Written evidence from pteg (TE 71)
1. INTRODUCTION
1.1. pteg represents the six English
Passenger Transport Executives (PTEs) in England which between
them serve more than eleven million people in Tyne and Wear ("Nexus"),
West Yorkshire ("Metro"), South Yorkshire, Greater Manchester,
Merseyside ("Merseytravel") and the West Midlands ("Centro").
Leicester City Council, Nottingham City Council, Transport for
London (TfL) and Strathclyde Partnership for Transport (SPT) are
associate members of pteg, though this response
does not represent their views. The PTEs plan, procure, provide
and promote public transport in some of Britain's largest city
regions, with the aim of providing integrated public transport
networks accessible to all.
1.2. pteg welcomes the opportunity
to respond to the Committee's inquiry into this important topic
and would be willing to appear before the Select Committee, should
the Committee wish us to expand on any of the points made in this
response.
2. TRANSPORT
INVESTMENT IN
THE CITY
REGIONS
2.1. There is compelling evidence, particularly
from the Eddington Transport Study1, to show that investing
in transport in urban areas is one of the most effective forms
of investment there is. Indeed it has been recognised that investing
in transport can pay economic dividends - one estimate is £3
of benefits to every £1 spent2. More recently
the Cabinet Office has quantified the costs of congestion and
other disbenefits arising from the relatively poor quality of
transport in urban areas as at least £40 billion, with
congestion accounting for around one third3.
2.2. However, pressure on the public finances
means that every area of expenditure is under intense scrutiny.
In the past, transport (along with other capital investment)
has been subject to disproportionate cutbacks during periods of
public spending reductions. The result of this has been a stop-start
approach to investment in better transport infrastructure and
the services that depend on it, which has impacted upon the UK's
overall competitiveness. The Coalition Government has recognised
that to make the same mistakes this time round will make it harder
to create and sustain new jobs4. Nevertheless the
June 2010 Budget outlined reductions to total capital expenditure
of £49 billion in 2009-10 to £20 billion 2013-14 - a
reduction of 63%5.
2.3. We believe that investing in urban transport,
as well as devolving more powers and responsibilities to city
regions, is therefore especially important in the current context
since it makes it possible for large numbers of people to access
work6. Nowhere is this truer than in the city regions
of the North and Midlands, where the concentration of labour,
capital, knowledge and other significant assets makes them key
to economic recovery and growth. However, it is also in these
areas where the impacts of the recession are being felt most strongly;
where there has been a historic imbalance in the funding levels
received for transport when compared with London; and where transport
budgets risk being disproportionately affected by wider reductions
in spending.
3. TRANSPORT
AND THE
ECONOMY
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?
3.1. The economic conditions within the UK have
been altered substantially by the recession and subsequent financial
crisis. There have been some relatively short term impacts upon
demand for transport and congestion, but based on past evidence
there is likely to be an upsurge in demand as the economy recovers
(for example, Network Rail estimates that passenger numbers on
rail networks serving our cities will more than double by 20347).
Therefore any short term slow down in demand does not negate
the need to invest in transport (particularly given the long lead-in
times for capital projects) and high value public sector investment
can, therefore, make a significant contribution to the economic
recovery.
3.2. Unemployment has risen disproportionately
higher in the North and Midlands and at a faster rate than London
and the South East. Some parts of our city regions (often those
areas most formerly reliant on single heavy industries) were only
beginning to feel the benefits of wider economic growth when the
recession struck. In these places, local economies are still
very fragile and considerably more vulnerable to the impacts of
recession than major cities, despite often being geographically
close.
3.3. Despite these changes, it is our contention
that the Eddington Transport Study still represents the best analysis
of the transport challenges we face. Critically for our city
regions, this work reiterated the link between transport investment
and improved economic performance in urban areas in particular,
noting:
"A good transport network is important in sustaining
economic success in modern economies: the transport system links
people to jobs; delivers products to markets; underpins supply
chains and logistics networks; and is the lifeblood of domestic
and international trade." - Eddington, 2006:11
3.4. Whilst it is welcome that the Coalition
Government has recognised the need to rebalance the economy, our
analysis shows a gap has opened up between spending per head on
transport between London and the regions8. It is also
worth noting that the gap is far greater for transport than for
many other key areas of public spending, such as health and education.
The latest (2008-09) Treasury figures on relative transport spend
per head figures between London and the regions shows what's happened9:
- London: £641.
- North West: £287.
- West Midlands: £259.
- Yorkshire and Humber: £248.
- North East: £234.
3.5. Furthermore, we are concerned that both
in year spending cuts and projected cuts to transport budgets
nationally are having or will have disproportionate impact on
our areas. Our research shows that our areas suffered higher
than expected cuts to revenue (£12.45 per head of population
compared to £8.75 for England) and capital (£7.25 compared
£4.12) expenditure in this year's spending reductions; and
that 21 out of 62 (i.e. 34%) of Major Transport Schemes halted
were in our areas.
3.6. We recognise that London needs and deserves
a good quality public transport system and has made an effective
case for investment. However, because we start from a lower base
and do not the long term deals that are in place for London and
for national rail, we are likely to be disproportionately hit
by reductions in funding10. Our cities need a fair
share of the available transport spend going forwards and any
reductions in transport spending need to be carefully thought
through to ensure that the major city regions of the Midlands
and the North are not disproportionately affected.
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?
3.7. The Coalition Government has indicated that
transport investment must be focused on those schemes which are
likely to deliver relatively high rates of return on investment
in terms of jobs and economic growth. The Government has also
expressed a desire to "rebalance the economy" and to
focus on supporting those areas of the country which have become
heavily reliant on public sector employment. We support these
objectives and believe that they can be realised by focusing on
investment which delivers jobs and growth in areas hit hardest
by wider public expenditure reductions.
3.8. Our position is supported by the work of
the Eddington report, which made three important points in relation
to types of intervention that lead to the greatest returns on
investment within city regions:
- the cumulative impact of several relatively small
improvements to the transport system can often be at least as
big as that of the large projects;
- the rate of return on transport investment is
highest in large urban areas, in part because of agglomeration/productivity
effects not recognised in standard transport appraisal11;
and
- the failure to address key constraints and bottlenecks
in the transport network, such as the capacity constraints now
affecting heavy rail commuter routes in many city regions given
several years of steady growth, can seriously constrain the ability
of cities to compete internationally against places with less
congestion and better quality public transport.
3.9. PTEs are responsible for the delivery of
integrated transport in the city regions. They have a track record
of investment across all modes of transport, from investment in
passenger information, bus priority and interchanges right through
to major scheme developments for light rail schemes. We would
argue that PTEs have been at the forefront of delivering on Eddington's
recommendations.
SMALL SCHEMES
3.10. Small schemes, such as many of the projects
delivered by PTEs, can deliver high rates of return. Recent analysis
by Professor Phil Goodwin12 suggests that low cost
measures, such as cycling and smarter choices can have benefit
to cost ratios (BCR) as high as 20 and 30, respectively; other
measures, such as bus improvements (best BCRs around 10) and rail
infrastructure (best BCRs around 6) also represent excellent value
for money. By comparison, Professor Goodwin suggests that large
road schemes are typically likely to have a much lower impact
per £ spent. His analysis highlights the potential to achieve
a greater rate of return by focusing on more localised, targeted
and sustainable schemes.
3.11. One further consideration is that the short
term impact of the recession on car ownership and usage also creates
an ideal opportunity to promote a longer term behavioural shift
to more sustainable modes of transport, since the public may be
more willing to consider the alternatives. Moreover, in times
where funding is in short supply, the promotion of "smarter
and active choices"[233]
may offer the most cost effective investment opportunities. The
work of the Sustainable Travel Towns is important in this regard13.
We welcome the Government's recent announcement that these issues
will be addressed specifically in future local transport funding
streams14.
URBAN INVESTMENT
3.12. The impact of transport investment on the
urban economy can be significant. Research has shown that the
relative economic returns in our city regions are at least as
high as those obtained elsewhere, for example London15.
The wider impacts can be significant:
- analysis of the Leeds trolleybus proposal (by
Steer Davies Gleave) shows the impacts in terms of job creation
and economic output are approximately the same order of magnitude
as the direct benefits to transport users (i.e. in travel time
savings);
- analysis of the Coventry Spirit Bus Rapid Transit
scheme (by CEBR) showed benefits in terms of job creation alone
30% higher than the capital cost of the scheme; and
- phase I of the Midland Metro light rail scheme
estimated generated GVA benefits almost 50% higher than its capital
cost.
TACKLING CONSTRAINTS
TO GROWTH
3.13. Research by KPMG16 illustrates
how public transport accessibility to the city centres of metropolitan
areas can make a critical contribution to higher productivity
and wages, job creation and direct foreign investment. According
to their analysis, rising overcrowding on the local rail networks
radiating from Leeds and Manchester represents a growing constraint
on economic growth and could be losing the national economy £250
million of GVA per annum. They therefore argue that the appraisal
of investment in new rolling stock must recognise the role that
rail plays in supporting a shift of economic activity towards
the densest and most productive locations and sectors of the economy.
3.14. These findings are echoed by the analysis
of the Northern Rail Hub scheme in Manchester17 and
the Centre for Cities report on agglomeration and growth in the
Leeds City Region18. These reports agree that public
transport schemes improving city centre accessibility can generate
wider economic benefits corresponding to 20-25% of total benefits,
which are not currently taken into account by the Department for
Transport.
ADDRESSING WORKLESSNESS
3.15. At times of rising unemployment, access
to jobs also needs to be a key driver for transport investment
in order that the flexibility of the labour market is maintained.
PTEs play a lead role in this respect through promoting schemes
such as WorkWise, which shows that relatively straight-forward,
low cost projects allowing unemployed people free travel on public
transport to get to interviews, and for the first "make or
break" weeks of employment, have a dramatic effect on their
chances of getting, and staying in, work. In the West Midlands,
for example, more than 80% of WorkWise customers said they would
have struggled to get to new jobs or interviews without the free
travel passes. Furthermore, 80% of customers were still in employment
after 13 weeks.
3.16. More broadly, our research19
also shows that investing in sustainable modes of transport has
a positive effect on direct employment. The research found that:
"A reduction in car travel, and a transfer to
public transport, would result in a net increase in jobs as, on
average, rail and bus transport employ more people per passenger
km than car travel."
How should the balance between revenue and capital
expenditure be altered?
3.17. As noted above, small investments can often
have the greatest relative impact in the context of tightly constrained
budgets20. However, many of the most cost effective
measures (for example, the promotion of smarter and active choices21)
require revenue support. The lack of flexibility in budgets and
the current restrictions on financing through capital grants (i.e.
due to the HMT's "Golden Rule"22) mean these
measures are often difficult to fund. Perversely the impact of
some of these measures, for example through their impact on carbon
emissions and climate change, could have long-lasting benefits.
In terms of our experience of implementing projects, we also
feel that there should be a much greater recognition of the fact
that capital expenditure is often reliant on revenue streams over
the longer term and that this can be critical for the achievement
of the long term objectives of a given project. We wish to see,
therefore, much greater flexibility at local level in the definition
of capital and revenue expenditure.
Are the current methods for assessing proposed
transport schemes satisfactory?
3.18. The current system of appraisal provides
a useful tool for assessing transport schemes. However, it does
have some significant weaknesses. We are concerned that, as currently
constructed, it does not give sufficient weight to investments
which help generate economic growth, nor does it necessarily promote
more sustainable investments such as public transport. Therefore,
we welcome the Coalition Government's intention to review the
process for transport appraisal.
3.19. The Eddington Study led to a significant
shift in DfT thinking regarding the appraisal of the wider economic
benefits of transport investment, which culminated in the publication
of guidance23 which acknowledged that transport investment
may generate additional benefits relative to those considered
to date, including:
- agglomeration benefits translating into increased
in productivity in areas with higher concentration of economic
activity; and
- impacts on national economic output due to improved
labour supply and the move towards more productive jobs.
3.20. Recent evidence24 shows that
wider economic benefits can represent in excess of 25% of the
total benefits in large urban areas and that this figure is likely
to be highest for schemes that provide the greatest improvement
to city centre accessibility. The exclusion of wider economic
benefits from the appraisal of transport projects may therefore
lead to sub-optimal decisions, particularly if economic growth
and jobs are a priority for investment. We are therefore calling
for this methodology to become part of the formal appraisal process
with the effect that investment decisions will be better aligned
with the objective to support economic growth.
3.21. There is also a growing debate at a more
fundamental level, which:
- argues that even the DfT's wider benefits approach
fails to fully take into account the potential for some forms
of transport to support a step change in economic growth; and
- in any case should be focusing on economic potential,
i.e. by assessing the economic potential (through the impact on
GVA) of investment25.
Such an approach can help prioritise transport investment
according to its economic impact, rather than focusing on the
welfare benefits captured in the NATA type appraisal.
3.22. With respect to smaller, higher impact
schemes, such as cycling and smarter choices, it is still a significant
challenge to demonstrate their health, social inclusion and access
to employment benefits using standard DfT appraisal methods. This
is because such methods have been historically geared towards
quantifying travel time savings for more conventional interventions.
Additionally the carbon impacts of transport investments are
not well captured by the current system and would therefore need
to be given a greater emphasis in a revised appraisal system,
if the intention is to prioritise more sustainable modes of transport.
3.23. We could also see merit in DfT appraisal
methodology having greater overlap with the methods used by other
government departments such as DWP, which focuses its assessment
of interventions on their direct impact on government revenue
and expenditure. This may facilitate the joining up of investment
decisions by different government departments more easily.
3.24. In addition, we also wish to see a more
proportionate approach to appraisal for transport schemes - currently
schemes over £5 million need full approval by DfT.
We believe the limit should be increased to £25 million,
with a lighter touch appraisal of smaller schemes carried out.
We believe that this would free up capacity, improve decision-making
times and reduce costs.
How will schemes be planned in the absence of
regional bodies and following the revocation and abolition of
regional spatial strategies?
3.25. We believe that under any new arrangements,
the city regions should be given the scope to plan, prioritise
and allocate resources within their areas in pursuit of clear,
shared and agreed economic objectives. The Integrated Transport
Authorities (ITAs) currently have responsibility for the preparation
of the Local Transport Plans (LTPs) for the city regions, with
the PTEs responsible for delivering the policies contained within
them.
3.26. With the proposed removal of Regional Strategies,
LTPs have become the main statutory policy framework covering
transport at the sub regional level, and put ITAs/PTEs at the
centre of local decision-making and delivery. Given the need
for efficiency and to avoid "reinventing the wheel",
particularly in a constrained public spending environment, it
would seem logical for any new arrangements, i.e. such as those
developed as part of Local Enterprise Partnerships (LEPs), to
build upon these existing arrangements for delivering strategic
transport in the city regions.
September 2010
REFERENCES
1 http://www.dft.gov.uk/about/strategy/transportstrategy/eddingtonstudy
2 http://www.citiesmanifesto.org/transport
3 Cabinet Office (2009)
An Analysis of Urban Transport.
4 HM Government (2010)
The Coalition: our programme for government.
5 Office Budget Responsibility
2010.
6 Over 50% of households
on the lowest real income quintile do not have access to a car
(DfT National Travel Survey, 2008).
7 http://www.networkrail.co.uk/browseDirectory.aspx?dir=%5CPlanning%20for%20CP5&
pageid=5669&root
8 http://www.pteg.net/NR/rdonlyres/34058AE6-C6D4-47F0-AB93-A53D36658676/0/The2010ptegFundingGapreportfinal.pdf
9 All figures are
annual public spend per head of population.
10 http://www.pteg.net/NR/rdonlyres/3B1DCAA1-0452-4E27-A825-B0B883130941/0/
GovernmentspendingcutsGTreport
11 A report for London
First
(http://www.london-first.co.uk/documents/TRANSPORT_DOC_FINAL_SPREADS.pdf)
shows that the impact of wider economic benefits on the rate of
return of transport investment is likely to be of the same order
of magnitude in the city regions as in London due to higher congestion
and construction costs in the capital.
12 Goodwin, P. (2010)
Improving value for money in the context of transport expenditure
cuts: feasibility study, University of the West of England.
13 http://www.dft.gov.uk/pgr/sustainable/demonstrationtowns/sustainabletraveldemonstrati5772
14 http://nds.coi.gov.uk/content/detail.aspx?ReleaseID=415581&NewsAreaID=2&H
UserID=895,777,888,850,772,866,710,705,765,674,677,767,684,762,718,674,708,683,706,718,674
15 http://www.london-first.co.uk/documents/TRANSPORT_DOC_FINAL_SPREADS.pdf
16 KPMG (2010) Value
for money in tackling overcrowding on northern city rail services.
Report to the Northern PTEs.
17 http://www.thenorthernway.co.uk/document.asp?id=718
18 http://www.centreforcities.org/assets/files/pdfs/071127LeedsPaperFINAL.pdf
19 http://www.pteg.net/NR/rdonlyres/D09F59E8-72C6-438C-8964-60A1993A8F48/0/
EmploymentintheSustainableTransportSectorpdf.pdf
20 Goodwin (2010)
Improving value for money in the context of transport expenditure
cuts: feasibility study, UWE (DRAFT).
21 See footnote 1.
22 The HMT Golden
Rule is based on the principle of intergenerational equity whereby
the proportion of expenditure going towards revenue support is
constrained since it is assumed all benefits from that sort of
expenditure will be felt "today".
23 Transport Analysis
Guidance (TAG) Unit 2.8C on "Wider Impacts and Regeneration"
September 2009.
24 http://www.london-first.co.uk/documents/TRANSPORT_DOC_FINAL_SPREADS.pdf;
http://www.centreforcities.org/assets/files/pdfs/071127LeedsPaperFINAL.pdf
25 see http://www.networkrailmediacentre.co.uk/Press-Releases/INVESTING-TO-BUILD-BRITAIN-S-ECONOMY-1561.aspx
233 Smarter and active choices are about encouraging
people to think about the range of transport modes they could
use to reach their destination and enabling them to choose the
most sustainable option - in many case the best option might be
to walk, cycle or use public transport. Back
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