Written evidence from the Northern Way
(TE 34)
SUMMARY
- ¾ This
submission is by the Northern Way, the public and private sector
partnership established to promote the North's productivity and
output growth and currently funded by North West Development Agency,
One North East and Yorkshire Forward.
- ¾ UK
economic conditions have materially changed since the Eddington
Transport Study but we see no evidence that the recession has
changed the relationships between transport connectivity and economic
growth that Eddington considered or Eddington's prescription,
namely the economy needs adequate and appropriate connectivity
within and between city regions, as well as to and from port and
airport international gateways.
- ¾ Our
evidence identifies key differences between transport demand in
the North and the South. Existing travel patterns in the North
are more sustainable. Car trips are shorter, bus use higher and
rail use is growing but before the recession every percentage
point of economic growth in the North led to transport demand
growing more strongly in the North when compared with the South.
Evidence shows that the North has a higher elasticity of transport
demand.
- ¾ The
recession has brought to the fore the importance of well targeted
investment to facilitate economic growth. This is pressing in
the North given that it has been most affected by the recession
and the projections that the North's economy will be most affected
by public sector spending cuts. As we move out of recession, without
investment the more sustainable pattern of transport demand in
the North will be lost.
- ¾ The
Northern Way's evidence shows that what is needed to foster the
North's economic growth is a balanced approach that looks at the
connectivity needs of travel within city regions and the links
between the North's city regions. Also important are links between
the North and London with its World City functions, and international
connectivity via port and airport gateways within the North and
elsewhere in the country.
- ¾ The
split between capital and revenue budgets can be a potential barrier
to implementation. We would welcome further relaxation of the
demarcation between capital and revenue budgets.
- ¾ The
Northern Way supports the concept of NATA appraisal but considers
that development of its processes and practices is needed. Also
consideration needs to be given to how cost benefit analysis is
used in decision making.
- ¾ There
has been recent very valuable work on how transport investment
can influence the size of the economy as measured by GVA. Our
evidence is that more work needs to be done before such techniques
can become part of mainstream appraisal.
- ¾ The
Northern Way has filled a "strategic gap" by acting
as a counterbalance to Scotland and London where there are strong
statutory bodies in Transport for London and Transport Scotland
to make the strategic case for transport investment and progress
implementation.The abolition of regional apparatus has the danger
of creating a strategy gap for the identification and promotion
of transport interventions of sub-national importance. Local Enterprise
Partnerships will need to work together and be sufficiently resourced
if they are to fill this gap.
THE NORTHERN
WAY
1. This submission has been prepared by the Northern
Way, a public and private sector partnership currently funded
by the three Northern RDAs (North West Development Agency, One
North East and Yorkshire Forward). Our goal is to improve the
sustainable economic development of the North towards the level
of more prosperous regions by growing
the North's economy faster.
THE NORTHERN
WAY GROWTH
STRATEGY
2. The 2004 Northern Way Growth Strategy
Moving Forward: The Northern Way
sets out how the Northern Way seeks to bridge the output gap in
the North's economy. It highlights transport as a priority for
transformational change. It identifies three transport investment
priorities:
- ¾ to
improve surface access to the North's airports;
- ¾ to
improve access to the North's sea ports; and
- ¾ to
improve links within and between the North's City Regions.
THE
NORTHERN TRANSPORT
COMPACT
3. The Northern Way has established the Northern
Transport Compact to provide advice on transport priorities at
the pan-northern level linked to productivity. Chaired by Professor
David Begg, the Compact includes City Regional, private sector
and RDA members from the North's three regions. The Compact has
led the development of the Northern Way's Transport Strategic
Direction and Priorities as well as subsequent work.
THE STRATEGIC
DIRECTION FOR
TRANSPORT
4. The Northern Way's Strategic Direction
for Transport is an evidence-based assessment of the most
appropriate transport interventions that will promote productivity
gain, while at the same time seeking to protect and enhance the
North's natural and built environment, and contributing to the
nation's commitments regarding climate change. Looking over 20
to 30 years, it sits below the three high-level transport goals
of the Growth Strategy and above the level of individual priority
schemes and projects. The Strategic Direction sets out the types
of interventions which will have the greatest productivity impact,
as well as where in the North those interventions will have the
greatest impact.
5. While the Strategic Direction for Transport
pre-dated the Eddington Transport Study, its prescription and
that of Eddington are consistent, namely what is needed is a balanced
investment strategy that considers transport links within our
city regions, between the city regions of the North and between
the North and the rest of the country, as well as links to port
and airport international gateways located in the North and elsewhere
is the country.
THE NORTHERN
WAY'S
SHORT, MEDIUM
AND LONG
TERM TRANSPORT
PRIORITIES
6. Having established our Strategic Direction
for Transport, we then identified Short, Medium and Long
Term Transport Priorities. Our prioritisation work shows that
while the transport proposals being pursued by stakeholders across
the North will make worthwhile contributions to productivity growth,
taken together they do not allow our Strategic Direction for Transport
to be met. Consequently, if the North's productivity growth is
to be maximised a number of the "Strategic Delivery Gaps"
need to be addressed. We have identified strategic delivery gaps
for the rail network, the road network and associated with network
integration. The rail gaps are the Northern Hub (the strategy
to transform rail in the North), rail gauge enhancements for multi-modal
container traffic, a rail rolling stock strategy and strategies
for trans-Pennine and north-south rail (including high speed rail).
The road gaps relate to the need for a long term strategy to keep
the strategic road network moving and a north-wide approach to
behavioural change. For network integration the strategic gaps
relate to pan-Northern smart ticketing and strategic park and
ride.
TRANSPORT AND
THE ECONOMY
1. 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?
7. As work published by the Northern Way in March
this year has shown, the recession has significantly affected
car and public transport demand, as well as the number of air
passengers and volume of domestic and international freight. However,
we see no evidence that the recession has changed the relationships
between transport connectivity and economic growth that Eddington
considered, nor the basic prescription that he put forward, namely
the economy needs adequate and appropriate connectivity within
and between city regions, as well as to and from port and airport
international gateways. What the recession has done is bring to
the fore the importance of well targeted investment to stimulate
and facilitate economic growth. This is most pressing in the North
given that it has been most affected by the recession and the
projections that it will be most affected by public sector spending
cuts.
8. Importantly, our Transport Demand in the
North report showed key differences between the North and
the South. Our work has shown that travel patterns in the North
are more sustainable than in the South. Car trips are shorter,
bus use is higher and rail use is growing (and continued to grow
during the recession). However, in the years leading up to the
recession, transport demand in the North grew more strongly than
in the South. Every percentage point of economic growth in the
North led to transport demand growing more strongly in the North
when compared with the South. In the period of recession that
followed, indications are that demand also fell away more in the
North. In short, the North has a higher elasticity of transport
demand than the South. Car trips are getting longer, rail trips
are growing in number while bus use is now declining again.
9. In the North and without further intervention,
a continuation of the pre-recession trends would suggest that
transport demand in the North is likely to become more like that
in the South.
10. The trend of re-structuring employment and
economic activity as the North moves to a more private sector
focused knowledge economy, is set to continue for many years to
come. As we move out of the recession, it should be anticipated
that the trend in the North of increased car use, increased rail
use, but declining bus use will resume (and mooted changes to
the concessionary fares regime and to BSOG would accelerate this
decline). This reinforces the need for a balanced strategy of
policy interventions that seeks to facilitate economic growth
through targeted enhancements to the North's transport system,
combined with measures that seek to exploit the more sustainable
pattern of transport use that currently exists in the North and
wherever possible, supports the use of more sustainable modes.
2. 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?
11. Speaking in Shipley at the end of May in
his first major speech as Prime Minister, David Cameron identified
the Coalition Government's goal of rebalancing the economy away
from the heavy reliance on the South East, and through the growth
of private sector businesses.
12. As we have already set out, the Northern
Way's evidence shows that what is needed to foster the North's
economic growth is a balanced approach that looks at the connectivity
needs of travel within city regions and the links between
the North's city regions. Also important are links between the
North and London with its World City functions, and international
connectivity via gateways within the North and elsewhere in the
country. Enhancing connectivity within city regions is focused
on expanding labour supply across functional labour markets. Improving
the connectivity between city regions facilitates the movement
of goods, business to business links and allows the expansion
of labour markets, most notably for entrepreneurial high level
skills. International connectivity facilitates trade.
13. Clearly the outcome of the Spending Review
will be less funding to enhance strategic and local transport
networks in the North. Given the importance to the economy of
capital investment in our transport networks, we contend that
both enhancement and maintenance budgets need to share the burden
of programme reduction. There will be a high economic cost if
the spending reduction is met by the enhancement programme alone.
Of course, spending reductions means there is a need to prioritise.
To contribute to the Spending Review we have submitted to the
Secretary of State our evidence-based assessment of what these
should be. Our submission is summarised in the Annex to this memorandum.
14. We are also mindful of the time taken to
develop significant transport interventions and the importance
of bringing forward investment proposals in a timely manner. This
means that it is important that funds are continued to be made
available to Network Rail, the Highways Agency and local authorities
for scheme development. As well as identifying priorities for
which construction can start by 2014/15, we have also set out
priorities for proposals that we consider should be taken through
the business case, powers and other statutory processes for implementation
subsequent to 2014/15. These too are summarised in the Annex.
3. How should the balance between revenue
and capital expenditure be altered?
15. We are concerned that the split between revenue
and capital funding could be seen as a barrier to implementation
of measures that the Northern Way has identified as delivering
productivity benefits to the North. For example, more widespread
implementation of the Managed Motorway programme (and beyond that
greater integration between Highways Agency and local authority
intelligent transport systems) has a revenue as well as capital
implication. In the case of Managed Motorways, this relates to
the costs of operating control centres and provision of Highways
Agency Traffic Officers amongst other things. A further example
would be the more widespread and mainstream implementation of
smarter choices measures, where Northern Way research has identified
worthwhile productivity benefits but also that constrained revenue
capital budgets are hindering implementation.
16. We would welcome further relaxation of the
demarcation between capital and revenue budgets.
4. Are the current methods for assessing proposed
transport schemes satisfactory?
17. In short, more research and development work
needs to be done to develop approaches that quantify the impact
of transport investment on the size of the economy and so they
can be incorporated into the appraisal mainstream.
18. The Northern Way's focus is on promoting
the North's economic growth while at the same time promoting a
low carbon economy, but these are not the only reasons to support
transport investment, nor is it just the economy and carbon that
are affected by transport investment. The Northern Way strongly
supports the conceptual approach of the New Approach to Appraisal
(NATA) as it is an important decision making tool that offers
a methodology and framework to consider positive and negative
impacts of transport schemes.
19. This does not mean, however, that the further
development of NATA is not warranted. Attention needs to be given
to the methods and parameters employed in cost benefit analysis
(CBA) and how this is used in assessing the value for money of
transport investment. We welcomed the extension of the conventional
cost benefit framework to include economic wider impacts, the
largest and most significant of which is agglomeration. Also we
contend that insufficient weight is given to carbon in the appraisal
process. In this regard, we welcome the Coalition Government's
decision to review the process by which transport schemes are
prioritised.
20. A particular area of interest is the potential
role in appraisal of assessments of the Gross Value Added (GVA)
impacts of transport investment in determining overall transport
spending as well as the prioritisation of transport investment.
The Greater Manchester authorities, Greengauge21, Network Rail
and the Northern Way have each promoted work to develop and apply
techniques in this area. Collectively, this work suggests that
monetised GVA impacts of well targeted transport investment could
be up to three times the welfare benefits in a conventional transport
CBA.
21. Given the Northern Way has identified the
criticality of transport connectivity to the North's economic
growth and the important potential impacts of GVA analysis on
funding availability and scheme prioritisation, we commissioned
the Institute for Transport Studies (ITS) at the University of
Leeds to review the methods that have been developed to assess
the GVA impacts of transport investment. Their findings are important
to this inquiry. ITS identified a number of new insights that
have come from the GVA assessment work. In particular:
- ¾ Transport
investment can both stimulate a local economy and lead to redistribution
of economic activity from elsewhere. The redistribution of economic
activity due to a transport investment is important. The available
evidence suggests that redistribution effects are stronger than
local productivity gains.
- ¾ In
turn, this reinforces the benefit in distinguishing between people-based
productivity effects and place-based productivity effects.
People-based effects come about from the migration of productive
labour and are principally associated with re-distribution. It
is place-based effects (such as greater agglomeration) that determine
the net increase in national productivity.
- ¾ From
the work to date, the contribution of different transport modes
to productivity appears very different. The GVA benefits of rail
investments can be large and overall the evidence thus far suggests
that on a per traveller basis, rail investment has a greater productivity
impact than road investment.
- ¾ Changes
in productivity associated with rail schemes are particularly
driven by productivity changes of medium skilled workers.
22. There are a number of further issues which
are important when considering how these new approaches are used
to inform decision making: namely, how much is spent on enhancing
the transport system and where is that expenditure directed. Conventional
cost benefit analysis takes an equity approach, that is the value
for money case of a transport investment is a function of its
use and how much it costs, not where it is located. In the GVA
benefit calculations, both location and the area over which impacts
are assessed are important influences on the derived estimates
of GVA uplift. More work needs to be done to understand the area
over which a transport intervention influences the economy.
23. ITS also identify that the estimates of GVA
uplift are a measure of economic potential rather than
are an assessment of the actual impact on the economy of a particular
transport investment. For this potential to be realised, further
investments may be needed in, for example, sites and premises
or skills and training. The nature of these additional investments
is unspecified and uncosted in the GVA assessment methods. It
seems important that alongside the GVA assessment, work is undertaken
to understand the capacity of a local economy to deliver the projected
economic potential.
24. Considering the GVA assessment work in the
context of the conventional approach to cost benefit analysis,
the ITS review also identifies that well specified transport investments
in the North have equal if not greater potential to deliver GVA
benefits per pound invested when compared with investments
in the South East. This concurs with findings from the Northern
Way's own work when considering conventional cost benefit analysis
incorporating economic wider impacts (principally agglomeration),
namely well specified transport investments in the North have
equal if not greater potential to deliver welfare benefits
per pound invested when compared with investments in the South
East. However, what the ITS work also clearly concludes is that
prioritising on a basis of GVA benefits per pound would give a
different answer to a conventional benefit cost ratio.
25. Bringing all these points together, the key
finding from ITS is that techniques to quantify the impacts of
transport investments on the size of the economy are in their
infancy. The work that has been done to date has helpfully furthered
our understanding, but more research and development work needs
to be done before such approaches can become part of the appraisal
mainstream.
5. How will schemes be planned in the absence
of regional bodies and following the revocation and abolition
of regional spatial strategies?
26. Many of the strategic weaknesses in the North's
transport system cross city region boundaries. The journey to
work catchments of the city regions overlap. What the work of
the Northern Transport Compact has done is identify the key investments
needed in the North's transport networks to address these weaknesses.
It has also overseen progress towards delivery through the early
planning stages for a number of significant interventions, such
as the Northern Hub. It has done this by fastidiously avoiding
duplication of work best undertaken at a city regional level and
adding value to what can be achieved by city regions or regions
acting in isolation. The Compact's approach of building the evidence-base
on the links between transport and economic growth has been widely
welcomed and is described as influential by Department for Transport.
Independent evaluation of the Compact's work has identified tangible
benefits to the North.
27. It is the Government's intention that Local
Enterprise Partnerships (LEPs) will lead the development of strategy
and identification of investment priorities for their functional
economic areas. This will be challenging as individual local authorities
will be both key partners in LEPs and transport scheme promoters.
The intended geographic scope of LEPs will ensure that they have
a natural focus on journey to work catchments and therefore on
city and local transport networks. While the strategic road network
and national rail network will be important to LEPs, the development
of plans and programmes for investment in and management of these
national networks will be directed nationally.
28. Over the last five years, the Northern Transport
Compact has led for the three northern regions on pan-regional
links and links between the North and the rest of the country,
with representation from city authorities and the PTEs/ITAs, as
well as private sector interests. It has filled a "strategic
gap" or "market failure" by acting as a counterbalance
to Scotland and London where there are strong statutory bodies
in Transport for London and Transport Scotland to make the strategic
case for transport investment as well as progress implementation.
The removal of the regional apparatus would mean in transport
terms that there will be a strategy gap between nationally led
initiatives and what will be the local focus of the LEPs. This
appears to be recognised by the Secretary of State in his recent
evidence to the Transport Committee where he expressed interest
in sufficiently strategic coalitions of LEPs on some strategic
transport issues.
29. We are considering how the work of the Northern
Transport Compact can continue on strategic transport issues in
the North. This would be supported by LEPs, where they are established,
being given a statutory duty to cooperate on cross-boundary transport
issues as well as ensuring they have sufficient resources to work
collectively to continue the evidence building and early scheme
development work that the Transport Compact has led over the last
five years.
Annex A
NORTHERN WAY'S PRIORITIES AS SUBMITTED TO
THE SECRETARY OF STATE FOR SPENDING REVIEW CONSIDERATION
STRATEGIC ROAD
NETWORK
Scheme Implementation by 2014-15
- ¾ M62
Managed Motorway between Leeds and Bradford
- ¾ Completion
of the upgrade of the A1 in North Yorkshire to motorway standard
- ¾ Upgrade
of the A556 between the M56 and M6 in Cheshire
- ¾ M60
Junction 15 to 12 - additional lane
Scheme Development by 2014-15
- ¾ M1
Managed Motorway around Sheffield
- ¾ M60
Managed Motorway around Manchester
- ¾ Low
cost interventions for the management of the A1 Gateshead Newcastle
Western Bypass
RAIL
Scheme Implementation by 2014-15
- ¾ Network
enhancement between Liverpool and Leeds
- ¾ Network
enhancement between London and Sheffield
- ¾ Electrification
of the lines between Manchester and Liverpool, Manchester and
Preston, and Liverpool and Preston
- ¾ Enhancements
to the East Coast Main Line, including the introduction of a standard
hour timetable
Scheme Development by 2014-15
- ¾ Northern
Hub, for implementation by the end of Control Period 5
- ¾ Intercity
Express Programme
- ¾ New
rolling stock for Northern and Trans Pennine franchises
- ¾ Trans-Pennine
electrification
INTERNATIONAL GATEWAYS
Scheme Implementation by 2014-15
- ¾ Rail
gauge clearance for the east Coast Main Line north of Doncaster
to Scotland, between Doncaster and the East and West Midlands,
to Teesport and to the north and south banks of the Humber.
- ¾ A160/A180
upgrade
Scheme Development by 2014-15
- ¾ A5036
to the Port of Liverpool
- ¾ Gauge
clearance (associated with electrification) of trans-Pennine rail
routes
September 2010
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