and no estimate for 2006-07 the following year. The reason is that the Department now allocates Integrated Transport Block funds to local authorities on the basis of a needs-based formula, rather than project-based bids. As a result, these LA returns no longer provide information beyond the year that has recently been completed. We would expect the next Departmental Annual Report to show figures up to provisional estimates for 2006-07, as described above—and the annual report the year after to show updated figures for 2006-07 and provisional estimates for 2007-08.

— We have looked more closely at the data underlying the table, and can update the table. Later LA returns were sometimes available than had previously been used, and a couple of local authorities provided information that was inaccurate: for example, showing figures in metres, not kilometres. Correcting for these, the table would be:

	2001-02	2002-03	2003-04	2004-05	2005-06	2006-07 (Estimated)
Cycle Track (km)	629	640	565	558	515	457
Cycle Track Number	458	575	575	581	460	593
Cycle Lane (km)	405	369	386	308	234	140
Cycle Lane Number	352	416	424	375	267	253
Data taken from finance forms for:	2004-05	2005-06	2006-07	2007-08	2008-09	2008-09 (received July 2007)

C. Airport Slots

3. The 2006 annual report envisaged that the EU regulation of airport slot allocation would be revived during 2006-07 (p 145). The Department at that time reported that it was studying alternatives to the current allocation mechanism with a view to informing the UK's negotiating position. However, there is no update of this in the latest report. What progress has been made regarding the revision of the EU regulation of airport slot allocations?

(a) How is the Department attempting to influence the negotiations for the UK's benefit?

— The European Commission is in the process of reviewing the EU airport slot allocation regulations. In December 2006 it circulated a questionnaire to stakeholders, including Member States, about the effectiveness of the more technical changes to the regulations introduced in 2004 to which the Department responded. No timetable for completing the review has been set by the Commission, but the Department's understanding is that a Commission Communication or proposals for the regulation's revision may be published later in 2007. In the course of 2006 the Department also funded a research project looking into alternative mechanisms for allocating slots created by new capacity. This was completed in late 2006 and published on the Department's website. A copy was also sent to the Commission. The Department has discussed the review with the Commission, including the Department's priorities for changes to the regulation. The Department has also met UK stakeholders to consider potential changes to the regulations.

D. Galileo

4. According to the 2006 Annual Report, the concessionaire of the Galileo project was to be appointed by the end of 2006 and operations were to begin by the end of 2008. This section in the 2007 Annual Report (p 144) about the Galileo project is identical to that in the 2006 Annual Report, other than it is now reported that the concessionaire is to be appointed by the end of 2007 and operations are to begin at 2011-12. No reason has been given for these delays.

(a) Why has the project been delayed? What is the Department doing to ensure that the project meets its new deadlines?

— In their letter of 14 March, the German Presidency reported that negotiations had come to a standstill between the consortium bidding to run the Galileo public private partnership (PPP) concession and the Commission Agency, the European GNSS Supervisory Authority (GSA). The consortium was concerned about the transfer of risk, the long term certainty of public sector funding and the integration of the EGNOS augmentation programme with Galileo. However, the consortium had not agreed on its governance structure and the distribution and location of infrastructure and work-share and this appears to have been the immediate cause of the breakdown.

— Despite the intervention of the German Presidency it proved impossible to resolve these problems to the satisfaction of all parties. In June, the Transport Council agreed a Resolution concluding that the negotiations had effectively broken down and should therefore be brought to an end. The Council asked the Commission to bring forward proposals for the October Council to consider, setting out in detail, alternative options for taking the programme forward. It was also necessary to include all possible options of public funding, based on an additional and thorough assessment of costs, risks, revenues and timetables. The UK and the Netherlands entered a joint minutes statement at the Council, stressing the desirability of using a PPP model to deliver the programme and the need for competitive procurement.

— The Department has been in regular contact with Commission officials, the GSA, and our other Community partners as the Commission develops the detailed proposals requested at the June Council. We believe that the Community needs to use this opportunity to get the project back on track by taking an informed decision on the way forward. The UK continues to press for a realistic timetable for the programme.

(b) The former Minister stated that the Galileo problems would not delay any introduction of road pricing schemes. What impact will the delays in the Galileo project have on the introduction of road pricing schemes or other transport projects at the local or national level?

— The position remains the same. Global Navigational Satellite Systems (GNSS), including both GPS and Galileo, can support a wide range of applications. However, no decisions have been taken on whether to proceed with the introduction of a national road pricing scheme or on the technology that might be used to support such a scheme. No UK transport projects, at local or national level, are dependent on Galileo.

(c) What are the cost implications of the delays to Galileo and any consequential delays to other projects?

— The delays to the Galileo programme have increased the cost estimates for the programme but, given the failure of the current PPP negotiations, it is unclear what the final costs will be. In our joint minutes statement with the Netherlands to the June Council we asked for the Commission's assessments to "include a cost benefit comparison, on the same evidential basis, between public procurement plus an operating concession, and a PPP for procurement and operation, as originally planned. The comparison should cover the planned project lifetime, with replenishment as foreseen, and be based on the most up to date information". The original plan had been that the costs of the satellite deployment and establishment of the ground control facilities in a PPP would be funded one-third by the EC, through grant, and two-thirds by the PPP partner from an overall estimated cost of €2.1 billion (£1.4 billion). The concessionaire as the PPP partner would then receive the revenue generated whilst meeting the operating and replenishment costs of the system for the contract period. A move to greater public procurement and finance therefore has long term implications for the EU Budget.

— With the failure of the current PPP negotiations the Commission put forward, in its Communication of 16 May 2007, some approximate figures, based on early assumptions and extrapolations of data, for the cost of different future options for the procurement and operation of Galileo. They indicate a total required public sector budget commitment, including for infrastructure, availability payments (or operating costs), and replenishment costs, over the period 2007 to 2030 of between €9 billion and €12 billion (£6.1 billion-£8.2 billion), depending on the option chosen. The public sector costs in the period 2007-13 (the period of the current Financial Perspective) are estimated at between €2.4 billion and €3.4 billion (£1.6 billion-2.3 billion) compared to the current available budget of €900 millio.

— Any increase in the public sector contribution to Galileo would need to come from a redeployment of funds from within the EU budget and may have an impact on other programmes and projects financed by the EU budget. The Commission is expected to present a revised draft EC financial instrument on the funding of Galileo (during 2007-13) to the budgetary authorities after a decision has been taken on the nature of the procurement and operation of the programme by Council later this year.

(d) Given that private funding is unlikely owing to the lack of commercial interest, is it not now likely that the system will be increasingly justified by its military purposes? How does DfT hope to ensure that the system will be, as the Minister stated on 2 July, a civil project under civil control?

— The involvement of private funding in the Galileo programme has not been wholly discounted. The proposals on the next phases of the programme, currently being developed by the Commission, include considerations on the potential level of private sector involvement.

— Galileo has been defined and agreed as a civil programme under civil control since the project's inception and the EU Transport Council has repeatedly endorsed this; most recently in its October 2006 Council Conclusions. In the December 2004 Transport Council Conclusions it was also made clear that changing the civil status of Galileo would require a decision under the terms of the Common Foreign and Security Policy (CFSP). CFSP decision-making is by unanimity.

— Galileo's open service, like that of GPS, can be accessed by all and therefore could be used by military forces, for example for navigation or location purposes. The Government's policy is to safeguard against the development of a system for purely military applications, such as guided munitions. We remain committed to working to ensure that Galileo's development continues in line with its agreed status as a civil programme under civil control.

E. Quality of Data

5. Figure 4b, "Road travel trends", has not been updated since 2004. The data in the 2007 Annual Report (p 62) is reported on a different baseline to that in the 2006 annual report (p 63). When does the Department intend to update this data on road travel trends?

— Figure 4b in the 2007 Annual Report is based on data from the National Travel Survey (NTS), presented as three year rolling averages. The latest data available from the NTS when this chart was produced were from the 2005 NTS, so the latest point which could be calculated as a three year average was 2004 (using data from 2003, 2004 and 2005). In the 2006 Annual Report the point for 2004 was based on data for two years (the average of 2003 and 2004) but the method was revised for the 2007 Report to be more methodologically robust. Data from the 2006 NTS were published on 30 August 2007 and an updated version of Figure 4b, covering 1996-2005 is attached.

— In 2006 a weighting strategy was introduced for the NTS. This is designed to adjust for the fact that certain groups are more likely to participate in the survey than others. It also adjusts for the observed tendency for respondents to record fewer trips towards the end of their "travel week", during which they are asked to record details of their travel patterns (known as "drop-off"). The weighting methodology has been applied to data back to 1995, thus producing a discontinuity in the time series at this point. Most time series are therefore now based on data for 1995 onwards. Using three-year rolling averages, the first data point on the latest chart is therefore 1996. Further details of the weighting methodology are available on the Department's website at http://www.dft.gov.uk/pgr/statistics/datatablespublications/personal/methodology/weightingnts/

— Furthermore, we are also considering publishing our forward look of future travel trends based on our National Travel Model, with an annual update in line withthe frequencywith which we currently publish ourobserved statistics.

6. The 2007 Annual Report noted that customers are increasingly using on-line systems for licensing vehicles which require an MOT and for paying car tax (p 17). What is the overall proportion of customers using these on-line systems?

(a) Has the Department got any targets for the proportion of customers to pay MOT and car tax, using computerised systems in the future? If so, what are they?

— Take-up of the DVLA Electronic Vehicle Licensing (EVL) service continues to increase with almost 1.1 million transactions taking place during July 2007. Currently some 32% of all licensing transactions (figure for July 2007) are completed using EVL. Theforecast for EVL is to achieve a take up of 60% by the end of 2008 however it should be emphasised that this is dependent on a number of key changes that are being considered. These changes are:

1. Continuation of proactive marketing for the scheme including the development of an incentive scheme that is acceptable to Ministers.

2. Proposed changes in legislation being accepted.

— The EVL service links with the Motor Insurance Database and also with VOSA MOT data to verify that thereare current insurance and MOT certificates (when required—eg cars over three years old) in place for the vehicle being licensed.

7. The 2007 Annual Report noted that 34 of the 37 cross-government policies contained in the Social Exclusion Unit's 2003 report on transport have been implemented (p 26). Which policies have not yet been implemented and when will these policies be implemented?

(a) What assessments have been made of the impact of those policies that have already been implemented?

— Of the three policies currently outstanding, two are in the process of being implemented. These are policies 5 (barriers to flexible transport) and 29 (criteria for eligibility for Patient Transport Services), and are planned to be implemented in late 2008 and October 2007 respectively. Full progress on the remaining outstanding policy (policy 13—revision of national planning policy guidance) is being held in abeyance following CLG's decision to revise only those PPGs affected by policy changes. However subsidiary guidance on Transport Assessments takes account of social exclusion and accessibility issues.

— For most of the policies, it is too early to say what their impact has been. However, the impacts of the following two policies are due to be evaluated—policy 1 (accessibility planning, which is the cornerstone of the Social Exclusion Unit report) will have an evaluation research project commissioned later this year or early 2008, and policy 16 (tackling road accidents in disadvantaged communities) is due to have its evaluation reported in Autumn 2008.

2. PSA TARGETS

A. PSA1 Strategic Congestion (Annual Report 2007, p 235)

8. The 2007 Annual Report reported slippage against the PSA 1 target, strategic congestion. It noted that the Highways Agency is putting in place a series of measures to achieve the target, including support units and improved roadwork management (p 242). What evidence is there that these measures will improve traffic flow?

— The Highways Agency's PSA reliability target delivery plan includes a number of measures that contribute to a reduction in Average Vehicle Delay (AVD) on the strategic road network. The business case for each work stream was assessed and, based on a number of technical assumptions, an AVD benefit was estimated. The delivery and usage of these measures are monitored and reported on a monthly basis.

— With reference to the two elements highlighted, incident support units and improved roadwork management, an early indication of the benefits they deliver are as follows—

Incident Support Units (ISU)

— Before committing additional investment to enhance the service provided by ISUs, the Agency worked closely with its service providers to accurately benchmark the frequency and speed of their response to serious incidents. Following this assessment, a number of improvements to the ISU service were assessed on a value for money basis and improvements were implemented, termed Enhanced ISUs.

— Enhanced ISUs have been in operation since the start of the measurement year (March 2007 to April 2008). The Highways Agency has been collecting data on average response times associated with incidents that primary ISUs have been dispatched to. This information has been obtained from service providers on a monthly basis following the enhancements. Data collected over the first four months of the measurement year indicate the average response time of primary ISUs has improved by around 11% (3.6 minutes) across 373 incidents where data were available.

— In order to substantiate and confirm these encouraging early results, the Agency has commissioned a detailed study to assess the actual impact of enhanced ISUs in mitigating worst delays and returning traffic to freeflow levels following serious incidents. The results of this work are expected in October/November 2007. When combined with the information being collated from service providers, who directly operate the ISUs, it will provide evidence of the scale of journey time reliability benefits delivered by enhanced ISUs.

Roadworks Management

— Roadworks can cause severe delay and disruption on the network. Therefore, managing roadworks as effectively as possible, to minimise their impact on vehicle delay, is a key component of the Agency's reliability delivery plan.

— Guidance has been developed on the application of speed limits to be implemented during roadworks. A standard 50 mph limit shall be used, except in exceptional circumstances where a lower limit is required for safety reasons. A number of existing and planned schemes have revised their construction traffic management arrangements in light of this, raising the temporary speed limit from 40 mph to 50 mph.

— Studies are currently being conducted to identify the positive impact on average journey times of increased speed limits through major roadworks, such as the M1 J6a to J10 road widening scheme. Early, un-validated results indicate that increasing temporary speed limits from 40 mph to 50 mph has had a significant impact on reliability for the 10% worst journeys. A comprehensive set of results, derived from a larger sample of schemes, is expected in October.

(a) How will the de-trunking affect DfT's ability to reverse the slippage against this target?

— The policy of detrunking, ie transferring to local highway authorities the responsibility for trunk roads that were considered to be non-core, was set out in the White Paper "A New Deal for Transport", published in July 1998 (Cm 3950). The inter-urban reliability PSA target applies only to the "core" routes remaining in the strategic road network following the detrunking programme; all non-core routes are excluded from the PSA measure and progress with the detrunking programme therefore has no impact on achievement the target.

— The non-core routes were excluded from the inter-urban reliability PSA target as progress with the detrunking programme is unpredictable and depends upon agreements being put in place with the relevant local highway authority. Moreover, as explained in "A New Deal for Transport" in advance of detrunking, the Highways Agency only promotes further improvements on non-core routes where they are warranted on safety grounds. All other improvements, ie congestion/reliability improvements, are considered by local highway authorities as part of their local transport plans.

B. PSA2 Rail (Annual Report 2007, p 246)

9. What measures have been taken to ensure that the data used to compile the Public Performance Measure (PPM) are robust, given that the 2006 Annual Report reported that Network Rail breached its licence by failing to provide accurate information to its customers and funders (Annual Report 2006,p 100)?

— The Office of Rail Regulation has commissioned an audit of this data and the findings demonstrated that the data and its sources were sound.

10. The Technical note for PSA 2 (last updated June 2006) stated: "A quality assurance audit of the systems that generate data, including PPM if required, will be undertaken as part of the development of the Office of Rail Regulation's new responsibility as the single repository for rail industry data". Has this been done? If so, what are the findings?

— Auditors commissioned by the Office of Rail Regulation have examined the processes and procedures which govern the production of performance measures. The auditors have reported to ORR that procedures are improving,and have made one specific recommendation and four observations, which ORR confirm will be followed up with Network Rail.

11. We note that the Department is examining the funding options for the Thameslink project. What are the risks that the proposed capital spend will lead to higher fares for passengers?

— The White Paper "Delivering a Sustainable Railway" published in July 2007 confirms that the policy on fares increases remains at RPI + 1%. There is noproposal to vary this in the case of the Thameslink project.

C. PSA3 Buses and Light Rail (Annual Report 2007, p 252)

12. On what basis does the Department find that it is on course to meet this target, given that the target for growth patronage in every region outside London remains "challenging" (p. 253)?

— The Department's assumptions for bus and light rail patronage growth suggest that the 12% national patronage target will be met by 2010-11. However, the element of the target for growth across all regions by 2010-11 remains challenging. It is interpreted as year-on-year patronage growth in each region over the last three years of the target period—and the Department's current view is that, given the long-term background trends in car ownership and usage in some regions, and the consequent implications for bus patronage, it remains a real challenge to achieve this.

(a) Aside from the local authority areas listed on p.253, which other local authority areas have seen an increase in bus and light rail patronage?

— DfT's own internal estimates for patronage down to local authority level cannot be used owing to restrictions on disclosure of data arising from the provisions of the Statistics of Trade Act 1947. However, based on local authority data (Best Value Performance Indicator 102 as reported in Local Transport Plans delivery reports), compared to DfT estimates, the following areasare among those that have seen a significant percentage increase in patronage growth:

Bournemouth, Poole and Christchurch

Brighton and Hove

Cambridgeshire

Dorset

Kent

Kingston-upon-Hull

Milton Keynes

Northamptonshire

North Nottinghamshire

Peterborough

Swindon

Telford and Wrekin

West Sussex

Wokingham

York City

(b) For each region, in what year does the Department first expect to see overall growth in bus and light rail patronage?

— The latest estimates of bus patronage show that nearly all regions outside London saw a rise in patronage in 2006-07 (compared to the previous year). This is largely a result of the free concessionary fares policy. A further boost can be expected in 2008-09 with the introduction of the national concessionary fares scheme.

(c) Of the 12% target for national increase, what proportion does the Department expect to come from increased patronage in London?

— Current DfT forecasts show an overall increase in bus and light rail patronage of 22% by 2010-11 (from a 2000-01 base). Much of which can be attributed to growth in London. Some regions outside London could show an increase in patronage by the end of the target period, but the overall picture in the regions is likely to be one of decline. However, this decline has been reduced in recent years and the increases in patronage associated with the introduction of free concessionary fares are turning around the downward trend in all regions.

(d) What impact, in terms of increases in patronage, is the introduction of a national concessionary fares scheme in 2008 likely to have (p 278)?

— Our current estimate is that the introduction of a national concessionary fares scheme in 2008 could bring a 3.2% increase in patronage over two years.

(e) What are the cost implications of the national concessionary fares scheme?

— The Concessionary Bus Travel Act 2007 provides for a national bus travel concession in England from April 2008, giving around 11 million older people and eligible disabled people free off-peak travel on local buses in any part of England. Up to £250 million of additional funding is to be made available each year to fund this. Bus operators will continue to be reimbursed by local authorities for carrying concessionaires on a "no better or worse off" basis. The Government is confident that this further funding is sufficient in total to meet the extra costs to councils.

— In addition, the Department will pay local authorities in England a grant to cover reasonable new burdens arising from the need to issue new travel passes for the national concession. The size of the grant payment will be announced shortly when the specification of the new pass has been finalised following consultation and discussions with suppliers.

(f) Given the need to improve services outside London, why have the resources available for other bus grants such as the Bus Challenge schemes and "Kickstart" projects declined since 2004-05 (Figure 6b, p 99)?

— The decrease in spending on "other bus grants" largely reflects the completion of the Department's funding of projects supported under the Rural and Urban Bus Challenge schemes. The last competitions for funding under these schemes were held in 2003. The schemes have succeeded in their purpose of demonstrating the potential of innovative approaches to meeting public transport needs. The schemes were never intended to provide permanent revenue support. In many cases projects initially supported by Challenge funding are now continuing with support from local authorities and other sources. We will consider the case for a further competition for "Kickstart" funding in the light of the outcome of the Comprehensive Spending Review later this year.

13. In the 2006 Annual Report, the DfT has committed to exploring the potential benefits of innovative light rail schemes, including projects costing less than £5 million (p 285 of the 2006 DAR). However, we can find no detail to any such schemes in the 2007 Annual Report. Can the Department give any details of pilot schemes involving light rail that are be set up in the future?

(a) What is the Department doing to establish light rail schemes?

— The 2006 annual report outlined measures taken by the Department to address a specific conclusion of the Public Accounts Committee in their 2005 report on Light Rail. The Committee concluded that "innovative ultra light rail technologies had been excluded from departmental funding because they cost less than the £5 million qualifying threshold for a scheme to receive financial support". In guidance to Local Authorities produced in 2005 the Department, taking the PAC finding into account, waived the £5 million threshold for bids for pilot or demonstration schemes and made it clear that when considering such bids it would be prepared to take into account not only the scheme's immediate costs and benefits, but the potential to unlock benefits if adopted elsewhere. Since introducing this facility no Local Authority has submitted such a pilot or demonstration scheme for funding. The Department will continue with these arrangements but recognises that the issue is not simply the availability of funding for Local Authorities, but the development by the private sector of the appropriate technology to the extent that it is a realistic and deliverable proposition for Local Authorities to take forward.

14. The technical Note (updated 30 May 2007) stated that local authorities were being encouraged to develop local accessibility indicators as part of their LTPs. There is an update on progress of this in the 2007 Annual Report (p 114), which notes that the Department's core accessibility indicators for 2005 have been calculated and will be sent to local authorities by spring 2007. what are the core accessibility indicators?

— The core accessibility indicators provide a number of measures of accessibility by public transport, walking and (where appropriate) cycling to seven service types: primary schools, secondary schools, further education, GP's, hospitals, food shops and employment. With the exception of further education, indicators have also been produced for an "at-risk" sub-group of the population. The indicators have been released as a series of spreadsheets on the DfT Transport Statistics website, for England, excluding London, at Lower Super Output Area (over 27,000 different areas). They show, for instance, the percentage of households in an area that are within 15 and 30 minutes of a particular service.

(a) What will be the relationship between the Department's core indicators and authorities' local indicators for accessibility?

— Accessibility is a local issue and as part of their Local Transport Plans authorities were required to submit accessibility strategies. These strategies were founded on an evidence base of the real problems that local people experience in reaching jobs and key services such as education, training and healthcare. As part of this process, authorities were required to develop at least one local indicator for accessibility that could be used to measure the success of their local strategies. The core indicators have been calculated to help local authorities develop their evidence base for their accessibility strategies. Using nationally consistent datasets, they give local authorities a picture of journey-time barriers to accessibility to important services in their area. Most of the accessibility indicators adopted by local authorities in their LTPs are based on journey times.

for more details on DfT accessibility indicators.

D. PSA 4 Urban Road Congestion (Annual Report 2007, p 243)

15. What stage has the Department reached in assessing whether the local authority delivery plans will achieve the urban congestion target?

— Local authorities in the ten largest urban areas in England have set local targets for tackling congestion in the context of increasing demand for travel. The Department has provided guidance and support to these authorities on producing delivery plans setting out how these targets will be met. The Department has assessed the plans against a set of criteria to determine whether they provide confidence that the local targets will be met or exceeded. Where a plan provides such confidence, the Department has released that area's share of the Congestion Performance Fund, which totals £5 million for 2007-08. So far eight of the 10 urban areas have produced plans which have been assessed as giving confidence the target will be met. The Department is working with the remaining areas to address the issues with their draft plans, and with all the ten areas as appropriate to tackle congestion and meet the local targets. The delivery plans are live documents which the authorities use to manage their programme of work to tackle congestion. They will therefore be kept up to date, and the Department will see updated versions of the plans on a regular basis.

E. PSA 5 road safety (Annual Report 2007, p 257)

16. Road Casualties Great Britain: Main Results 2006 shows that 169 children under 16 were killed in 2006 on the road compared to 141 in the previous year. Why has the number of children killed in road accidents increased and what measures is the Department taking to ensure that the increase is not sustained?

(a) The figures also show a small increase in pedestrian deaths, but a small decrease in the number of KSI casualties. This is against background of a 7% reduction in the overall number of pedestrian casualties. What factors does the Department believe explain these trends and what action is the Department taking to reduce further the number of pedestrian deaths?

Children

— The increase in child pedestrian deaths in 2006 was disappointing. However, the 141 killed in 2005 was the lowest number on record. The 2006 number of 169 is similar to the number killed in 2004, which at 166 was then the lowest on record. The long term trend continues to be downwards. The number of children seriously injured fell by 6%, from 3,331 in 2005 to 3,125 in 2006.

— Our target is to halve the numbers of children under 16 years old killed or seriously injured, by 2010, measured against the baseline of the 1994-98 average. The number killed and seriously injured in 2006 was 3,294, which is 52% below the baseline of 6,860.

— It is difficult to say exactly why there were 28 more children killed across Great Britain in 2006 than in 2005. When dealing with road accidents where each case may involve a series of interacting causal factors, such relatively small numbers are subject to a certain amount of random fluctuation from year to year. For this reason, it is helpful to look at longer term trends and to larger sample sizes—for example including serious injuries. The longer term trend might suggest that the 2005 figure may be below the long term trend rather than the 2006 figure being above it. Another possibility is that external factors may have a part to play, such as the hot summer in 2006 leading to more outdoor activity by children for more of the year, increasing their exposure to traffic and hence the risk of being involved in an accident.

What DfT is doing

— We published a new child road safety strategy in February 2007, replacing that issued in 2002. It sets out to implement a wide range of measures to reduce casualties, including more local safety schemes and greater promotion of safer road use by everyone, under the THINK! banner. DfT runs a series of child and teen road safety publicity campaigns and will shortly be launching a new campaign aimed at parents of younger children. Our campaigns aimed at drivers on a range of issues also help to improve child road safety.

— We are firmly committed to tackling the significantly higher incidence of road casualties in disadvantaged communities. Our £17.6 million Neighbourhood Road Safety Initiative has supported 15 local authorities in the most deprived areas to tackle their special road safety problems. We shall promulgate lessons learned and best practice from these, and our Birmingham Inner City Demonstration project, to all authorities.

— There is strong evidence that practical training is by far the most effective means of improving children's skills and judgements. So we have funded the £9 million Kerbcraft child pedestrian training research project in 64 English local authorities, completed in March 2007. Schemes were selected on the basis of deprivation and child casualties, training 5 to 7 year olds in three important road-crossing skills. Independent evaluation shows that trained children have made statistically significant improvements to key behaviours, compared to untrained children. We will be disseminating the findings of the research to all local authorities.

— We strongly advise parents to encourage their children to take cycle training. The national cycle training standard, under the Bikeability name, provides a practical on-road training scheme. This provides the opportunity to influence their future travel behaviour by enthusing them and equipping them with the necessary skills. We are providing additional funding for local authorities to increase their cycle training capacity and direct to schools by way of the Schools Sport Partnerships for new cycle training for 10-11 year olds as part of our plans to roll out Bikeability training across England. An extra 100,000 children will be trained by 2008-09.

— Engineering measures, especially 20 mph schemes, and enforcement measures, such as speed cameras, have been shown to benefit all road users and especially children.

Pedestrians

— The number of pedestrians killed in Great Britain in 2006 increased by 4, from 671 in 2005 to 675. This is 33% below the 1994-98 baseline average of 1008. The number of child pedestrians aged 0-15 killed in 2006 increased by 8, from 63 to 71, while the number aged 16-59 fell by 3, from 337 to 334 and the number aged 60 and over rose by 1, from 267 to 268. The number of unknown age fell from 4 to 2. So the increase in pedestrian deaths and the increase in child deaths in 2006 are probably related, though as noted above, such small fluctuations may not be statistically significant.

What DfT is doing

— Much of our activity to improve child road safety mentioned above relates to pedestrian safety. A range of engineering measures can help to improve the street environment and make it safer for child and adult pedestrians, including safer crossing places andtraffic calming measures. These are provided by local highway authorities. DfT provides guidance on good practice, including the recent publication of "Manual For Streets".

— Other factors leading to an improvement in pedestrian safety include the design of cars to reduce the severity of pedestrian impacts, as well as efforts to improve driver behaviour through enforcement and publicity in areas such as speeding and drink-driving. Also, many adult pedestrian fatalities are themselves over the drink-drive alcohol limit. The Home Office has recently produced a publicity campaign on the risks of alcohol, which included the increased risks of being involved in a road accident as a pedestrian.

F. PSA 6 Air Pollution (Annual Report 2007,p 260)

17. The 2007 Annual Report indicated that objectives for three pollutants—nitrogen dioxide (NO2), particles (PM10) and sulphur dioxide (S02)—were not met (p 261). In what areas are these pollutants most concentrated and what are the public health implications of this?

— In 2006, air quality modelling shows that 89km2, with a population of around 770,000, in London, Greater Manchester and the West Yorkshire urban area and 4745 km of major roads (motorways and A roads) in urban areas (1,500 km in London) exceeded the NO2 annual mean objective. The PM10 24 hour objective was exceeded at 51km2 with a population of 410,000 in London, the West Midlands urban area and Coventry and 1,580 km of major roads (1,012 km in London). The PM10 annual mean objective was exceeded at 163 km of major roads (160 km in London). Air quality modelling in 2005 showed a small area exceeded the SO2 15 minute, hourly and daily objectives, around a brickworks in Stewartby, Bedfordshire. The modelling has not been completed for 2006 to date.

— The exceedences of the limit values are expected to have a range of effects on health depending on both the pollutant and the level of exposure. The key concerns include impacts on daily deaths, admissions to hospital from treatment of both respiratory and cardiovascular diseases and bronchoconstriction. These pollutants may also have additional impacts on particularly sensitive groups such as asthmatics and children.

18. The 2007 Annual Report states "data uncertainties for the whole of the UK automatic monitoring network will be recalculated following type approval of the equipment required by the guidance document from the European Standards Institute" (p 262). Have the data uncertainties for the UK monitoring network been recalculated yet? If so, what is the new calculation for the rate of uncertainty of data in the UK monitoring sites?

— The data uncertainties have not been recalculated for the entire network yet, as around 50% of the automatic monitors on the UK automatic monitoring network have not been "type approved" to date by European Standards Institute: CEN. For those monitors that have been through the "type approval" process, uncertainties are +/-15% or better.

19. The Technical Note states that the objectives for nitrogen dioxide and particulates "might need to be revised" following a European Commission review in 2004-05. What was the outcome of the review and what implications has it had for the objectives for nitrogen dioxide and particulates?

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— The Directive arising from the EU Review will also include compliance flexibilities of at least five years for NO2 and, for PM10, three years after the date of entry into force of the directive. Use of these flexibilities will be subject to establishing an air quality plan.

G. PSA 7 Climate Change (Annual Report 2007, p 260)

20. The Renewable Transport Fuels obligation requires 5% of transport fuel to be from renewable sources by 2010. The annual report (p 266) states that "the government now intends the level of the Obligation to rise from above 5% after 2011-11". Could the Department provide a table that shows the proportion of transport fuel that the Government intends to be drawn from renewable sources, and from which sources, in the next 10 years?

— The Department does not hold precise forecasts for how obligated suppliers under the RTFO intend to meet their obligation. An obligation of 5% by volume is equivalent to 2.5 billion litres of biofuels a year and we expect suppliers to meet this from both imports and domestically produced biofuels. Raising the level above 5% would be dependent on evidence of biofuels being produced in a sustainable way. The European Council has set a target for a 10% share by energy (equivalent to about 13% by volume) of biofuels in overall EU transport petrol and diesel consumption by 2020, again subject torequirements on sustainability.

3. FINANCIAL PERFORMANCE

21. The resource Budget for the Driver and Vehicle Licensing Authority (DVLA) has fluctuated considerably over several years. In particular, the 2006-07 estimate outturn is for £214 million, an increase of £50 million over the prior year (2007 Annual Report, p 210). What are the reasons for these fluctuations?

(a) The DVLA's capital budget in 2006-07 has increased by £20 million from the prior year (pp 212-13). What are the reasons for this increase?

— The increase in DVLA's budget between 2005-06 and 2006-07 results from a number of factors. An increase in funding for VED collection and enforcement was planned for 2006-07 as part of the agency's SR04 settlement. However the year also included a number of one-time changes such asfunding to support the development of the Department's Shared Service centre in Swansea and changes in the accounting treatment of VED enforcement receipts. The increase in DVLA's capital budget in 2006-07 also relates primarily to the development of the Shared Service Centre.

22. In note A3 (capital budgets) the figures for capital spending on railways (within PSA Objective I, "Support the Economy") are not consistent with those in 2005-06 DAR.

There are also significant changes to the figures for the other PSA objectives (II, III and IV). These are not adequately explained in the footnotes on pp 220-221. Could the Department please reconcile these tables?

— The reclassification of London and Continental Railways (LCR) accounts for nearly all of the difference in Rail Capital figures between DAR 2006 and DAR 2007 (ref footnote 2b p220—the reconciliation table is contained in Annex A).

— This reclassification had the effect of bringing the LCR Capital Expenditure within the DfT budget and of moving the capital grant and utilisation of the provision in respect of CTRL out of the budget.

— The remaining differences can be accounted for by changes in Budgeting treatment as set out in the HMT Consolidated Budgeting guidance.

— A budget reclassification of the treatment of profit/loss on disposal of assets from resource to capital (indicated by NCH) accounts for three changes in the Railwaysnumbers. It was Resource Non Cash in DAR 2006 and Capital in DAR 2007 (see footnote 2a p220).

— The reclassification of resource investment from resource to capital accounts for the difference marked as RINV. The line was reclassified to capital due to the fact that it is a provision in respect of a capital grant.

— A full reconciliation, which includes the Railways differences, is attached in Annex A.

— In addition to the budget reclassifications described above which also affected other areas of the Department, there was a major reclassification of the Greater London Authority Transport Grant from Capital to Resource. That change is marked in Annex A as GLA and referred to in footnote 2c page 220 of DAR 2007.

23. Please explain the key risks to the budgets in 2007-08.

— The Department is planning to drawdown resource near cash EYF to bring provision into line with funding assumptions in the 2004 spending review settlement, to fund pressures the increases in franchise costs has arisen from the change of contractual arrangements with GNER from a franchise agreement to a management contract (pending the reletting of the franchise), which moved anticipated income from a premia receipt to revenue neutral to DfT and to provide funding for the reclassification of London and Continental Railways as a public corporation. As in previous years it is anticipated that the Department will pay grants to Cross London Rail Links Limited for ongoing work on the Crossrail hybrid Bill not currently in budgets. A significant risk to the Department's budgets is likely to arise from Metronet going into administration. We are working closely with Transport for London, London Underground, and Metronet's PPP Administrators to better understand and manage this risk, but it is too early to say with any certainty what the financial implications will be. [check for update]

4. EFFICIENCY PROGRAMME

24. The Committee would like an analysis of the Department's reported efficiency savings according to whether they are "provisional", "interim" or final, as classified by the Office of Government Commerce.

— As Question 25, below, requests a copy of the Department's latest quarterly efficiency return to HM Treasury (which has now taken on lead responsibility for the Spending Review 2004 efficiency programme from OGC), we have answered this question in the context of this latest return, being the most up to date figures available. Of the total £682 million efficiency gains reported at Quarter 1 2007-08 (covering the period to 30 June 2007), £436 million (64%) were classified as "Final" and £246 million as "Interim". No gains were classified as "Provisional". Of the £246 million in the "Interim" category, we expect these gains to be confirmed as final according to the following timetable:

Highways Agency Strategic Roads.

Local Authorities.

— The remaining balance of £15m relates to smaller measures, where gains cannot be confirmed as "Final" until full-year outturn figures are known at the end of the financial year.

25. The Committee would also like to have copies of the Department's latest quarterly efficiency monitoring reports that were submitted to the OGC. We note that other committees have already requested and obtained such documents and like them we would, if the Department requested, treat these as confidential. (It would be helpful if any material which the Department submits in confidence could clearly be marked as such on each page)

— Attached is a copy of our latest efficiency return to HM Treasury, for Quarter 1 2007-08, which was submitted to HM Treasury on 31 July 2007 (attached as Annex B). In order to avoid classifying this document as "Confidential", we have removed the forecast element from the version that was sent to HM Treasury. We will be quite happy to share the full version with the Committee, if required, but we have been advised that the full version, including forecast data, would need to be treated on an "in Confidence" basis, as HM Treasury have not yet placed forecast information in the public domain.

26. What proportion of the efficiency gains reported in the 2007 Annual Report (p 44, Figure 3a) were cashable?

— The Gershon Review set the target efficiency gains to be delivered by Departments and stated that at least 50% of these gains should be cashable. The Department for Transport was set an overall target of £785 million in efficiency gains by the end of financial year 2007-08, meaning that at least £393 million must be cashable. The Annual Report included overall gains of £532 million achieved up to 31 December 2006, of which £366 million, or 69%, were cashable. Our most recent return to HM Treasury, for Quarter 1 2007-08, reported overall gains of £682 million, of which £509 million, or 75%, were cashable.

(a) What verification of efficiency savings has been carried out, if any, beyond the OGC reporting?

— The Programme has pursued a number of approaches to verify that gains claimed and the methodology for calculating them are robust and transparent. The programme as a whole has undergone two OGC Gateway 0 reviews, which provided an independent assessment of the measurement methodology, governance and challenge function within our programme. The major workstreams within our programme have also undergone Gateway 0 reviews for their own area, again providing an independent view on the health of our programme and how it is managed.

— The Department's own Internal Audit team has carried out health checks and reviews of the rigour being applied in the management of the programme. The Department's programme was also included in a report on the Government-wide efficiency programme, published by the National Audit Office in January 2006, which commented positively on several aspects of the Department's approach to assurance. The Department continues to pay close attention to ensuring the robustness of gains, with sign-off of all returns being carried out from the bottom up. The Senior Responsible Owner of each individual workstream must sign off their contribution to quarterly reports to confirm that they have satisfied themselves that all gains claimed are robust and in accordance with the HM Treasury measurement guidance.

(b) What is the Department doing to ensure that its efficiency programmes do not lead to reduced service quality?

— In order to qualify as a genuine efficiency gain, it is essential that initiatives do not lead to a diminution of service quality and all the initiatives that make up our programme have agreed standards in place to ensure that service quality is being maintained. The Department's Efficiency Technical Note, published on the DfT web-site, includes a summary of these quality standards. Every workstream claiming efficiency gains has agreed a quality measure with the HM Treasury Efficiency Team and they are obliged to confirm in each quarterly report that quality of service has been maintained against this standard.

SUPPLEMENTARY QUESTIONS AS OUTLINED IN LETTER DATED 8 AUGUST 2007

Metronet

1. What communications did DfT have with the PPP Arbiter, LU and TfL concerning Metronet in the period leading up to the publication of the DAR?

— DfT regularly liaises with the TfL and LU at a number of levels regarding the performance of London Underground. DfT also held a number of discussions with the PPP Arbiter's Office to discuss aspects of the PPP Agreements, consistent with our respective roles. These discussions and correspondence would have covered a number of major issues, including the PPP contracts and the performance of both infrastructure companies, Metronet and Tube Lines.

2. What contingency planning did DfT carry out after the Arbiter's first Annual Report? In particular, did DfT monitor the steps taken to improve Metronet's performance?

— DfT is not party to the PPP contracts, they are between LU and the PPP companies. As such it would be inappropriate and impractical for DfT to get involved directly in the management of the PPP contracts or the infrastructure companies themselves. As stated above DfT has regular liaison meetings with LU, TfL and other parties relating to the Underground, factors affecting its performance and the steps being taken to improve Metronet's performance.

3. We note that at the end of the third year of its PPP contract one of the two Metronet companies (Metronet SSL) had achieved a cumulative bonus, ie it was performing above threshold (2006 DAR, p 136). What were the circumstances that caused this sharp decline in the performance of SSL?

— The Department's 2006 Annual Report includes a bonus of £5.8 million attributed to Metronet SSL over the first three years of the PPP, representing 0.5% of LU's expenditure under the SSL contract.

— While Metronet did receive performance bonus payments up to the third year of the contract these were significantly below the level anticipated in their bid. It is also only during the third contract year that the level of abatements under the station upgrade programme increased, reflecting the higher number of stations due to be completed. One of the major areas of concern highlighted by the Arbiter's Annual Report of Metronet in November 2006 was their station programme where it was noted that they were significantly behind schedule in delivering their obligations. Metronet were also starting to experience difficulties in their delivery of the improvements of ambience (appearance) and capability (line capacity).

— It is important to note that Metronet's difficulties stemmed primarily from the cost side (ie higher than bid cost) and secondarily from the performance side, though that too was material.

4. In 2005 the Committee was informed that new signalling would be installed on the Victoria, Piccadilly and Bakerloo Lines over the period 2013-20. What are the likely impacts on this programme of Metronet going into administration?

— While Metronet is in administration LU, the administrators and Metronet are working together to ensure that work continues towards delivering the Victoria line upgrade by the contract date of 2013, but it is too early to judge whether administration will have an impact on the completion date. Work on the upgrade is continuing, including the new signalling system where cabling has now been installed in the tunnels and communications testing successfully undertaken between trains and the new equipment rooms. The first new train is also now being tested on the network, with the new fleet due to enter service from 2009.

— The Piccadilly line is being upgraded by Tube Lines and not Metronet, so is unaffected by Metronet going into administration. The line upgrade, including a new signalling system and train fleet, is on schedule to be completed by 2014.

— The upgrade of the Bakerloo line is scheduled to begin during the second period of the PPP—beyond 2010, with completion in 2020. Early planning is currently underway within LU and Metronet.

Shared Services Transfer Programme

5. The DVLA/DSA business unit was scheduled to "go live" in April 2007 (DAR p 47). Has this now occurred? Was the testing sufficient to ensure that there were no teething troubles?

— The go live of the SSC and the first two business units—DVLA and DSA—took place in April as planned. The go-live was phased over several weeks with functionality being released and users being brought on stream on a planned, gradual, basis.

— Although SSC operational readiness was tested prior to go-live through an extensive dry run, as a result of challenging time-scales, certain risks to the stability of the system were known and articulated.

— Teething problems were experienced and there are some residual issues over system stability and the processing of purchase orders and invoices. This has led to difficulties with banking services and a backlog of invoices waiting processing. Some emergency payments have been required and some suppliers have been paid late, in part due to the lack of purchase order numbers on invoices. Additional staff were brought in to address the backlog of invoices, but there are likely to be three months in which DVLA and DSA's prompt payment targets will not have been achieved. The teething problems were due more to the bedding in and understanding of end to end processes and procedures rather than deficiencies with solution testing.

— Employee Self Service (ESS) and Manager Self Service (MSS) have been rolled out to all professional and admin users in DVLA and DSA. On-line T&S functionality for DSA's driving examiners will be rolled out once improved Portal performance and system reliability has been sustained.

— Four payroll runs have now been made by the new SAP system, and error levels are currently lower than previously experienced.

6. Has the roll-out provided evidence to enable better-informed scoping of the potential benefits of the shared services programme?

— Further to the "go live" of DVLA and DSA a small Benefits Realisation team has been established and is engaged with both agencies and the SSC in order to support and challenge their delivery of benefits.

— Solid foundations were put in place identifying benefits in the original business case in 2004 and 2005. A new quarterly reporting cycle is in place to enable both the benefits team and the agencies to fully understand the realisation of these and additional tangible and intangible benefits.

— At "go-live" of the two business units, not all functionality was transferred to the Shared Service Centre. The items of deferred functionality surrounding time management and e-recruitment will effectively delay realisation of around 40 Full Time Equivalent's (FTE's) at DVLA until October 2008. Work is currently underway to assess the impact to DSA. Despite this, both agencies have identified both FTE and IT cost savings as being realised. In addition to those measurable savings, focus is also being given to intangible benefits which can often be ignored and were not previously considered. They cover the benefits drawn from more efficient ways of working; cultural benefits as well as the effects of better quality and more timely information to the organisations' decision making processes.

7. What are the emerging issues for the roll-out of the SSC for the central Department and other agencies?

— An in-depth "lessons learned" exercise was undertaken following the implementation of DSA and DVLA and the resulting recommendations are now being put into practice in support of the migration of the next two organisations to migrate, DfT(C) and MCA.

— The key issue now is that the SSC and SAP solution are in place and operational. These need to be fully stabilised and prepared to accept new customers in 2008. The incoming organisations need to be ready to adapt to the new ways of working, with a clear and full understanding of the effect on end-to-end processes rather than simply in terms of a new IT system, and the resulting organisational and cultural change of working with an "external" service provider. This will require a joined up, one team, approach between the programme, the SSC and the new customers and will be supported through communications and training.

— Two key lessons that the central Department and other Agencies need to make sure when preparing for the transition to shared services is that appropriate attention is paid to specifying the Business Unit organisation structure, employee roles and responsibilities, and data management and migration. This will help ensure the right training is provided to embrace the new ways of working and ensure that staff get access to the information and shared services they need to improve local performance and the delivery of front-line services.

— In parallel, business unit (including SSC) effort needs to be directed to the timely realisation of benefits through adoption of new ways of working through a mutually agreed service relationship framework that directly supports performance and continuous improvement using service level agreements (SLAs) and operating level agreements (OLAs), including exploiting the non-financial benefits of employee and manager self-service and better quality and more timely management information.

November 2007



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