Written evidence from Transport for London
(TE 10)
1. Introduction
1.1 Transport for London (TfL) welcomes the opportunity
to contribute to the Committee's inquiry into Transport and the
Economy.
1.2 Investment in the capital's transport makes
a vital contribution to the achievement of the Government's economic
growth strategies and reflects the discipline of the Government's
new fiscal regime.
1.3 London and the South East together provide
more than 40% of all tax revenues in the UK. Continuing planned
investment in London's transport network will ensure the UK maintains
or improves its global competitiveness and will support the economic
recovery.
1.4 The Tube upgrades and Crossrail provide the
backbone of TfL's Investment Programme. They are both key elements
of national infrastructure and are highly dependent on each
other to deliver maximum benefits. Without these projects, London
will not be able to cope with population growth by 2031 equivalent
to the current population of South Yorkshire. In addition, the
Government's commitment to High Speed Rail means that many thousands
more passengers will need to be carried by the capital's transport
system.
1.5 It is also important to remember the sheer
scale of existing public transport use in London with more than
11 million journeys made on an average day. Almost half of all
bus journeys in England take place in the city and 60% of all
rail journeys in Great Britain start or finish in London.
1.6 There is a very strong long-term economic
case for investment in London's transport infrastructure, which
is supported by politicians, businesses and other stakeholders
in the capital including voluntary and community, and environmental
groups. Together, it is estimated that the Tube upgrades and Crossrail
will add at least £78 billion to the UK's wealth, so the
schemes more than pay for themselves in terms of long-term economic
growth and tax revenues.
Our response to the questions in the terms of reference
for this inquiry is as follows.
2. 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?
2.1 While the UK and wider global economy experienced
a severe financial crisis beginning in 2007, which was followed
by a particularly deep recession, there is no evidence to suggest
that the long-term economic prospects of London or the UK have
changed. There remains a need to invest in transport infrastructure
to support economic growth in the future.
2.2 In his review, Eddington pointed out that
the most effective transport investment should target growing
areas to ensure that benefits are delivered immediately upon completion.
He also noted that the interventions delivering best value for
money are likely those that provide relief to congestion. These
arguments remain equally valid today.
2.3 Eddington highlighted the relationship between
the increase in travel demand over the last twenty years and economic
growth. The draft replacement London Plan, published October 2009,
and the Mayor's Transport Strategy (MTS), published May 2010,
set out the long- term growth that is forecast for London, with
population expected to rise by 1.3 million by 2031, and employment
by 750,000 over the same period. Growth in travel demand in London
can be expected to continue, therefore, as set out by the MTS,
by about 15% overall and about 30% for public transport.
2.4 There is evidence of growth in transport
demand since the Eddington report was published. Although there
has been a pause in growth, the chart below shows that demand
growth was so high in 2007-09 that even though there has since
been a downturn, demand appears to be close to the level forecast
by the Department for Transport (DfT) in Developing a Sustainable
Railway. Whilst it may still be too early to draw conclusions
on the strength of this recovery, it would nevertheless suggest
that the economic downturn has not removed the need for Underground
or rail capacity expansion to support economic growth in the medium-term.
2.5 London continues to suffer from congestion
on its transport network, despite the recession. The region is
still in need of more public transport capacity to allow its economy
- which did not suffer as much as the national economy from the
recession - to grow.
2.6 Transport schemes take much time to plan
and implement. Prior experience with recessions suggests that
the planned capacity improvements in London are still needed as
long-term employment and population trends remain unchanged.
Sources: ATOC ticketing
data and TfL Traffic Report
3. 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?
3.1 There are advantages from investing in infrastructure
that is more likely to be used immediately upon completion and
deliver returns from an early stage. In the current environment,
public spending can best support national economic growth by targeting
infrastructure investment in regions with growing economies, particularly
in London, and infrastructure that promotes international business
activity so that the benefits of trade can be captured.
3.2 This view is supported by business. A recent
survey of companies in the capital found that 98% consider the
Tube and Crossrail investment programmes to be important to London's
economic competitiveness in the future. If those schemes were
not to proceed, 92% of those surveyed thought the long-term effects
will be severely damaging for London's business community.
3.3 This is an important consideration as many
of the Tube's assets have reached the end of their planned life
and need replacement. Some signalling equipment, for example,
dates from the 1920s and 1930s. The continued operation of elderly
trains and signalling will reduce capacity on the Underground
by 30%.[12]
As ageing assets further deteriorate, the risk of failure increases
and there might have to be lengthy closures. Key interchange stations
including Victoria, Bank, Paddington and Tottenham Court Road
would close altogether in peak periods due to overcrowding. Increasingly
delayed and unreliable journeys will reduce the capital's attractiveness
as a location in which to do business.
3.4 Investment in London's infrastructure has
also created employment and wealth for other UK regions, such
as the orders placed for new London Underground and Overground
trains with Bombardier in Derby. This has helped to support the
rail sector in that city which in 2007 contributed £2.6 billion
to the local economy and directly and indirectly employed 8,500
people.[13]
3.5 London is the most productive region in the
UK, with its workforce being about one-third more productive than
the national average, and it plays an important role in the global
economy. London has historically generated a very significant
surplus of tax revenues that is to the benefit of the UK. Together,
London and the South East provide 43% of all tax revenues in the
UK, while in 2007-08 it is estimated that the capital contributed
between £14 billion and £19 billion via a tax export.
Investing in London is sure to provide an immediate return to
the Exchequer as many of the transport schemes here seek to alleviate
congestion/overcrowding on a transport network that is very frequently
stretched to the limits. Research by from London First, the business
organisation which represents the city's leading employers, found
that the capital's infrastructure schemes generate four times
as many wider benefits for a given level of transport investment
as schemes elsewhere in the country.
[14]
The following diagram shows that while transport schemes in London
have similar traditional benefit: cost ratios to those in other
UK cities (shown on the vertical axis), the wider economic benefits
are four times higher (shown on the horizontal axis).
3.6 Investment in London's transport system will
maintain and improve London's international competitiveness, which
is important for tax revenues: companies not locating in London
will more likely choose other world cities rather than elsewhere
in the UK.
3.7 International connectivity is vital to sustaining
the capital's status as world city. Against a backdrop of long
term growth in demand, ensuring easy access to a wide range of
destinations via air and high speed rail is needed for business
and leisure travellers alike. The South East Airports taskforce
is due to report its findings in 2011; however there is broad
agreement on the need to improve surface access to airports and
their passenger handling facilities. Increasing load factors and
plane sizes may make more efficient use of runway capacity; however
there remains a debate about making use of alternatives to Heathrow
to accommodate future demand.
3.8 In London, the greatest economic benefits
will be derived from spending that improves accessibility to Central
London by increasing peak capacity. This includes the upgrades
to London Underground, Crossrail, Thameslink and other High Level
Output Specification rail capacity schemes. The Tube upgrades
will bring economic benefits of £36 billion and the benefit-cost
ratio of each line upgrade ranges from 6:1 to 10:1. Crossrail
will increase rail capacity in London by 10% and deliver economic
benefits of at least £42 billion. National Rail schemes like
Thameslink are also very important to Central London's future
growth as they extend the reach of London's labour market, providing
benefits to London businesses but also expanding the opportunities
of residents across South East England.
Source: Greater Returns:
Transport Priorities for Economic Growth, London First
3.9 Within growing regions, like London, investment
intended to regenerate areas is also needed. It is important for
transport infrastructure to be put in place to facilitate growth
by improving accessibility to existing brown field land and other
development sites. This helps alleviate pressure in housing markets
and allows the benefits of economic growth to spread across the
region. In East London there are barriers to movement, particularly
where the River Thames causes severance, that reduce the attractiveness
of much brown field land to businesses and households and holds
back growth in the region. Investment in improved and new crossings
is vital to overcome existing severe congestion and severance
problems in the area.
3.10 The bus network will also continue to play
a major role in the capital's economic success. The number of
people relying on the bus is at its highest level since 1962 and
continues to grow. The bus network plays a vital role in outer
London, where three-quarters of all bus journeys are made. It
provides connectivity and employment opportunities to outer town
centres and key interchange stations.
3.11 Investment in National Rail services is
also vital to the capital's success in view of the particular
importance of London. The city's greater dependence on rail than
other parts of the country is confirmed by analysis of data from
the Office of Rail Regulation and the DfT:
- ¾ The
average London resident makes five times as many rail trips as
the average resident in the rest of England;
- ¾ Sixty
per cent of rail journeys start or end in London - this is around
650 million journeys per annum of a total of 1,100 million journeys
in Great Britain;
- ¾ Public
expenditure per rail trip in London is only one quarter of that
elsewhere in England;
- ¾ London
passengers contribute more to the cost of rail travel. Average
rail fares are higher in London and the South East than in the
regions. The average fare per passenger km is £1.28 compared
with 94p for regional passengers; and
- ¾ Overall,
if you consider transport revenue spending in London as a proportion
of the value it adds to the economy, the Capital gets no more
than some other parts of the UK (see table below), while capital
spending more than pays for itself over time.
| Gross Value Added (headline workplace GVA)
2008
| Identifiable government expenditure on transport (IGET)*
2008-09
| IGET as a proportion of GVA |
| Area | £bn
| £per head | Index
UK=100
| Capital
£bn | Current
£bn
| % |
| London | 265.1
| 34,786 | 170
| 3.8 | 2.5
| 0.9 |
| Greater South East | 558.4
| 25,697 | 125
| 6.2 | 3.6
| 0.6 |
| England | 1,081.4
| 21,020 | 102
| 10.1 | 7.5
| 0.7 |
| North East | 40.9
| 15,887 | 77
| 0.3 | 0.3
| 0.7 |
| North West | 120.7
| 17,555 | 86
| 1.0 | 1.1
| 0.9 |
| Yorkshire and Humber | 89.1
| 17,096 | 83
| 0.6 | 0.6
| 0.7 |
| East Midlands | 80
| 18,041 | 88
| 0.5 | 0.5
| 0.6 |
| West Midlands | 94.5
| 17,463 | 85
| 0.7 | 0.7
| 0.7 |
| East | 111.6
| 19,473 | 95
| 0.9 | 0.4
| 0.4 |
| South East | 181.8
| 21,688 | 106
| 1.5 | 0.7
| 0.4 |
| South West | 97.8
| 18,782 | 92
| 0.7 | 0.5
| 0.5 |
| Wales | 45.6
| 15,237 | 74
| 0.5 | 0.5
| 1.0 |
| Scotland | 103.8
| 20,086 | 97
| 1.3 | 1.5
| 1.4 |
| Northern Ireland | 28.7
| 16,188 | 79
| 0.3 | 0.3
| 1.0 |
| UK | 1,259.6
| 20,520 | 100
| 12 | 9.7
| 0.8 |
Sources: HM Treasury Public Expenditure Statistical Analysis
2009; National Statistics NUTS
3.12 London adds 70% more value to the economy each year than
the UK average, far more than any other English region or any
other part of the UK. For the most recent year available, the
table above shows the Identifiable Government Expenditure on Transport
allocated to the regions, using the Treasury's Public Expenditure
Statistical Analysis methodology, and the value each region adds
to the economy, using National Statistics data.
3.13 The column on the right shows current-account government
spending on transport in each region as a percentage of the value
that region adds to the economy. This measure shows, as a proportion
of the value the region adds to the economy, non-capital support
for transport in each English region is broadly the same with
London and the North West receiving an identical proportion of
their Gross Value Added in transport spending. This demonstrates
that London gets no more revenue spend than other parts of the
UK, in relation to the value added to the economy, and as described
above, the capital spending more than pays for itself over time.
3.14 The figure for London includes TfL's grant from the DfT
as well as other DfT spending on rail and motorways, while the
figures for the Greater South East combine London with the South
East and East regions. The above table shows total transport expenditure
across all modes. The situation for rail, as mentioned earlier,
is that public expenditure per rail trip in London is only one
quarter of that elsewhere in England. (see below).
PUBLIC EXPENDITURE PER RAIL TRIP (£)
Sources: ORR National
Rail Trends yearbook 2009/10 table 7.1; DfT annual
report and resource accounts 2009/10
4. How should the balance between revenue
and capital expenditure be altered?
4.1 In the current economic climate, spending
by Government on transport should focus on investment rather than
revenue spending to ensure that much-needed improvements to infrastructure
are completed and will be in place when demand returns as the
economy begins to grow again.
4.2 Planned upgrades to London's Underground
and Crossrail are necessary to alleviate chronic overcrowding
on London's transport network and to provide room for future growth.
They will provide benefits to London and the UK as a whole, as
described in Section three. Already passenger numbers on the Underground
and on National Rail are picking up again as the region moves
on from recession.
4.3 Consistent revenue expenditure is, however,
also needed to deliver transport services to support economic
objectives. This includes revenue maintenance of highway assets,
enforcement and policing, and local transport improvements for
walking and cycling. These areas are all vital to the smooth efficient
operation of the transport system - for both passengers and freight
- that is so important to businesses and the wider economy.
4.4 London also suffers from having two overly-distinct
transport networks: the TfL network and the National Rail network.
Each has different levels of service quality and fares tariffs,
yet the customers are largely the same with identical needs. This
acts as a disincentive to use of public transport, especially
by less frequent travellers. Evidence shows that passengers and
other stakeholders value TfL's service quality standards including
turn up and go train frequencies; earlier first and later last
train services; and better passenger information. The provision
of the higher TfL service quality standards has a strong business
case, but requires higher revenue expenditure.
4.5 In London, revenue spending is also used
to support bus services, which are vital to London's continued
economic success. Buses are the most widely-used form of public
transport in London, with over six million trips made every weekday
- over 2.2 billion passengers per year (around half of all bus
journeys in England) and up 59% over the past ten years. They
are also critical for employment and widen access to jobs. Sixty-two
per cent of bus passengers are in employment (49% full-time and
13% part-time).
4.6 The bus network is the only public transport
service present throughout Greater London, serving the entire
population of the city. Services provide local and longer-distance
links and also act as feeders to the rail network. They are the
primary public transport for many inter-suburban trips and the
principal link with the central area for many parts of inner London.
Buses are important for local economies and are keeping town centres
alive. Bus passengers contribute the largest proportion of monthly
visitor spend in 15 of London's town centres at 38%, outweighing
those who walk (32%) and car users (14%). Around one in eight
of all bus trips is part of a longer journey also involving a
rail service.
4.7 The bus network is flexible and regularly
reviewed. It thus supports delivery of new homes, hospitals, retail
and office development, and other centres of employment or public
services. A comprehensive, reliable network reduces car-dependency
and provides access to a wider range of employment opportunities
for residents. Increased use of buses is the main component of
the increase in public transport's mode share of travel in London
between 2000 and 2008 (28 to 33%). This level of change is a major
achievement for a city such as London, not matched by any comparable
city in recent times.
4.8 London's roads run at or near capacity for
much of the day. Any reduction in bus services is likely to increase
the number of car journeys as people use other means of transport.
This will add greatly to the cost of congestion, which grows enormously
once demand exceeds road capacity and to the costs from car pollution.
4.9 Transport providers also have a duty, especially
during periods of tight public spending constraints, to demonstrate
value for money at every opportunity. TfL has found efficiency
savings of over £5 billion up to 2017-18 while protecting
frontline services. Work on schemes for which no funding was available
has been stopped; senior salaries have been frozen for the past
two years and, unlike in other areas of the public and quasi-public
sector, performance awards have been waived by senior staff; back-office
expenditure is being reduced by 25%; staff numbers are being reduced
by eight per cent including operational and management roles in
London Underground. Many hundreds of further reductions are happening
across TfL: a total of £220 million has been saved by reducing
the use of consultants and temporary workers; around £160
million has been saved by moving to cheaper offices; and over
£200 million has been eliminated from the Marketing and Communications
budget.
5. Are the current methods for assessing proposed
transport schemes satisfactory?
5.1 Transport appraisal guidance has been improved
recently through the New Approach to Appraisal (NATA) Refresh
process. The inclusion of Wider Economic Benefits has ensured
that appraisal takes account of the significant benefits transport
capacity can bring to the economy. The Department for Energy and
Climate Change methodology that greatly increases value of Carbon
emission savings, with further increases likely following regular
future reviews, is also welcome.
5.2 Further improvements to the appraisal system
can be made, but another major upheaval would be disruptive and,
in our view, is not warranted. Some commentators believe there
could be a much better appraisal framework which would radically
re-prioritise transport programmes. However, it would be better
for the existing framework to continue evolving, and for more
effort to be put instead into devising procedures for improved
decision making.
5.3 Appraisal guidance could usefully be revised
to capture more accurately the role transport provision can play
in directing growth to less developed areas. For example, in London
there are many areas with significant brown field land ready for
development that are poorly served by the transport network, which
is likely to inhibit economic growth.
5.4 Time savings are extremely important in transport
appraisals. Schemes such as Crossrail produce substantial time
savings as well as providing wider economic benefits. However,
because brown field sites available for development have few existing
trips very little time savings arise from schemes that connect
these locations. As a result, the current methodology does not
build a strong business case for such schemes. This creates an
impossible situation; the land is difficult to develop without
transport infrastructure yet the appraisal guidance does not result
in a solid business case to be made to justify new schemes. As
a result, projects needed to support the redevelopment of East
London, including river crossings, are not fully valued.
5.5 Other countries seem to make the transition
from brown field site to opportunity area more easily. Appraisals
need to be able to assess potential long term journey benefits
together with associated economic growth and various quality of
life improvements, as well as benefits for existing journeys.
The methodology is currently weak in this area.
5.6 It is vital, particularly as public funding
of potentially growth-promoting transport schemes is likely to
be severely constrained in the coming years, that when companies
and households gain more from transport improvements than simply
faster journeys, these impacts are accurately identified in appraisals.
Investigations into the nature of such gains have tended to get
bogged down in an academic debate about supposed double-counting
of monetised benefits, when the real unresolved issue is who actually
gains financially and by how much.
6. How will schemes be planned in the absence
of regional bodies and following the revocation and abolition
of regional spatial strategies?
6.1 The London Plan and London's other regional
strategies provide an important guide to both public and private
investment and development in London. London's regional plans
are not affected by this policy decision.
6.2 London has benefited greatly from having
a single regional transport authority, TfL. This has allowed for
most of the transport services across the region to be integrated
and for regional transport priorities to be achieved. The Mayor
of London's Transport Strategy has been developed (by TfL) alongside
the Mayor's Spatial Strategy (developed by the Greater London
Authority) and his Economic Development Strategy (developed by
the London Development Agency) to provide an overall integrated
plan for London's development. However, better integration of
transport modes and coordination of planning could be achieved
if the Mayor was given responsibility for National Rail services
in the capital. These suburban services, particularly in South
London, are an important part of London's transport network. But
because they are part of the National Rail franchising system
the service they offer is not fully integrated with other transport
modes in London. One need only look at the challenge of implementing
a uniform fare structure across the Underground and National Rail
networks to see why this is undesirable.
6.3 A consistent approach to minimum service
standards across London and improved planning and sponsorship
of schemes by a locally accountable sponsor such as the Mayor
or TfL could help to deliver more for less.
7. Conclusion
7.1 The Government is facing a huge challenge
in tackling the country's budget deficit, while protecting frontline
services, and supporting economic recovery. Sustained investment
in London's transport infrastructure is essential, however, if
the capital is to accommodate forecast population and employment
growth at the same time as maintaining its position as a leading
world city and as a generator of wealth for the rest of the UK.
September 2010
12 20 per cent of the 30% reduction derives from a
reduction in train fleet availability. This 20 per cent is comprised
of: routine minor damage over life of fleet (5%); older trains
suffer more equipment failures with harder to replace components
(10%); and a combination of occasional serious problems across
fleets and the effect of deteriorating signalling equipment (5%).
The remaining 10 per cent of the overall capacity reduction comes
from a reduction in train speed, largely due to the longer dwell
times at stations caused by fewer trains being in service. Back
13
Planes, Trains and Automobiles Research, commissioned by
Derby City Council, East Midlands Development Agency and Derbyshire
& Nottinghamshire Chamber of Commerce from URS Corporation
Ltd, December 2009 Back
14
Greater Returns: Transport Priorities for Economic Growth,
London First, June 2010 Back
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