Written evidence from the Association
of Greater Manchester Authorities and Greater Manchester Intergrated
Transport Authority (TE 58)
Have the UK's economic conditions materially changed
since the Eddington Transport Study and if so, does this affect
the relationship between transport spending and UK economic growth?
The position of the UK economy has of course shifted
significantly since the Eddington Study reported in 2006, through
the recession of the latter years of the past decade and into
the forthcoming period, which will be dominated by the national
imperative to address the fiscal deficit. However, the core findings
of Eddington - namely that effective connectivity is essential
to driving long-term, sustainable economic growth whilst supporting
environmental goals and, most critically, that investment must
be prioritised to maximise this impact - remain more critical
than ever.
In essence, Eddington posed the question: "How
can our investments be targeted to support economic growth?"
He concluded that targeted transport investment holds the potential
to increase business efficiency and underpin productive clusters
(or "agglomerations") of economic activity by expanding
labour market catchment areas, enlarging markets, and facilitating
business-to-business interaction.
In doing so, he recommended that investment should
be focussed on improving transport performance "in those
places that are important for the UK's economic success"
and defined "three strategic economic priorities for transport
policy":
- Congested and growing city catchments;
- Key interurban corridors; and
- Key international gateways.
Eddington also noted that transport is not the sole
ingredient of economic growth: he identified skills and inward-investment
incentives as examples of other key factors, and critically pointed
to the need for effective alignment across all transport and non-transport
activities to maximise their impact on national productivity.
It is important to note that Eddington is far from
alone in having reached these conclusions, which have been reinforced
and developed through a series of studies by a range of public
sector and independent bodies in recent years. The relationship
between transport and the economy identified by all of this work
is now central to the economic debate that is framed by the 2010
Spending Review, which asks a primary question of all public sector
spending activity: Does the activity provide substantial economic
value? Alongside this, the Government has also been clear in its
intention to drive low carbon economic growth.
It is, therefore, now more critical than ever for
the findings of Eddington and others to be fully played through
in appraisal and prioritisation processes to ensure that the substantial
economic value sought by Government is achieved on a consistent
basis.
Greater Manchester has built upon the work of Eddington
and others in recent years to establish a clear system of prioritisation
for transport investment, which fits very closely with national
economic and environmental policy priorities by prioritising a
package of investment that will maximise impact on productivity
and reduced worklessness, whilst also ensuring net reductions
in carbon impact.
The remainder of this response seeks to summarise
the approaches being developed and implemented in Greater Manchester
to inform the lines of enquiry put forward by the Committee.
What type of transport spending should be prioritised
in the context of an overall spending reduction, in order best
to support regional and national economic growth?
The type of transport spending that best supports
economic growth will vary according to the varying economic circumstances
across the UK. However, the work in Greater Manchester has shown
that more critical is the need to clearly and consistently prioritise
the nature of the economic returns that are being sought from
spending programmes. We strongly suggest that the traditional
welfare based approach to transport appraisal should be supported
by a separate assessment of the impact on the "real economy"
to determine major investment priorities, if economic returns
are to be maximised. This is discussed further below in answer
to the Committee's line of inquiry that specifically relates to
appraisal systems.
This would mirror the approach that was adopted by
the Greater Manchester authorities in May 2009, when agreement
was reached on a clearly prioritised £1.5 billion transport
spending programme to be delivered through the Greater Manchester
Transport Fund (GMTF). The GMTF programme reflects a local prioritisation
exercise that focused principally on economic impacts, with a
range of potential transport interventions having been modelled
to understand their potential impact on output - measured in terms
of Gross Value Added (GVA) - through changes in employment and
productivity.
The programme was prioritised to maximise the medium
term impact on the size of Greater Manchester's GVA for the available
funding. A prioritisation metric was established by comparing
the GVA impact of each potential intervention to its net cost
(with costs assessed on a whole life basis), resulting in a "scheme
efficiency" metric, expressed in terms of the GVA impact
per pound deployed.
In addition, the investment programme was designed
to to deliver a net reduction in total carbon emissions at the
programme level, and to secure a better than average improvement
in accessibility to employment to address persistent problems
of worklessness in the most deprived 25% of wards.
The resulting ranked programme is multi-modal, including
light rail, road, bus interventions, park and ride and a heavy
rail stations programme, reflecting the need to avoid prescriptive
solutions to different economic challenges and circumstances.
The programme is also different to that which would have resulted
from the traditional welfare based approach to appraisal that
is used by DfT, which would have prioritised schemes with a significantly
reduced overall economic impact.
Importantly, the evidence gathered was powerful enough
to give the ten Greater Manchester authorities the confidence
to allocate a very substantial element of local funding to the
programme, which constitutes more than half of the whole life
costs of the £1.5 billion programme. Greater Manchester
is now taking this methodology into other programmes as part of
its LEP and Combined Authority. The aim is a level playing field
approach to appraisal that will allow the relative impacts of
closely related interventions such as regeneration and housing
to be understood so that Greater Manchester is able to identify
the combined spatial programmes that deliver the best possible
impact overall.
Greater Manchester's experience demonstrates the
need for a revised approach to appraisal - as signalled by Eddington
and many other in recent years - that more accurately reflects
the real economic impact of investment, as this submission discusses
further below.
In addition, the Greater Manchester focus on worklessness
is critical not only to strengthen labour market productivity
- a key ingredient of long term success - but also as a key part
of a strong strategy for re-balancing fiscal spend, as the more
that we are able to get people into work, the more the nation
saves. An
integrated approach to spend and public service reform would enable
such savings, made in other Government programmes, to be used
to support investment in services such as transport.
How should the balance between revenue and capital
expenditure be altered?
Again, we would strongly suggest that the answer
to this line of inquiry lies not in a prescriptive balance between
revenue and capital expenditure. Rather, the most critical factor
will be to establish systems of prioritisation that can most effectively
address the twin objectives of net productivity and job creation,
which will be essential in driving new levels of growth and assisting
in addressing the fiscal deficit through enhanced returns to the
Exchequer.
The Greater Manchester authorities are now seeking
to build upon the GMTF prioritisation approach discussed above
to review the optimum range of capital and revenue spending activities
that will support increased GVA through the four-year period that
will be shaped by the Spending Review (2011-12 to 2014-15). The
process will determine the final spending priorities for the forthcoming
third Greater Manchester Local Transport Plan.
Central to this approach is the need for greater
flexibility and devolution across revenue and capital budgets
to allow the maximum scope to direct resources to those activities
that will have maximum impact on GVA.
In particular, we need to ensure that all subsidies
that support bus provision in Greater Manchester are being used
efficiently as possible. Recent work undertaken by GMPTE, developed
through an analytical approach similar to that set out here, suggests
that this is not the case at present. This work has identified
significantly greater scope to utilise subsidies to better support
bus network coverage and, potentially, pricing levels to lower
the barriers to entry into the labour market that they currently
pose in some of the most deprived areas of Greater Manchester.
This potential could be achieved by devolving decision-making
on how all public subsidy (currently managed in part locally
and in part nationally) - is brought together and clearly focussed
on supporting wider local interventions aimed at reducing the
costs of deprivation and increasing productivity through employment.
Are the current methods for assessing proposed
transport schemes satisfactory?
As suggested above, the approach which values welfare
benefits by summating individual travel time savings, on the basis
that this is what people are prepared to pay for the scheme, does
not capture the potential offered by schemes for increasing employment
and productivity. As such, the current appraisal framework fails
to represent the real economic outcomes of increased productivity,
reduced benefit dependency and enhanced returns to the Exchequer
that can be achieved through effectively aligned packages of investment.
It is not suggested that the GVA-added approach outlined
should supplant the traditional NATA methods but that they should
sit alongside a separate measure of economic benefit over and
above that received by exiting users, and as a prioritisation
tool, the value of which is heightened in the current fiscal context.
An effective GVA-added approach, based on that adopted for GMTF,
needs to capture how investments can change the size, location
and type of economic activity. The approach also allows decision-makers
to consider how an investment attracts unemployed people into
the workforce.
From the business perspective, transport investment
schemes can expand accessible labour markets and reach to other
businesses, thereby growing markets and increasing efficiency.
This can influence how businesses operate and where they locate,
supporting clustering and specialisation of business activity
and resulting in job creation and economic growth. Transport improvements
can also reduce direct costs, for example from fuel and staff
time, which lead to increased efficiency and economic output.
Using information on where businesses choose to locate and the
kind of business they do, the key relationships between transport
changes and economic changes can be effectively modelled. This
in turn, can be used to accurately project changes in the competitiveness
of different areas and the business response to transport investment
through relocation, growth and sectoral change.
Similarly, better access to job opportunities can
improve individuals' employment search prospects, help attract
people into work and reduce unemployment. This both increases
economic output and eases the long term welfare burden of worklessness
- a critical challenge in delivering the Government's objectives
in major conurbations such as Greater Manchester. Evidence on
the spatial relationship between unemployment and access to job
opportunities can be used to capture the impacts of an investment
on the pattern of worklessness.
As noted previously, this approach also offers the
scope for a level playing field for closely related sectors, such
as regeneration and housing in particular, which also work to
more effectively align the demand and supply sides of employment
markets to drive productivity and reduce unemployment. Ultimately,
the approach also provides the opportunity to how all such investments
affect the supply side of the economy and make the UK a more attractive
location for business, thereby integrating systems of prioritisation
both nationally and locally effectively towards shared growth
objectives. This offers the scope for optimal resource deployment
both within transport and beyond to maximise growth objectives.
How will schemes be planned in the absence of
regional bodies and following the revocation and abolition of
regional spatial strategies?
The GMTF agreement provides a clear demonstration
within Greater Manchester of the scope for effective planning
at the sub-regional level. As discussed above, we would argue
that this revised approach to prioritisation can and should be
equally applied across all parallel areas of expenditure aimed
at economic growth, so as to identify the optimal blend of expenditure
across housing, regeneration, transport and other public sector
areas to drive job creation and net productivity.
Moreover, there is clear evidence from work such
as the ground-breaking Manchester Independent Economic Review
(MIER) that the sub-regions like Greater Manchester act as
a "functioning economic area" in their own right. As
such, they provide the optimum spatial scale within which to take
effective decisions on trading-off across expenditure areas to
maximise local and national economic outcomes.
The Greater Manchester authorities have established
a clear platform to deliver a sub-regional model that will enable
this. Following 20 years of voluntary co-operation through the
Association of Greater Manchester Authorities (AGMA), the Greater
Manchester authorities are now awaiting a Ministerial decision
to establish the Greater Manchester Combined Authority, which
will become the accountable focus across Greater Manchester for
integrating economic development, regeneration, planning, housing
and transport policies.
This governance system includes a new approach to
the way in which transport systems are managed in Greater Manchester,
based around a new "Transport for Greater Manchester"
(TfGM) which will provide an enhanced focus on coordinating transport
and economic regeneration objectives to effectively prioritise
and deliver initiatives that best support economic objectives
as determined by the approaches summarised in this paper.
Alongside this, the Government has been clear that
the proposed Local Enterprise Partnerships (LEPs) will be a key
vehicle for sub-regional economic planning, and this is consistent
with our approach. The Greater Manchester authorities see a LEP
as a natural addition to these governance arrangements to build
on the unique public - private partnership that is already in
place.
A Greater Manchester LEP will represent a further
opportunity for Greater Manchester's businesses, local authorities
and our key partners to build upon 20 years of voluntary collaboration
to achieve a step change in our ability to secure private sector
led economic growth, whilst ensuring our residents are able to
benefit from and actively contribute to this growth.
Together the Combined Authority and the LEP will
enable the private sector to play an even more active leadership
role in securing economic growth and allow for the effective alignment
of decision making and delivery in key areas such as economic
development, regeneration, planning, transport, housing, inward
investment, business support, marketing and tourism, and employment
and skills. Our proposals include the potential to pilot a "single
pot" of funding for economic development, transport and housing,
around which decisions on prioritisation could be taken through
the broad approach discussed in this paper.
This will also allow for innovative funding solutions,
such as Greater Manchester's recently agreed JESSICA-funded Evergreen
funding initiative, which is designed to unlock partnership funding
for economic growth initiatives in a manner, to be most effectively
aligned with the Government's proposals for Regional Growth funding
and tax increment financing against future business rates.
The revised Greater Manchester governance arrangements
are also well-placed to respond to the removal of regional strategies
from the planning framework. In August 2009, the Greater Manchester
authorities agreed a sub-regional economic strategy (the Greater
Manchester Strategy). This is now being expressed in spatial terms
through work that will culminate in a Greater Manchester Spatial
Framework in early 2011, to be published alongside the forthcoming
Greater Manchester Local Transport Plan. Collectively, this will
provide an economic, spatial and infrastructure framework for
future planning at the sub-regional level.
Finally, it should be noted that all local authorities
in the North West of England have recognised the importance of
retaining appropriate collaborative relationships for joint-working
on those strategic matters that would not be fully addressed through
any individual LEP. There are already strong working relationships
in place between the Greater Manchester authorities and our neighbouring
authorities both within the North West, as well as South and West
Yorkshire.
In addition, we have a good track record of collaborative
working on specific strategic projects. A good example here is
the development of the case for the Northern Rail Hub, which offers
real economic potential for a wide area and which has been promoted
through the local authority-led North West Rail Campaign. Recent
collaborative working between a number of major cities to promote
the role of High Speed Rail in growing their productivity is a
further strong example.
Examples such as this demonstrate that local authority
bodies have the capability to work effectively to represent shared
infrastructure priorities in the absence of formal regional bodies.
September 2010
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