Examination of
Witnesses (Questions 1-46)
Q1 Chair: Good morning, gentlemen. Would you like
to identify yourselves for our records, please? Could I start
at this end?
Professor Henry
Overman: Henry Overman from the London School of
Economics.
Professor Alan Wenban-Smith:
Alan Wenban-Smith, Urban & Regional Policy, Birmingham City
University.
Professor John Tomaney:
John Tomaney, Newcastle University.
Q2 Chair: Thank you very
much. The last major study into transport and the economy was
the Eddington report in 2006. Do you feel that that report is
still relevant today?
Professor Henry
Overman: Yes, I think it is. My take on this is
that we are richer than we were when Eddington was being written,
even if the growth rate has been lower than during the time of
Eddington. The decisions that Eddington was looking at were about
the long-term impact in transport in this country, and I don't
see that much has changed. I think the emphasis on gateways, inter-urban
corridors, relieving congestion, still stands. I think the advice
to be realistic about the benefits and not commit yourself right
at the beginning to one particular mode of transport, as the solution
to all your problems, is correct. So basically, I think that the
recommendation still stands.
Q3 Chair: Any comments,
Professor Wenban-Smith?
Professor Wenban-Smith:
I have a slightly more sceptical view, in the sense that I think
Eddington's priorities were correct, dealing with the problems
of conurbations, of inter-urban corridors and international gateways.
But the trouble is, the actual priorities, in terms of schemes,
depended on a system of cost-benefit analysis that has been very
heavily criticised and I think, in many ways and respects, is
quite misleading. It was also made in the context of road-user
pricing being part of the package. Eddington himself would describe
that as a no-brainer. Without road-user pricing, his priorities
would inevitably lead to more congestion as people take advantage
of the additional road space to spread themselves further over
the landscape, which is what tends to happen. So I think Eddington's
priorities are fine but the actual list of schemes that descends
from that is much more doubtful.
Q4 Chair: So you don't
think the absence of road pricing, and less economic growth than
predicted, has a material effect on his recommendations?
Professor Alan Wenban-Smith:
No; on the contrary. I am saying that, without road pricing, Eddington's
priorities would lead to more congestion, more dispersion, more
CO2 production, and so on. It would be less good for the economy
without road pricing.
Q5 Chair: Thank you. Professor
Tomaney, do have any views on Eddington and how we should see
it today?
Professor John Tomaney:
Yes. I largely agree with Eddington's essential analysis that
there is a relationship between transport connectivity and economic
growth. I think what has changed is the economic conditions, quite
markedly. They have changed in terms of the lower overall level
of growth—as Henry has already pointed out—and I think
that is significant. Economic conditions have changed, in that
there are clearly going to be less resources available for major
transport investments.
In addition, I would like to draw attention to what
I think may prove to be one significant development. That is that
the current economic conditions have had a very distinctive geography
attached to them. We've seen the recession having a bigger impact
in the north and in the south. In thinking about the future of
transport investments, that should obviously be part of any serious
consideration, especially given that we now have a Government
who are committed to rebalancing the national economy away from
an alleged over-dependence on financial services in the south-east
of England. The role of transport in all of that, if we take the
essential premise of Eddington, is going to be critical to achieving
that objective, so I think some things have changed.
Q6 Chair: So what lessons
would you draw from that? Is there any particular type of transport
investment that should be supported, rather than another one?
Professor John Tomaney:
There are many kinds of transport investments that ought to be
supported, but I think critical would be those that support the
improvement of urban transport systems and the connectivity of
city regions, particularly in areas like the north of England—say,
between Leeds and Manchester—which raise the possibility
of the development or the agglomeration of further economic activities
in the north and may play a part in rebalancing the national economy,
if that's the key policy objective.
Q7 Chair: Should investment
go into new schemes rather than maintaining existing ones? Is
there a choice to be made there?
Q8 Professor
Henry Overman: I think there is a
choice to be made. That is a question that is not sensible to
try and answer in a general sense. This is one of the crucial
lessons from Eddington that I just see slipping further and further
away from us, which is that we need to be making these decisions
on a project-by-project basis. So there will be some new investment
that clearly, given where we are with public expenditure, should
not be being made. There are projects that were on the books that
we could easily be ditching. Likewise, there is some recurrent
expenditure on existing commitments that we are compelled to get
rid of. But the idea that somehow we can—in the abstract—make
a decision between the balance of these two things I think is
just impossible. We need people who know what the projects are
delivering to be making these decisions on a project-by-project
basis, not on an overall broad abstract basis.
Professor Alan Wenban-Smith:
I might be able to add a bit to that. I should say I'm not a proper
professor; I'm not an academic, I'm not an economist. My credentials
are very much having been a local government officer responsible
for exactly the sorts of things you have been talking about: transport
planning in places like Birmingham and Newcastle, as it happens.
This kind of question, the balance between new projects and maintaining
what you have is very difficult and very important. It deals with
one of your questions later on about the balance between revenue
and capital projects. There is a huge volume of revenue spending
necessary to keep the existing stock in good heart and doing its
job. At the margin, the question of whether you can better spend
the money by investing in a new project, that has capital charges
spent over a long period of time, is something that, as I think
Henry said, is not something for a general judgment. It's something
you need to make as a judgment in the circumstances of your particular
patch.
I used to be chairman of the Chief Engineers
and Planning Officers Group of the West Midlands and what we did
was to put together our programme of balance, small, large and
revenue schemes, and it cannot be done from Whitehall would be
my view.
Q9 Kwasi Kwarteng:
This is a double-barrelled question. We have all read the Eddington
report and my understanding is that he is very, as you say, focused
on project-by-project and looking at where the difficulties are,
and then trying to solve those, as opposed to having these blue
sky grand projects. Surely there is scope for these big projects
that the Government have. I take an extreme example. Before we
had aeroplanes. Once aeroplanes were invented, clearly, there
would be a decision to build an airport. There is no way you can
do a cost-benefit analysis of that, if you haven't had any experience
of what aeroplanes could do. That's an extreme case. I am not
saying something like that is going to happen any time soon. But
surely there is some scope for thinking outside this sort of project-by-project,
what I might call a nodal focus on particular problems and solving
those in a book-keeping kind of way. Do you have any thoughts
on that?
Professor Alan Wenban-Smith:
Sorry; you may have misunderstood what I said. I didn't mean that
every decision must be done on a sort of—
Q10 Kwasi Kwarteng:
No, sorry, I am not asking a question on what you said. I'm asking
a general question.
Professor Alan Wenban-Smith:
Okay, perhaps some of my colleagues would like to—
Professor John Tomaney:
I think there is international evidence that strategic investments
in big transport infrastructure can have economic development
impacts. We can find that sort of evidence around the world. We're
finding it particularly in the newly industrialising countries
at the moment. There is plenty of evidence of that. These arguments
are certainly being deployed in the north of England, for instance.
The future of Teesport and its disconnection from national transport
networks; the relative difficulty of getting goods in and out
of the port to markets in other parts of the UK has been emphasised
as a lost opportunity, in that sense. There are opportunities
to make investments in that port, which potentially relieve burdens
on infrastructure in the south, but they're not going to be justified
probably using traditional cost-benefit analysis. On the contrary,
when those methods are applied, then these sorts of investments
are shown not to have a sufficient return. I think your point
is a fair one but, nevertheless, there is no general rule I think;
that would be my view on this. The decisions that are taken in
the end are often strategic, political ones rather than narrowly
economic ones, in that sense.
Professor Henry
Overman: One of the problems is that people tend
to take their pet project and basically try to justify support
for it, on the basis that it will be transformational, and many
of these claims for projects that will be transformational do
not materialise once we go ahead and invest large amounts of money.
I was in Hull; the Humber Bridge was supposed to transform the
economy of that part of the world. If you go back and look at
the narrative, that is what it was going to do and it didn't.
I still think there is a strong argument for thinking about the
main benefits of transport being from: how many people are going
to use it, how much faster, safer and environmentally friendly
their journeys are going to be. Sometimes that might be terribly
hard to predict for something new but, at the end of the day,
the benefits of the airports do come from people who use them.
Kwasi Kwarteng: You could not
possibly model that; that is my point. At some level, you have
to have a strategic decision.
Professor Henry
Overman: I think this is right. In the time I have
been on Eddington, advising DfT and High Speed 2 afterwards, the
point I have consistently made to them is that our understanding
of those wider economic benefits is still limited. The rush to
bolt it all into the traditional cost-benefit analysis rather
misses the point that, at some level, we need to be making strategic
decisions about this, and then using the cost-benefit analysis
to help inform those strategic decisions, plus other forms of
evidence on those things. I do think a mistake that DfT made was
to rush to try and incorporate all of those things into its formal
appraisal process, which I believe has probably added more noise
than signal in the process.
Q11 Chair: So what you
are saying is that you are agreeing there is a need for strategic
decisions and they need some provision, but that can't always
be accommodated in the formula that we have?
Professor Henry
Overman: I think formal cost-benefit analysis remains
a good check on the extent of the claims that are being made for
things. We may well then decide that other evidence that we have—particularly
for some big decisions—says, "Well look, we're just
going to overrule this". But still, looking at how many people
we think are going to use it, how much faster their journey is
going to be, how much more environmentally friendly and how much
safer, is still a useful cross-check to be done. We then may want
some process for making strategic decisions where that is one
part of the information set that we use.
Q12 Kwasi Kwarteng: Just
to clarify, what you are saying is that we shouldn't solely use
cost-benefit analysis nor should we solely go on this sort of
big picture, strategic decision making, but we should somehow
use them in tandem. Is that what you are saying?
Professor Henry
Overman: I think, particularly for larger schemes
that are going to be very expensive, cost-benefit analysis forms
part of the set of information that you would gather to make a
strategic decision.
Chair: Is it on this?
Q13 Angela Smith: It is
on that question. The statement you have just made, I think helps
clarify things a little, because I was beginning to think that
perhaps you were recommending an approach that is reactive in
many ways, which will continue to intensify the regional disparities
that we suffer from in this country in terms of economic performance.
Perhaps you would like to comment on that, Professor Overman.
Professor Henry
Overman: I take it this way. Let's take High Speed
2; let's take a concrete example to motivate the discussion here.
I think, broadly speaking, the evidence that High Speed 2 will
lead to a reduction in disparity is pretty limited. Taking the
evidence that we have, which is the cost-benefit analysis—which
delivers pretty low benefits to costs for High Speed 2—plus
the wider evidence that people bring to bear, which seems to me
to make a series of claims about benefits of High Speed that I
don't think stack up. So then, let's offset that against going
to Manchester, Leeds, Newcastle, Bristol and doing investments
in those cities, so focusing on identifying a whole group of intra-urban
transport. I think, if we looked at that carefully, we would find
that the broad suite of evidence that we bring to bear would be
much more favourable to those intra-urban projects than it would
be to High Speed 2. You set out your objective—
Q14 Chair: You are illustrating
that, which is helpful to us, but you're also making an assumption
about choices there. Professor Tomaney, do you want to comment
on this?
Professor John
Tomaney: I broadly agree with Henry on the point
that the evidence that HS2 will have a positive impact on rebalancing
the national economy, to use the current jargon, is not really
there. I think the international evidence suggests that, where
you make these big investments in this kind of infrastructure—particularly
high speed train networks—as important to the investment
in the infrastructure itself is investment in the conditions of
the nodes around the lines that stimulate economic benefit and
economic development. There is some evidence from European high
speed train systems, and from Asian high speed train systems,
that this is a critical ingredient, and in the debates around
HS2 I haven't really seen that discussed. This points to the need
for understanding transport in a wider economic development context,
rather than just simply a single investment designed to have an
immediate impact.
Q15 <Julian
Sturdy: My point is following on from what we
have been talking about. I agree with the comments about pet projects.
I have been a local councillor and seen that in action in the
Department for Transport. So I think you make some very good points
there. In the wider context, is it possible to say what types
of transport schemes have the largest benefit on the economy?
I am not talking regionally; I'm talking nationally here as well
to try and get away from this pet project argument.
Professor Alan
Wenban-Smith: I think the important thing is to
get away from the proposition that transport benefits are the
only benefit that matters. We tend to talk in terms of user time
savings, accident savings, operating costs, that kind of thing.
The important effects on the economy are knock-ons from that,
or indeed quite independent of that in some ways.
To my mind, one of the things that would make the
biggest difference to the national economy, in terms of transport,
would be investing heavily in public transport systems in our
big cities, because it is strikingly clear that we've failed to
do that for 50 years now. If you look at continental Europe, and
cities of similar size to Birmingham and Newcastle—cities
I've done a lot of work in—their productivity, relative
to the national level, is streets above our UK experience. I think
it is down to the failure to take advantage of a lot of people
in a relatively limited space, which good public transport is
absolutely critical to. You don't need to look further than London
to see the productivity benefits of having good public transport.
To my mind, that is something truly transformational that we could
and should do and we've failed to do.
Q16 <Kelvin
Hopkins: This is interesting because I thought
I was in a tiny minority of HS2 sceptics. The opportunity costs
of producing this railway line, which would save a tiny amount
of time between major cities, as opposed to investing in improvements
elsewhere, I think is considerable and I am glad to hear what
you have had to say. Is it not the case, that if we could get
some of the freight off the existing main lines, dedicate them
to fast rather than high speed passenger, we would do much better?
I am thinking of 140 mile an hour working on the east coast main
line, with a couple of loops and quadrupling the track at Welwyn,
to solve the problem on that side of the country; 135 mile an
hour working on west coast main line with, again, some improvements
to overcome those problems, and a dedicated freight line that
takes all the freight off. That seems to me a much more sensible
approach than HS2.
Professor John
Tomaney: I'm not a railway engineer so I'm going
to pass on that.
Q17 <Chair:
We're not having an inquiry today into HS2 but it is relevant
to some of these issues. Can we consider the general issue—which
I think you have answered—about looking at local improvements
as well the major schemes? In today's situation, with all the
economic problems here, how important do you think it is to look
at local improvements on schemes, whether they be rail schemes
or other schemes? How significant are they in terms of the economy?
That is the question that we are looking at here.
Professor Alan
Wenban-Smith: My view, having had the responsibility
of bringing together transport, economic planning and spatial
planning in real places, is: it is absolutely crucial that those
things are joined together. It is a real problem achieving that
level of integration. We did it for a while in the West Midlands
but sadly it petered away because there are separate cultures,
separate Whitehall silos that each department relates to, and
it is very difficult to get that connection. We did, in fact,
produce an integrated transport policy. We had it agreed in government
that we would have one bag of money, not six different bags. It
didn't survive the onslaught of the civil servants, I'm afraid.
They took the view that these are separate pockets of money, even
though they are in one pair of trousers, worn by the Minister.
Q18 <Paul
Maynard: Professor Overman was mentioning earlier
about the need to make strategic decisions, to look not just on
cost-benefit analyses but on additional measures. What role do
you think national policy statements could have in improving the
quality of decision making, and how would the national policy
statements themselves need to be improved as a tool of good public
policy? Following on from that, given they are national policy
statements and given the abolition of the regional development
agencies and the statutory functions of the regional local government
leaders boards, how do you see the regional voice of transport
priority making now taking place? How is that going to occur or
how could it occur, given we seem to have a blank sheet at the
moment?
Professor John
Tomaney: If I take the last point first, I think
you've identified a really big issue. We're replacing the regional
spatial strategies, which were an attempt to integrate some of
these questions, which Alan has just mentioned: land use, transport,
economic development planning. They were flawed in some ways but
they were an effort to do that. We have certainly seen the end
of those but we're potentially facing a situation of the creation
of Local Enterprise Partnerships, of which I think, at the latest
count, there are some 56 proposed. I think that there are some
big issues about how they're going to operate, because, in principle,
they are entitled to bid for transport powers for their local
area. My reading is that very few of the Local Enterprise Partnership
proposals contain very specific suggestions, in relation to transport
and in relation to the kinds of powers that they would like to
exercise, although the Secretary of State, Mr Pickles, says that
they potentially can have whatever powers they want.
Taking my region, one scenario would be that you
would have a multiplicity of small Local Enterprise Partnerships
covering part of the region where you can very readily identify
the spillovers, in terms of transport planning, from one place
to the next. At the moment there is no mechanism for resolving
the potential tensions. So, for instance, in Tyne and Wear you
have potentially three Local Enterprise Partnerships and yet the
urban transport system—the Tyne and Wear Metro—running
through all three of those. What will the mechanisms be for ensuring
a rational use of resources in relation to public transport in
these areas? These are huge open questions. You have identified
an important issue but I don't know the answer to them, I'm afraid.
Professor Henry
Overman: I broadly support the move to LEPs but
I think there are two things they are not set up to do very well:
the inter-urban transport schemes that have impacts on the wider
environment, and housing decisions. I think in many circumstances,
with the larger inter-urban schemes, it's hard to see—in
areas where the LEPs are fragmented across the area that is going
to be affected by the scheme—how they will reach a decision
on this. I think it will have to go back to the DFT with input
from the Local Enterprise Partnerships.
Q19 <Chair:
It doesn't seem to quite fit with the localism agenda, does it?
Professor Henry
Overman: There are a bunch of decisions that you
will be able to push down to LEPs, which will be the perfectly
appropriately vehicle for making them. But LEPs are not the vehicle
for making decisions about inter-urban corridor investments, for
example. Those will just have to come back to the centre with
input from the affected Local Enterprise Partnership.
Professor Alan
Wenban-Smith: It is absolutely right. Subsidiarity
cuts two ways. Certainly it is very important to devolve appropriate
decisions, so that things can be joined up better, but there are
some decisions that necessarily have to be taken at national level:
national corridors, the balance between regions, for example.
It's very bad for the UK, as a whole, for regions to be grossly
unequal and that's something that is absolutely inalienably a
national responsibility.
Q20 <Paul
Maynard: I have a specific question, about whether
national policy statements were an appropriate vehicle to achieve
that regional rebalancing and whether they are working well at
the moment and, if not, how they could be improved?
Chair:> We have
had a national policy statement on ports and it is very unclear
quite where that is going. We are waiting for national policy
statements on national networks. No mention has been made of that
since May, so we don't know what is happening with that one. Do
you think this is an important concept in developing transport
and for the economy?
Professor Alan
Wenban-Smith: It potentially could be and should
be. The only example I have is the national policy statements
on energy but these were missing any kind of sub-national dimension
at all. I remember asking Ed Miliband, when he was Secretary of
State, "If generation is going to be wherever it needs to
be, because that is where the wind and the tide is and the structure
of industry is changing, so consumption is going to be wherever
that ends up, how come you can have a national policy statement
that doesn't say anything about the potential of the mismatch
between these things?" He said, "Good question. I don't
know the answer".
Professor Henry
Overman: At the very minimum, I think what they
will need to do is to set out the rules of the game for all these
LEPs that are going to be making decisions. That will be an important
role for national policy, to make it clear to the Local Enterprise
Partnerships, or whoever is making these decisions, what the framework
is within which they are going to be making them. So I do think
that national guidelines here will need to move away from saying,
"We think you should do that" to, "Here is the
broad framework within which we think you should be making these
decisions". So we tell people what we are going to do about
carbon pricing, so that they know how they need to be taking that
into account when they are making their local decisions.
I would see us moving towards those things, trying
to set the frameworks within which decisions are made, rather
than saying, "We think we're going to do this port here and
that port there". Although there will still need to be some
decisions along those lines where these are big national decisions.
But generally speaking, I think they are about the framework,
setting the framework within which these decisions need to be
made, rather than giving very explicit guidance for the decisions.
Q21 <Chair:
Professor Tomaney, do you have any views on this?
Professor John
Tomaney: I think what we're talking about is where
the limits to localism lie and the extent to which central Government
are prepared to draw limits around what localism can do. The rhetoric
from Government at the moment is that there will be no limit to
localism, as I understand it—reading the speeches from Ministers—but,
as my colleagues are pointing out, there are practical limits
to localism. One is that Local Enterprise Partnerships are very
small but don't represent functional economic regions. Some of
them do but many of them don't. There will inevitably be a situation
where Government have to come in and resolve difficulties, spillovers
between different jurisdictions, if you like. Then there are big
questions; carbon pricing is a good example, or about investment
in capacity in renewable energies, and so on, that Government
will have to be clear about. I think at the moment that isn't
part of what we're hearing from Government, but I suspect that
perhaps dragged kicking and screaming it will have to be part
of Government policy.
Q22 <Iain
Stewart: In a way you've touched on the question
I wanted to ask, and that is to introduce the "who pays"
element into who shapes the strategic objectives and prioritises
the specific schemes? What is your view of the mix between public
investment from general taxation, business-led private investment
and the user contribution? From those three broad categories,
who should be the one that drives the choices that we have to
make?
Professor John Tomaney:
It would seem to me that the likely mix of these is going to differ
quite radically around the country. There are already significant
private contributions to big infrastructures in London, for instance,
or at least resources raised at a local level. It is very much
more difficult to see how significant private investments in major
infrastructure will occur in, say, the north of England. There
may be possibilities in relation to, for example, Manchester,
but in many other northern cities the scope for significant private
investment seems to me to be much more limited than it would be
in the south of England. So I think that is a crucial point.
The same would also be true of user charges. The
capacity of northern towns to generate significant user charges,
I think, is obviously going to be a lot less than is the case
in the south. If we're moving in the direction of more user contributions,
a greater role for private investment in this process, then we're
probably going to see very increased regional differences in the
provision of the transport infrastructure.
Chair:> Mr Stewart,
do you want add anything?
Iain Stewart:
No. I'm interested in the other panellists' views.
Professor Alan
Wenban-Smith: I think it is very important that
there is a connection between who pays and who makes decisions.
It is a bit artificial saying, "We are going to localise
decision making but all the money is going to come from centre".
That doesn't work in my opinion. You have to find some way of
raising the money more locally, whether or not it's from users—and
that is obviously potentially a major target if you move towards
road user pricing in all sorts of different forms. But there are
other means—such as tax increment financing; land value
taxation—of supporting local infrastructure investment.
Those would all make a lot of sense, and it would give a lot more
muscle and purpose to the whole spatial planning system if those
were part and parcel of it.
At present, the ways of getting money out of developers
are pretty accidental in their incidence. Some local authorities
are very good at it; some are very bad at it. It is almost a lottery
and you get a lot of free riders. There are real problems about
that. As John Tomaney said, it means that parts of the country
that may need infrastructure at least are able to get the money
from that kind of source to support it. It's a mess. I think we'd
be much better off moving towards local sources of finance of
the sort I have mentioned, and much more responsibility for local
raising as well as spending of that money.
Q23 <Chair:
Professor Overman, would you like to comment on this?
Professor Henry
Overman: Broadly speaking, I agree that we need
to have the people who are making the decision on this more closely
connected to the financing of it. Inter-urban versus intra-urban
has always been an issue. To use High Speed 2 as an example again,
if you are—
Q24 <Chair:
Can we have another example as well?
Professor Henry
Overman: If you are Manchester, Leeds and Birmingham
local authorities I can see why you think that High Speed 2 is
a fantastically good idea. If we think about where the benefits
of that are going to be, they are going to be in those areas,
whereas at the moment how we are going to pay for it is left rather
vague. I assume potentially quite a lot of this will come from
public expenditure; whereas, if you think about the intra-urban
schemes, a much larger chunk of this potentially falls on the
local authorities affected. That provides a skew on decision making
that is more general. This is always the claim that was made for
buses over light rail, for example. Financing things does create
rather large distortions in the decision-making process.
Q25 <Chair:
What conclusions do you reach then, in answer to the question,
on the implications of methods of financing for decision making
on investment?
Professor Henry
Overman: I think I am in line with what the others
have said. We have to try and extract the user benefits as much
as possible. That includes people who get uplift on their land
values, but also the people using it, so those seem to be two
ready sources that we'd need to be extracting from. This is why
I'm in favour of road pricing. Then we need to make the decision
on the balance depending on the context of the project.
Q26 <Kelvin
Hopkins: Isn't there a striking contrast between
Britain and continental Europe in all transport, in that we have
privatised and fragmented our railway system; we have privatised
and deregulated our buses? Organising integrated, planned transport
systems, when that is the situation, is much more difficult.
Wasn't it the case that in Tyne and Wear, for
example, they were just about to get an effective integrated bus
and local rail system and it was all privatised and it fell apart?
Isn't there a lesson for us all in this? Indeed if we looked at
the one project where major private finance was involved, the
PPP on the Tube, this turned out to be an expensive disaster.
Indeed on a recent visit to SNCF, SNCF has said, "Yes in
France when we say 'PPP', we mean public, public, public".
Chair:> So what
is the role of private funding for economically beneficial transport
schemes?
Professor Alan
Wenban-Smith: I would step back a little bit further
from Mr Hopkins' question, because I think what he is saying—maybe
I am misinterpreting here—is that you need transport to
be part of a bigger story about what we're trying to do. Tyne
and Wear is very much a case in point. I was in charge of strategic
planning in Tyne and Wear at the time and I remember it well.
There is a problem there. When you fragment these things, you
don't get the benefit.
What is interesting, I think, when you compare with
continental Europe, they spend a lot more money on transport generally,
both public and private transport: it is not either/or. I think
it is no accident that they treat transport as part of the whole
business of building their cities or building their countries,
not as something separate, which is what we do. So they get a
lot more support for transport spending, because it is much more
broadly based. I think there is a lesson for us in that.
Q27 <Chair:
Does the current thinking encompass wide enough benefits? Is it
looking beyond the specific scheme?
Professor Alan
Wenban-Smith: Yes. It is about the question we started
with, about the difference in the cost benefit of particular schemes,
the bigger picture. I think what is critical of the bigger picture—and
Henry has made the point very well—you get pet schemes supported
for their transformational effects. It is like the iconic buildings
that make me reach for a gun, I have to say. There is a need to
have a line of logic connecting what you are going to do with
the transport field, with the wider effect you are producing,
and to adduce evidence about how those effects will work out.
That is a much broader, more strategic kind of thing than cost-benefit
analysis.
Q28 <Kwasi
Kwarteng: I just wanted to clarify something.
You are saying we should have a more strategic approach, as they
have in continental Europe?
Professor John
Tomaney: Can I just give an explanation on this?
Privatisation and fragmentation are not necessarily the same thing.
There is a great diversity in the mix of public and private in
the provision of transport infrastructures across Europe and around
the world. Privatisation can exist with integrated transport planning.
There are many examples of that. Significant parts of the transport
infrastructure in Sweden are privatised but there is a highly
integrated transport planning system. The same could be said in
Germany and the same could be said in Japan. So privatisation
does not preclude integrated transport planning. It has done in
this country but it is not the inevitable outcome.
Q29 <Julian
Sturdy: Professor Wenban-Smith, you said something
a few moments ago regarding developer contributions not working.
I would just be interested in your views on that within your previous
profession within local government and a local authority. It is
something that I have seen regularly and it frustrates me. Personally,
I think local authorities need to think longer term over section
106 funding and things like that, but do you think there should
be any more powers for them to try and use the money better? Quite
often there are time constraints over how they can use it, so
they think short term rather than long term and that is causing
problems.
Professor Alan
Wenban-Smith: It is a very bitty source of finance.
It is almost accidental. All kinds of local site factors come
in; it is about what you need to do to develop the site at all,
and things of that nature. It is so constrained. I tried in Birmingham
to get, for example, a levy from section 106 into a fund for building
light rail.
Julian Sturdy:
Absolutely, yes.
Professor Alan
Wenban-Smith: The legal advice was, "Yes, you
can do it but it's going to be blooming difficult and you'll have
to have some way of spending it in a much shorter term than you
are likely to accumulate the relevant amounts of money".
So there are real major difficulties about that.
I think there is a need for a different form of local
finance. A community infrastructure levy was one such. I hold
no candle for that in particular. Land value planning taxation
seems an obvious one. It is very local and very specific. Various
forms of development levy could be erected. There is always a
difficulty about that, in that some places are enormously profitable
to develop and other places struggle to develop at all; the incidence
of the value you can get does not match the needs in any particular
way. So it needs a serious look on a broader basis, and some equalising
between places with different potential.
Professor Henry
Overman: My feeling on section 106 is that a big
part of the problem is that these are negotiated on a project-by-project,
site-by-site basis. If you look in the area of housing, which
has some interesting parallels here, a large number of local authorities
raise zero effectively from section 106 agreements with developers.
If you speak to housing developers the interesting thing is most
of them are in favour of section 106 over anything else. I have
always thought that should tell you pretty well everything you
want to know about how well section 106 extracts development gains
from the developers. So I think that a move to something that
is more systematic, and relies less on the individual negotiating
skills of the local authorities, probably is the thing that we
will have to do if we want to extract more of this benefit. Again,
I am not tied to one particular model. It seems to me there are
many difficulties as you start to do that, but it does seem to
me that section 106 has not achieved either in housing or in infrastructure
development.
Q30 <Julian
Sturdy: So there has to be some changing of
the system?
Professor Henry
Overman: I think generally we need to move away
from the section 106. I think that it was nice, in the sense that
it gave flexibility to negotiate locally what you might want to
achieve but, in practice, it hasn't ended up extracting from developers
the windfall benefits that they are accumulating as a result of
planning decisions.
Q31 <Julian
Sturdy: For the major projects?
Professor Henry
Overman: I think for most projects. So I think there
is a serious—
Julian Sturdy:
Yes. It goes back probably to what you said about the pet projects,
because it tends to go on to pet projects rather than major projects
that can benefit the areas.
Q32 <Paul
Maynard: You were speaking earlier about comparisons
with Europe, which sounded quite interesting, and particularly
the amount of extra money they are spending over there. Is that
occurring at a sub-national level of government, those spending
decisions and spending activities? Secondly, do the economic and
social benefits derived from that extra transport spending match
up to the amount of extra spending? Is it delivering value for
money in your view?
If you could take the example of the AVE network
in Spain, my understanding was the decision was only taken to
build that network, on the proviso that the Spanish regional governments
constructed economic development plans that were considered to
be credible by central Government before a decision was made to
then go ahead with that network. How important do you believe
the existence of credible economic development plans are before
any decision is taken to go ahead with a project? Would it be
wrong to wait and say, "Let's decide to go ahead with a project"
and then, "Oh can we have an economic development plan too?"
Is it not the case that one needs to precede the other for the
full benefit of the transport spending to be obtained? That is
a very long question, sorry.
Professor Alan
Wenban-Smith: Just starting with the continental
experience, I think the level of decision making is very important.
The German system, I think is particularly interesting, in that
any particular major project is likely to have funding from the
federal government, the Laender, the regional government and the
locality. They negotiate a funding package between them, each
of them having the objectives they want to see reflected in the
final scheme. It is a very collaborative way of working.
I'm particularly familiar with the system in
Hanover that I visited a couple of times and it's enormously impressive.
I've not seen any formal cost-benefit analysis of it but they
spent a lot of money. It is an integrated exercise with rebuilding
the city. To answer an earlier question, they did it with a thing
called the Verkehrsverbund, which is a partnership of providers,
who are usually private sector, who agree to operate it as an
integrated system. All you can say is it works; it is enormously
impressive. If you look at the German productivity per head of
major cities, it is streets above the equivalent figures relative
to the national productivity of UK cities and, I must say, I associate
the two. I can't give you evidence to that effect but that is
my opinion.
You had a second question, which I have now
lost.
Professor John
Tomaney: I think the first point to
make is there is considerable variation in the structures of regional
governments across Europe, so there isn't a continental model
as such that we can point to. In your Spanish case, the powers
of the Spanish regions are very extensive and have grown quite
markedly over a relatively short period of time of about 20 or
30 years. It is quite correct to say that the major Spanish cities
and regions did develop economic development plans in association
with the arrival of the high speed train network, but it's also
true to say that not all of them succeeded. A very good example—which
Henry's colleague, Andrés Rodriguez-Pose, has written about—is
the case of Seville, in which a huge amount of investment went
into very large-scale developments that were intended to derive
benefits from the arrival of the high speed train, and that hasn't
been very successful.
There are other examples around Europe where
you could point to greater success. A good example would be southern
Sweden, particular Malmo, which is, by Swedish standards, a disadvantaged
region but it is also another region that is connected directly
to the Copenhagen region by the Oresund bridge. Slowly, the economic
benefits of that are becoming apparent in Malmo and there is a
slow integration of the labour markets between prosperous Copenhagen
and less prosperous Malmo using this transport link. For instance,
Copenhagen airport becomes the airport for Malmo and the connectivity
of Malmo, in that sense, is improved. You can find evidence both
ways in Europe. There isn't a golden rule, I think, but in principle
regional and local authorities have played a very key role in
trying to develop structures that potentially extract the benefits
of having these major infrastructures developed in their regions.
You could point to some of the French cities
as well, like Lyon, which could make the case that it has benefited
from this as well.
Q33 <Chair:
Professor Overman, do you want to add anything to those comments?
Professor Henry
Overman: I'm always a sceptic on these things.
I think part of the problem is that we look at these places; we
see they're high density, living in flats and using lots of public
transport, and we'd like our cities to be like that, despite the
fact that the vast majority of our population want exactly the
opposite from those things. There is a sense in which we want
a transport system that delivers what people want, consistent
with the other objectives around global warming, around carbon,
and so on. I do think there is a tendency to look at continental
Europe, look at it all being high density and public transport,
thinking, "This is a fantastically good thing" and then
imagining, "If only we could be like this".
Chair: I think the issue behind this
particular question is about economic development plans in the
area concerned, so it is rather bigger than that.
Q34 <Iain
Stewart: A thought came to me. The discussion
we have been having is primarily about the traditional modes of
transport that, as a country, we want to make. Looking into the
medium and long term, how is technology going to change that,
with fast broadband and video conferencing and all the developments
that are going to happen? Are we still going to need, as a population,
to move vast sections of us from home to work between 7.00 am
and 9.00 am and then back home in the late afternoon, early evening?
Are we going to have a complete step change in how we think about
our transport planning as a result of new technology?
Professor Henry
Overman: For sure, we have a great
track record of failing to predict the large shifts that are going
to come, but I don't have any claim to be about to improve that
track record for you. The thing we have consistently seen is that
these claims about the fact that we will have flexible working
and people will commute from home, and so on, those claims so
far have proved to be broadly unfounded and the demand for transport
has increased over time.
The crucial thing it does highlight—which
is something that I consistently push— is that, as much
as possible, the sensible strategy is not to make the large, sunk,
fixed cost things that Government do unless we absolutely have
to. Something that we often see is this feeling that we have to
make a decision one way or the other on these things. For example,
this is why some people argue that designated bus routes may well
be a better way of going, in a world of uncertainty, than fixed
light rail. Those arguments are quite interesting. Of course,
the problem is that they also highlight the car and personal forms
of transport as being the ultimate in flexibility.
Q35 Chair: So are you
saying you do not think that these technological changes are going
to make a significant difference to transport needs?
Professor Henry
Overman: I'm just saying I don't know—
Chair: You don't know?
Professor Henry
Overman: No, I'm saying in a world where you don't
know—
Q36 Chair: Does anybody
else have any view on that? You don't have to say anything if
you don't want to on that. Is this going to make a major difference
to transport needs?
Professor John Tomaney:
I think these technologies contain the potential to transform
the way we live and work but—as Henry says—the very
least you could say is that progress, in the direction that you
have just described, is very slow indeed, because there's lots
of path dependency and sunk costs involved in the way we live
our lives. In particular, one of the most difficult things to
do, of course, is to change people's behaviours. Policy levers
to do that are much more difficult to develop than the traditional
kinds of policy levers, which involve providing infrastructure,
and so on. It's possible that these things will have the impacts
you are suggesting but there was that famous front page of The
Economist, from a few years ago, that stated that "Lunch
still matters". There is this propulsion for people to continue
to work in the ways that they always have done. To bank on the
kinds of changes that you are talking about, I think would be
a big risk. Nevertheless, it could be that changes do move in
those directions.
Professor Alan
Wenban-Smith: A lot of information is embodied in
people and things and won't go down wires. We do, at higher levels,
need to make face-to-face contact with people; there seems to
be something about the human condition involved there. I should
say I think technology change may be forced because oil prices
are going to go very much higher in the not too distant future,
leaving aside any questions of carbon output and all of that kind
of thing. I think we are going to have to find some other ways
of dealing with things. One of the things that seems to have gone
away, and maybe it will come back again, is smart roads, roads
that are much more wired up to interact with the vehicles on them,
for example.
Q37 <Iain
Stewart: I just want to come in, in terms of,
particularly at the moment when we have significant pressure on
public funds, to what extent should the Government choose—if
there is a choice—between investing in increasing the transport
capacity and perhaps investing in technology, rolling out superfast
broadband, that might diminish the need to travel?
Professor John Tomaney:
There may be economic advantages to superfast broadband but it's
not clear that, among them, is that it will diminish the propensity
of people to travel. For instance, there is quite a large amount
of fairly convincing academic evidence that information and communications
technologies accelerate processes of agglomeration at a national
scale. The technology is only as useful as the people who have
the skills to use it and if those skills are concentrated in certain
regions or cities, the introduction of these kinds of technologies
can accelerate the growth of regional disparities. So there are
lots of unintended consequences at work here that we need to very
carefully consider.
Q38 <Kelvin
Hopkins: The focus of transport discussion
in Britain is always, it seems to me, on passengers. If we are
talking about economic development, freight is a major component,
or should be, and yet rail freight, in particular, the volume
of freight, the proportion of freight that goes by rail is pathetic
in Britain, simply because the capacity is not there. The capacity
is not just about track; it's about gauge as well. We can't get
road trailers on trains and we can't get full scale containers
through many of our bridges and tunnels. I have a specific scheme
I am involved with, but isn't there a case for significant investment
in dedicated rail freight that would take freight off the motorways,
off the north-south tracks and link all the conurbations with
the Channel Tunnel?
Professor John Tomaney:
That sounds like a pet scheme.
Kelvin Hopkins:
I have the details if you want.
Q39 <Chair:
Does anybody want to comment on rail freight?
Professor Alan Wenban-Smith:
I think it is partly a question of the distances. We're just a
little twig of a rail network. In continental Europe, there's
much longer distances and that suits rail haulage, the penalties
of offloading and on loading at either end are much less severe,
relative to the distances hauled. The real thing for rail freight
would be to connect up our little twig better with the continental
tree. Again, you're right, you have the gauge issue.
Q40 <Kelvin
Hopkins: You have to have capacity to put trailers
on trains and also put full size containers on trains.
Professor Alan
Wenban-Smith: The gauge issue, that's right. I agree.
Q41 <Chair:
Does anyone else want to comment on rail freight?
Professor Henry
Overman: It is a good example of where I can refer
you back to the very conversation we had at the beginning, which
is that I would not want to say either way what I think, without
looking at the specifics of the schemes and what the analysis
says about the benefits of the cost ratio of it. The Northern
Way, in its portfolio of projects that it has pushed on to its
transport compact, does identify some expenditure targeted at
freight that seems to deliver quite large benefit-cost ratios
and we clearly should be doing those. Again, it is just so dangerous
to go down this route of saying, "The issue is freight or
the issue is high speed". I think there will be a number
of freight investments that will be basically being supported,
on the basis of being transformational, and very few of them will
turn out to be so, whereas there will be some that look very good
on the basis of reasonable projections about what we think would
happen. I think we should be doing those.
Q42 <Angela
Smith: I am not interested in the transformational
but I am interested in dealing with what Eddington described in
2006, which is an analysis that suggests that the rise in cost
of congestion will cost the UK economy something in the region
of £22 billion by 2025. Isn't the overriding strategic objective,
when it comes to transport, the need to ensure that we tackle
that congestion effectively, that whatever we do is designed to
make sure that we move goods and people as efficiently as possible
to their markets? In order to do that, we have to sometimes understand
that transport is not just reactive and based on users and cost
ratios but also sometimes factors, such as the impact on congestion,
and the impact on markets and labour and movement of goods—as
Kelvin pointed out——is incredibly important.
Professor Alan
Wenban-Smith: There is a basic problem
here, which is that if you put in new investment, particularly
in roads where there's no price mechanism to counter that, it
simply brings forth more demand, which may be producing perfectly
worthwhile things but it is not a cure for congestion.
Q43 <Angela
Smith: I am not talking about just roads. I
am talking about public transport primarily, to be honest.
Professor Alan
Wenban-Smith: No indeed. It is a particular problem
in roads because there isn't a price mechanism for controlling
demand.
Q44 <Angela
Smith: But I think Eddington was talking about
dealing with road congestion and understanding that railways and
bus networks have an important part to play in dealing with that
congestion.
Q45 Professor
Alan Wenban-Smith: The thing that
always strikes me about rail congestion is that we carry round
great chunks of fresh air called the first class section of trains.
Half the train this morning was first class that had about three
people in it. Why do we do that?
Professor Henry
Overman: We do it because it allows the rail companies
to make more money and reduces the public subsidy that we pay
them, so let's be a bit careful here. These pricing structures
do play some role in ensuring that we extract money from the users.
Chair:> We are
looking at the importance of transport investment in the economy.
Ms Smith has raised an issue. Does anyone want to answer that
question?
Angela Smith:
I am not talking about empty carriages. I am talking about the
investment policy, the policy on the investment that we need to
put in place, as UK plc, to ensure that goods and markets are
as connected as possible, as efficiently as possible, and that
labour is able to get to its place of work in order to improve
productivity in the UK.
Chair: >Could
I ask each of you then for your final comments, in response to
Ms Smith's important question: what do you see as the key areas
for transport investment to improve the economy, apart from looking
strictly at cost-benefit analysis in the way that it has been
put forward? Are there any specific things?
Professor John
Tomaney: I think that the point that was raised
by Mr Maynard, earlier on, about the way we think about the connections
between transport infrastructure and economic development planning
is critical. In the current environment of austerity there will
be a real danger that we stop thinking about that connection,
and that would be something that I would urge the Committee to
consider.
Q46 <Chair:
Thank you. What is the most important thing to you, Professor?
Professor Alan
Wenban-Smith: I would agree entirely with that comment,
and my view of that would lead you to the proposition that increasing
productivity in the big cities is a major concern for regional
balance, as well as output; public transport that makes them work
properly.
Professor Henry
Overman: Reducing congestion. Eddington identified
it: reducing congestion in urban areas. It's absolutely clear
that this is where the largest benefits are.
Chair:> Thank
you very much for coming and answering so many questions.
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