UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE
To be published as HC 473-vi

House of COMMONS

Oral EVIDENCE

TAKEN BEFORE the

Transport Committee

Transport and the economy

Tuesday 14 December 2010

Rt Hon Theresa Villiers MP, Tera Allas and Tracey Waltho

Evidence heard in Public Questions 484 - 562

USE OF THE TRANSCRIPT

Oral Evidence

Taken before the Transport Committee

on Tuesday 14 December 2010

Members present:

Mrs Louise Ellman (Chair)

Steve Baker

Mr Tom Harris

Julie Hilling

Kelvin Hopkins

Mr John Leech

Paul Maynard

Gavin Shuker

Iain Stewart

Julian Sturdy

________________

Examination of Witnesses

Witnesses: Rt Hon Theresa Villiers MP, Minister of State, Tera Allas, Director and Chief Economist of the Transport Analysis and Economics Directorate, and Tracey Waltho, Director of Finance Strategy, Department for Transport, gave evidence.

Q484 Chair: Good morning, Minister. I would like to congratulate you on your appointment and your first visit to the Select Committee. I hope it will be the first of many. Could you tell us what are the specific economic problems we are facing that you feel transport investment has a part to play in resolving?

Mrs Villiers: First of all, can I say it is a great honour to be able to address the Committee for the first time? I too hope that I will be a frequent visitor in the months to come. I have a huge respect for the work that is done by the Committee, so I welcome this opportunity to take part in your deliberations today.

The CSR made it plain that we see investment in transport infrastructure as a key part of our efforts to reenergise the economy, to create growth and jobs. We believe that public investment in transport can yield significant advantages in terms of economic benefits and regeneration by connecting companies to their customers and by widening labour markets. I think there is a significant amount of empirical analysis which indicates very clearly the benefits of upgrading our transport network as a means to ensure that we become more competitive in the global economy and start to address the problems that have arisen as a result of the very significant recession that the country has been through over recent years.

Q485 Chair: When you say that transport investment can contribute to economic growth and jobs, how do you think that can actually take place? Is it specific investment that will have an automatic result, or is it something more general? Is it national or is it more local? Could you be a bit more specific?

Mrs Villiers: We have a programme which is multi-faceted: we have transformational change, which we are contemplating in terms of high-speed rail; we have some very significant upgrades to the existing railway network; we are also undertaking a targeted programme to address some of the worst road bottlenecks. Within the constraints of a very difficult fiscal situation and the pressing need to address the deficit, we are also making funding available for transport investment at a local level as well. At all levels we believe that these can enhance economic competitiveness and stimulate growth and jobs. A classic example is provided by Canary Wharf. I can’t believe for a moment that we would have created that huge financial centre in Canary Wharf without the upgrades to the DLR and the Jubilee Line. That kind of connectivity can have a dramatic impact on economic activity in a particular location. There are many other examples around. For example, in Europe, if you look at the experience in Lille, when it was connected to the TGV network, unemployment plummeted. So that connectivity can produce significant economic benefits in a regional and national sense, and also locally.

Q486 Chair: Can you give any example of an investment proposal for connectivity which will improve the situation outside of London and the south-east? You have given the example of Canary Wharf. Is there anything equivalent in any other part of the country?

Mrs Villiers: There are a whole range of issues. Electrification in the north-west, on the railways, will be very important. The improvements to the East Coast Main Line on the railways will be very significant. I believe that dualling the A11 at Thetford will have a significant benefit for Norwich and Norfolk. Of course, high-speed rail I believe will provide a major boost to our efforts to address the long-standing prosperity gap between north and south.

Q487 Chair: Is the Eddington study still relevant? One of its proposals was road pricing, and you seem to have ruled that out.

Mrs Villiers: Certainly some of the work that was produced in the Eddington study is still useful and still valuable. This Government does not share the report’s conclusions on a national road pricing scheme. We believe that a lorry road user charging scheme is feasible and could have significant benefits, but we have ruled out a national charging scheme for cars because of its practical implications. We don’t believe it is necessary, which is why we have ruled it out and we are not doing any preparatory work on it either.

Q488 Chair: Are the other suggestions in Eddington, of improvements to existing networks, expansion of airport capacity in the south-east and mode-neutrality in investment decisions still part of your policy?

Mrs Villiers: Certainly improvements to existing networks are very important. I have outlined some of them, but it is particularly worth highlighting rail where the £18 billion that the CSR sets aside for rail investment embraces one of the biggest improvement programmes to our rail network that has been witnessed in living memory, I think. As I have said also, Rod Eddington focuses on the economic importance of our urban centres and inter-urban corridors. The focus we have put on high-speed rail is designed at addressing those and maximising the economic benefits that we can gain through high-quality, high-speed connections between our urban centres, which can be such significant generators of economic growth. The importance of our urban areas came across very clearly from the Eddington study.

Q489 Iain Stewart: Could I just turn briefly to the road user charging point? I appreciate you have ruled out a general road user charging scheme, but do you see a role for specific projects like the M6 toll, which levy a charge? Do you see that as a way of levering in more investment?

Mrs Villiers: Certainly we are happy to consider proposals from the private sector if they want to bring forward proposals for toll roads to generate additional capacity. We feel that there are differences of substance and differences of principle when you are talking about charging for existing capacity as opposed to something which is new and additional. It seems to me that there aren’t people banging at the door in order to do that. I think I would be overplaying it if I said that this was going to be a major part of fixing road bottlenecks around the country. I think there is always going to be a substantial role for investing public sector capital where that is affordable, which is why, despite the crisis in the public finances, the Chancellor has provided funds for some major improvements on the road network.

Q490 Iain Stewart: There are no specific projects under review at the minute that would be of that nature?

Mrs Villiers: Not that I can think of. I know it has been talked about in relation to what we do about the Ellington to Fen Ditton A14 problem. I wouldn’t be able to tell you how serious those ideas are, although we, as a Department, have commissioned some research on possible solutions in relation to that problem. That might be something that is being considered in the community. I am not aware of concrete proposals on the table to start building new toll roads to address bottlenecks on the road network, but there may be some out there.

Q491 Kelvin Hopkins : Can we return to Eddington? He was sceptical about HS2, as indeed I am myself. One simple point is that there are enormous opportunity costs in such an expensive project-money which could be invested in other ways, as he would put it, to unblock transport constraints elsewhere. You have mentioned city areas, inter-urban corridors and so on. Should there not be a bigger emphasis on dealing with the more detailed schemes which would solve some of the problems that Eddington identified rather than a big prestige scheme which might be of limited benefit if we could upgrade existing rail?

Mrs Villiers: I don’t think we have to have an either/or situation. I really do think it’s vital that we continue to invest in our existing transport networks and upgrade them in exactly the way that you are talking about. That is why, despite dire predictions about how transport would come out of the comprehensive spending review, we have maintained pretty much all the rail projects we inherited from the previous Government and we are committed to a very substantial upgrade programme with the existing network over the coming years. The reality is that the major spending on high-speed rail won’t begin until future years after we expect the public finances to be back in shape. The annual cost of investing in something like high-speed rail is not substantially bigger than perhaps the annual cost of investing in something like Crossrail. These projects inevitably are expensive but the overall benefits are going to be substantial. You need to do both. One of the significant benefits of high-speed rail is that it will release capacity on the existing network. I know that you have a longstanding interest in freight. If we sought to solve the problem we have in terms of the inter-urban corridor between London, Birmingham and Manchester by trying to squeeze more traffic into the West Coast Main Line, that wouldn’t release the paths for freight that you would get with high-speed rail. There are significant benefits for the existing network in relieving the pressure by building high-speed rail because you create more space for freight, more space for commuter services and more space for stopping services.

Q492 Kelvin Hopkins : I will come on to freight later on perhaps, if I may. Eddington estimates that by 2025 annual costs of congestion will be £22 billion-an enormous sum of money-and dealing with congestion would be beneficial in terms of both cost and carbon emissions. Vast numbers of cars sitting in traffic jams, and indeed lorries as well, pouring out carbon dioxide doesn’t help. Shouldn’t dealing with that congestion be the number one priority?

Chair: Minister, how are your proposals going to deal with congestion, in particular, because there has been a sharp reduction in proposals for investment in roads?

Mrs Villiers: The planned investment in roads is not as substantial as had been pencilled in previously by the previous Government. The reality is that we are facing one of the worst crises in our public finances in our peacetime history. I would very much defend the approach taken by the Chancellor in relation to transport. The recurrent pattern of spending squeezes in the past has always been, if there is a sudden crisis in the public finances, and you need to get things back in order, what is the first thing that gets axed? It’s a whole range of transport capital projects, with roads and rail the first to suffer. As an unprotected Department, I think the predictions were that transport would be decimated. I don’t believe that has happened. We have had to take some difficult decisions on rail fares, but overall we still have a substantial amount of investment in the railways and a substantial amount of investment in targeting the worst bottlenecks on the road network.

But the reality is that we need to look at a range of issues. For example, we have a project under way about how we speed up clearup times after an incident on the national road network. We are working on the introduction of lane rental schemes to mitigate the congestion caused by irresponsible use of road works. We are looking to increase fines for overrunning road works. We are looking to give local authorities more freedom about how they run the roads so that they can help smooth traffic flow. On top of that, we are introducing a local sustainable transport fund to help local authorities look at ways to encourage the use of other modes, lower carbon modes, to improve the public transport system, to provide an attractive alternative to some of the millions of car journeys that currently take place on our roads every year.

Q493 Mr Harris: Which of Eddington's conclusions will the Government actually be implementing?

Mrs Villiers: Certainly, we appreciate the pressing need to invest in our transport infrastructure. As I have said, the comprehensive spending review gives a commitment to do that. That includes the sorts of upgrades in capacity that Eddington called for on the existing network.

Q494 Mr Harris: Forgive me, Minister, but investing in the transport infrastructure is something that all Governments do. Eddington recommended road pricing, and the expansion of airport capacity in the south-east.

Mrs Villiers: We are not doing either.

Mr Harris: Exactly.

Mrs Villiers: We are not investing in road pricing. We have made our position very clear on airports in the south-east. We will be opposing new runways at Heathrow, Gatwick and Stansted, in accordance with the commitments that both coalition partners made very clear in their manifestos.

Q495 Mr Harris: Granted it was commissioned by the previous Government, but isn’t it the fact that, if the Eddington report had never been published and if Rod Eddington hadn’t been asked to take the step of producing this report, not a single current Government policy would be different?

Mrs Villiers: I wouldn’t say that one should junk every piece of analysis in the Eddington report. There is work that we can draw on, but we have made a very clear commitment on road pricing, which I have explained to the Committee, and we have made our position clear on airport expansion in the south-east. We recognise the importance of aviation to the economy and to people’s quality of life, but we believe that those new runways would have imposed an unacceptable cost in terms of our environments and our quality of life, and we have an electoral travel mandate to oppose those three new runways.

Q496 Mr Harris: I think you are, perhaps, Minister, deliberately misinterpreting my question. Isn’t it the case that the Government intends to proceed with its current transport policies without any reference to Eddington?

Mrs Villiers: I think that is a misinterpretation. We are certainly happy to draw on some of the work that he did. Our conclusions on a number of key issues that you have mentioned happen to be different from those of Rod Eddington. My understanding is that even he has slightly changed his view on high-speed rail. So the fact that we don’t agree with the Eddington report on a new runway at Heathrow and on road pricing doesn’t mean that we are not prepared to take on board his analysis and use it where we think it is going to be appropriate.

Q497 Mr Harris: I have one last question. Apart from analysis, what recommendations of Eddington will be implemented by the Government?

Mrs Villiers: Eddington emphasised the importance of modal connections between our ports, for example. We are very focused on that in some of our road programmes. The strategic freight network, as well, also emphasises the connections with international gateways.

Q498 Mr Harris: It is only because of Eddington that you are putting emphasis on that, then? If Eddington hadn’t been published you wouldn’t be doing that?

Mrs Villiers: I am not quite sure why you are so hung up on this point. Perhaps I am not really getting what you are trying to say. In a lot of what Eddington said, a number of his ideas and his analysis are consistent with facts which are selfevident. Connections between international gateways are important.

Q499 Mr Harris: What I am trying to establish is that what the Government seems to be doing with Eddington is cherry picking those bits that the Government already agreed with and rejecting everything else. Is that not the case? I am not saying that is necessarily wrong from a political point of view.

Chair: Is that a fair representation?

Mrs Villiers: We are a new Government. This was a report produced by the previous Government. We will draw on it where we feel its conclusions are useful and its analysis is helpful. On other points, where we don’t agree with it, no, we won’t be adopting Eddington’s approach.

Q500 Mr Leech: I think all Governments cherry pick what they want to cherry pick. Anyway, your area of responsibility in heavy rail has obviously been one of the biggest winners, if there can be any winners in the comprehensive spending review, but a large amount of that rail investment is for projects like Thameslink and Crossrail, and, obviously, ultimately, a commitment to High Speed 2. But, looking in the longer term, there are some big rail investments needed in the north as well, particularly the Northern Hub. How committed is the Government to supporting the Northern Hub as we move on in the future?

Mrs Villiers: There is some very good work being done on the Northern Hub by Network Rail and the affected local authorities. I was up in Manchester just a few months ago to talk through the proposals with those who are sponsoring them. It is certainly going to be something that we will be considering very seriously for the next Network Rail control period. You will appreciate that it is a very formalised process and I cannot at this stage prejudge which of the projects will emerge at the end of the HLOS process are the ones that we will support, particularly of course because, ultimately, decisions are influenced by the ORR. It is not simply a question of the Minister signing at the bottom of a piece of paper. But I am very impressed by the work that has been done on the Northern Hub. I know that it could generate significant benefits and it is a project that I will be following closely. It must be a really strong contender for support in the next railway funding settlement control period.

Q501 Mr Leech: One of the fair criticisms of the previous Government was the imbalance between the amount of money spent in the south-east per head and the rest of the country. I don’t think anyone would expect there to be absolute parity, but I think there was general consensus from MPs from all political parties that the north had fared particularly badly over the last few years in terms of transport spending per capita. Would it be your intention to try and redress that balance over the next few years?

Mrs Villiers: We certainly want to be fair between different regions. We also have an overarching policy, as I mentioned already this morning, to try and close the prosperity gap between north and south. One of the ways in which we could do that is by targeting our transport spending on projects which will generate growth in different regions. In the comprehensive spending review process the concerns of different areas of the country were certainly taken on board. There is a tension here in that, very often, the transport projects in London and the south-east can generate bigger benefits. We have to trade that off against the need to try and achieve our ambitions in terms of regeneration of the rest of the country. So we balance those factors to take on board not only the value for money and the economic generation of a particular project, but also balancing different regional interests and being as fair as we can be to different parts of the country. Indeed, there is a significant amount of investment going on in both road and rail which will benefit areas outside of the south-east. In particular, I think eight of the 14 major highways projects schemes are in the north of England. It’s not an easy balance always to get right, but I think, also, we do need to acknowledge that investment in the south-east and London can generate benefits for the economy as a whole, which are felt right across the country.

Q502 Julian Sturdy: When we took evidence for the economic impact of transport in Birmingham, we were told that there had been a modal shift from road to public transport up there. Do you feel that as a Department you are seeing a slowdown in the use of road and more movement towards public transport, or do you think this is a slight blip, and that as economic growth comes back that will shift back to road?

Mrs Villiers: It is not easy to say there is a distinctive pattern or a single picture across the whole of the country. Obviously, a very severe recession has an impact on car journeys; it relieves congestion pressures on the roads. In some of our cities over recent years-Birmingham, but particularly I think in Manchester and Leeds-one has seen an increase in rail use as working patterns have changed. As the economy, say, in Manchester, has become more servicebased, you get more rail commuting, on a similar basis to what we have seen in London over in the last century or so. That does have an impact on modal shift, but I would not say that there is a set pattern which is occurring everywhere. As we have already heard this morning, road congestion continues to be an economic drag and so we continue to need to improve the public transport offer as an incentive for people to switch from road to rail. We also need to give local authorities the opportunity to invest in their local transport systems to try and help that goal.

Q503 Gavin Shuker: Minister, what would be the specific impact in terms of passenger numbers on the number of people using railways after RPI plus 3% is applied?

Mrs Villiers: We are very confident that rail passenger numbers will continue to grow strongly over future years, even with the additional rises. An estimate is that growth might be 4% less than it would otherwise have been if the RPI plus 1% formula had been continued. The situation we inherited, of a Government borrowing 25% of the money it spent every day, was simply not sustainable. Difficult decisions had to be made. Unfortunately, some of those difficult decisions have impacted on rail fares, but, as I say, I have every confidence that rail passenger numbers will continue to grow and the increase in fares will help us deliver vitally important capacity improvements which will improve conditions for passengers and generate economic benefits.

Q504 Gavin Shuker: Do you believe that the impact of that reduced growth will be equally spread across all socio-economic groups, men and women, or do you think it will disproportionately affect some people?

Mrs Villiers: In terms of the socio-economic impact of analysis of rail users, obviously in the south-east a lot of high-income groups use the railways. In terms of the overall decisions we took on the spending review, obviously we took on board the equalities impact and the social impact in the decisions we had to make, but the reality was that there were going to be some hard choices because of the deficit we inherited from the previous Government.

Q505 Gavin Shuker: So you did carry out an equalities assessment?

Mrs Villiers: We considered the equalities consequences and some of the social consequences of the decisions we made in the comprehensive spending review.

Q506 Gavin Shuker: Just specific to that decision on RPI plus 3%, you are saying that you did or you did not carry out an equality impact assessment?

Mrs Villiers: I don’t believe that we carried out a full equality impact assessment, but my understanding of the position is that we did look at issues around equalities and we did consider the impact it would have on different communities.

Q507 Gavin Shuker: Finally, in terms of your assessment of which groups it will disproportionally affect, are you able to illuminate us as a Committee?

Mrs Villiers: I don’t think I can illuminate. I think probably I will have to write to the Committee to give you further detail on the work that has been done on that. I’m afraid it is not something that I have at my fingertips. [Interruption.] I am prompted that we do have impact assessments for the spending review.

Chair: We would like to have some information on that, please.

Q508 Iain Stewart: Could I ask about the integration of strategic projects between different modes of transport? As an example, I cite the evidence we found in Birmingham when we visited the airport. There, they believe that, for a relatively modest capital outlay to lengthen the runway and the connection with High Speed 2, which will bring the journey time to central London to less than 40 minutes, they can effectively become an additional south-east airport, in addition to servicing the traditional Midlands market. Is that sort of consequential benefit factored into the planning of projects like High Speed 2?

Mrs Villiers: I am very much aware of the ideas that they have at Birmingham Airport for capitalising on a potential new connection to HS2 and the preferred route that has been put forward by HS2 Ltd. I think they are absolutely right. There could be tremendous opportunities for Birmingham Airport if the proposals for a HS2 stop at Birmingham International go ahead. Regional airports can play a crucially important role in supporting regional economies, but also, if we get the right connections, I hope they can play an increasing role in helping relieve overcrowding in airports in the south-east. So I welcome Birmingham Airport’s enthusiasm for a high-speed rail connection. I think it could be very positive for them.

Q509 Iain Stewart: I use that just as an example. In the Department are you thinking strategically across all modes of transport in benefiting the economy, or do you look in isolation at rail projects, road projects and aviation projects?

Mrs Villiers: No. Obviously we want to focus across modes. That is one of the reasons why we have repeatedly talked about the significance of integrating airports like Heathrow into the new high-speed rail network. Just another example: in terms of the Felixstowe to Nuneaton connections between ports, we are looking at both the strategic freight rail network and road issues as well. There are all sorts of ways in which one can improve the performance of the transport system by focusing on different modes to get the right mode for the right solution. So, yes, of course, that is an important priority for us, to look in the round at how you can integrate different modes and use them most effectively.

Q510 Steve Baker: Minister, we have talked a lot about growth and, for me, growth is about the accumulation of capital goods. Could you just explain how these transport investments will promote the accumulation of capital goods?

Mrs Villiers: I am not quite sure exactly what you mean by "accumulation of capital goods". Crossrail, for example, is arguably going to generate about £50 billion worth of economic benefits for the UK as a whole. The proportion of that which might be capital goods is not something of which I’ve seen a breakdown, but overall I think there is no doubt experience shows that if you upgrade your transport system you can connect labour markets and businesses to their customers, and you can improve productivity because people don’t have to spend so much time stuck in a traffic jam. There are all sorts of ways in which improving transport generates economic prosperity.

Q511 Steve Baker: I am trying to think about how to follow up without delivering a short speech on it. What I am concerned about is that we have talked about rebalancing the economy so that the north is regenerated, and it seems to me that we have this tragedy that the north was our industrial heartland and yet it has degenerated and our growth now comes out of banking in the south and the south-east. You have described high-speed rail as being transformational. I am trying to understand how journeys that are a few minutes shorter between the south and the north will transform the north back into our industrial heartland or some other kind of economic heartland, because it just feels to me as if there might be some potential agglomeration benefits, some shorter journey times for salesmen, but I am not really clear how we get capital investment back into the north through shorter journey times.

Mrs Villiers: I believe that journey times with high-speed rail will be significantly shorter than they are at present. That will generate major benefits. Part of the proof of that is, if you go to the northern cities such as Manchester and Leeds, they are crying out for a high-speed rail connection. There is very significant support. They see that as a vote of confidence in the region. That kind of connectivity to markets in the south-east will be tremendously beneficial to those economies. It could provide a real step change and help us tackle an economic problem in this country which has defied Governments for the past 50 years. Again, looking at experience, say, in Japan, connections via high-speed rail have had tremendously beneficial impacts on regional economies by connecting them to economic powerhouses in other parts of the country.

Q512 Chair: Is there any economic development plan to go together with the plans for High Speed 2 to the north?

Mrs Villiers: Certainly, to get the maximum benefit out of high-speed rail we will need to be looking at integrating it with the local transport systems to spread the benefits. Looking overall at our regeneration plans, we think it’s not just for high-speed rail but across the board. To tie in your investment in transport in your transport policy with your ideas for planning and regeneration is tremendously positive. So, in all our programmes for transport and investment, we will be taking on board our goals in terms of regeneration and planning and the general economic situation.

Q513 Chair: On current plans, when would High Speed 2 actually get to the north?

Mrs Villiers: I don’t have the dates in front of me. Have we set a date for Leeds and Manchester? No date has been set for the completion of the Yshaped network, so we don’t have a date for that at the moment.

Q514 Steve Baker: Earlier on you mentioned Lille and Canary Wharf. Thinking about the short and medium-term benefits for a particular group due to an investment and comparing that to the unseen costs on everybody else as a result of that investment, could you comment on the unseen costs of some of these major infrastructure projects? It may well be that Leeds is regenerated by a high-speed link, but to what extent do you feel we have completely covered the unseen costs on everybody else of implementing that piece of infrastructure?

Mrs Villiers: We have already started an exceptional hardship scheme to try and mitigate the costs to people who may already be affected by proposals for high-speed routes. Assuming we make progress on our plans, the statutory blight schemes will also address the problems caused by local environmental impact. Of course, projects of this magnitude do have a local environmental impact. That is partly offset by schemes like the EHA and the blight schemes under statute. The Secretary of State has made it clear that he wants to see a more generous scheme than the statutory minimum, but, also, in the process on which we are about to embark-a consultation followed by a Hybrid Bill-a tremendous amount of work is going to go into mitigating the local environmental impact and the effect of high-speed rail on the communities who live closest to it.

Q515 Steve Baker: May I just follow up on that, because my concern is slightly broader than that? As you know, people in Buckinghamshire have a particular concern, but more broadly than that, it seems to me the debate is polarising, particularly on high-speed rail, into those at each end who expect a benefit and those along the route who will see the direct impact. It strikes me that the whole country will end up paying for high-speed rail in particular. It is just an example, actually. People in Cornwall will contribute to high-speed rail but I am not sure how they will see a benefit.

Mrs Villiers: I think the whole country will benefit from the economic boost that comes with high-speed rail. I think much of the country is benefiting from the 68 miles of high-speed rail track that we have with HS1. Also, I think it is always worth remembering that the Chancellor has committed a significant amount of funding for investment in transport infrastructure projects right across the country. There will be benefits generated by high-speed rail which I think will impact on the economy as a whole and the competitiveness of UK PLC, but our programme for high-speed rail is accompanied by an extensive investment programme in our rail network and, to an extent, in our road network as well.

Q516 Mr Harris: I was going to return to RPI plus 3% for a second, but something you said on Crossrail intrigued me. Eddington said that the returns from projects designed to transform the economy are speculative. When the Crossrail Bill went through Parliament in 2008, the figure for its economic benefits was £18 billion. Actually, even at the time, I couldn’t get from officials what time scale that was over. You have just said it is £50 billion, which is great, but that’s quite an increase over two years. I don’t expect you to answer at the moment but would you be able to drop us a note explaining why that figure has gone up such a lot in two years?

Mrs Villiers: I can certainly give you some more information on that £50 billion figure. Possibly the difference here is that it would include some wider economic impacts which weren’t perhaps assessed in the £18 billion figure that was in the Bill.

Q517 Mr Harris: I am sure that is what it is. I would be interested to see what that is. Heading back to RPI plus 3%, what discussions in the Department were there on the logic that, since rail passengers are so much wealthier than bus passengers or people who drive cars, they can bear the brunt of such an increase? Was that part of the thinking?

Mrs Villiers: No. I think that mischaracterises the discussions. We had to find a way to ensure that we could continue to deliver vital investments in the rail network, to address overcrowding and to support economic growth. We felt that it was just impossible to do that without asking customers to contribute more. I fully appreciate the concern about the level of rail fares, and that’s why this Government is determined that the costs of running the railways will come down. I very much welcome the fact that Andrew Adonis set up the McNulty review. It is now vital that the work that comes out of that review gets costs down on the railways and explains to us why our railways in this country cost so much more to run, in order that we can deliver lower costs and better value for money. We have had to take the decision on rail fares but, absolutely, we know that there is a pressing need to get costs down on the railway to respond to the concerns of passengers.

Q518 Mr Harris: I only asked you because the Secretary of State said as much at a meeting of the All-Party Rail Group that I chaired in October. I think you may have been present when he said that because of the socio-economic balances of rail passengers they could actually bear the brunt of RPI plus 3%, more than other local transport users. But given that is the policy we now have, and given you have admitted that growth in passenger numbers will now as a direct consequence of that be less than what it otherwise would have been, how can you suggest that congestion on our roads will do anything except get worse as a direct result of RPI plus 3%?

Mrs Villiers: As I have said, there is a possibility that the growth figures would be less than they would otherwise be. It is no guarantee, but what I am absolutely convinced of is that passenger numbers will continue to grow, and they will continue to grow strongly. In terms of addressing congestion on the roads, we need to continue to have a wideranging strategy to try and deal with that, which includes road improvements, making better use of the road capacity that we have, improving reliability on our public transport system and making public transport as attractive as we can within the constraints of the crisis in the public finances with which the Government of which you were a member left us to grapple.

Mr Harris: I do remember. I remember your party supporting our spending plans up until November 2008 as well. But those are all the questions I have, Chair.

Q519 Chair: Is motor traffic going to increase? What are your predictions?

Mrs Villiers: In the past, car journeys have always increased and have tended to increase with the growth in the economy. There are arguments to say that you start to get to a point when the growth tails off, but we believe that car journeys are probably going to continue to increase. That is why it is absolutely urgent that we promote the uptake of ultra low carbon vehicles if we are going to decarbonise car transport and mobility. But also, we need to do what we can to improve our road network and ensure that the capacity we have is used in the most efficient way possible.

Q520 Chair: What are the Department’s assumptions about the rate of increase? We have received evidence, some of it saying that the rate of increase of motor traffic is stalling and isn’t going to recover.

Mrs Villiers: I would have to write to you on the detail on that, because I don’t have it memorised, but I am certain that the Department could provide you with some more information about our expectations in terms of car traffic over the coming years.

Q521 Kelvin Hopkins : Can I return to rail freight? Sir Nicholas Stern is rightly concerned to see what contribution transport could make to the climate change agenda and the Secretary of State mentioned the Government’s climate change agenda when he came to see us. The fact is that, for heavy freight, road produces 12 times more CO2 per tonne mile than rail, and even for lighter freight there is still an enormous difference. Yet-and I say this from experience-the Government and the Department do not take rail freight seriously. A lot of warm words are said, but actual investment in rail freight is very, very small compared with other forms of investment. Is the Department not looking now seriously at proper investment in rail freight so that we can get fullsized road trailers and containers on trains from one end of the country to the other, between conurbations and indeed through the Channel Tunnel? Isn’t that what we need to make a real difference?

Mrs Villiers: One of my personal priorities in the discussions on the spending review was to safeguard the funding and support for the Strategic Freight Network. That project, from the previous Government, was a very positive piece of work. They engaged very well with industry in identifying some of the most important upgrades to the rail freight network. I was delighted when we were able to confirm funding for it in the CSR. Yes, of course, there is more that could be done with a move to European gauge. The reality is that a number of those upgrades would be expensive, but programmes such as improving connections between Southampton, the West Coast Main Line between Felixstowe and Nuneaton, and the Barking and Dagenham work are all important projects which will make freight more attractive as a mode for business. I think we have a positive outcome from the CSR on rail freight and I will certainly continue to press to maintain our priority for these kinds of projects in the future as well. Also, we have secured a budget for the mode shift grants as well.

Q522 Kelvin Hopkins: What is being done is obviously welcome, but the reality is that the amounts involved are so small by comparison with, say, the upgrade of the West Coast Main Line or whatever, and less than is going to be spent on upgrading Birmingham New Street and Reading stations, for the whole of the rail freight network. Is it not the case that we need dedicated freight capacity which can take Continental trains, which can’t get through our platforms or our tunnels or under our bridges, and whatever you do with most of the main lines you are not going to get that? They will not be able to take road trailers on trains, which is what road haulage would need to make it worthwhile putting their stuff on trains, and it will not be able to take the fullsized containers-the 9 ft 6 containers-which are becoming standard for most of the network. Isn’t the reality that we need a much more serious approach, with a dedicated rail network or rail line indeed from the Channel Tunnel to Glasgow, linking all the main conurbations? Would that not be more helpful in regenerating the north and making a real economic link between the north, those big conurbations and the continent of Europe?

Mrs Villiers: I can’t agree that a dedicated freight network would generate more benefits than a high-speed rail network. As I’ve already said, I think there will be benefits for freight by building a high-speed rail network because it would release more paths on the existing network. There are many upgrades to our railways that could generate real opportunities for freight and, as a result, real economic and environmental benefits. It just depends what is affordable in the current climate; there is a limit to what we can afford. But I certainly take your points on board and I will continue to press to ensure that rail freight is given a significant weighting in the decisions that we make on policy, spending and budgets this year.

Q523 Kelvin Hopkins : The cost of such a route would be a tiny fraction of what is going to be spent on High Speed 2, but in my meeting with a previous Secretary of State with a team on this very subject I detected a degree of hostility by officials to such an investment. Have you any idea why officials are so hostile to major investment in rail freight?

Mrs Villiers: To be honest, that has not been my experience. Obviously, if you are talking about a specific scheme for a specific route, then inevitably that can sometimes cause anxiety because that might have an impact on local communities and speculation about what that might be. We know, given the lively debate we are having for high-speed rail, that one needs to be cautious when one starts talking about building new railway lines. But your experience of officials doesn’t reflect mine. I can quite often have differences of views with my officials but I haven’t noticed them being particularly anti-rail freight at all.

Q524 Chair: If we are looking not at a specific route but at the general principle of supporting freight on rail, are you supportive of that policy of encouraging freight to use rail and to make it more practicable for them to do so?

Mrs Villiers: Absolutely. We are very supportive of a switch from road to rail freight. We recognise that has economic benefits in terms of relieving congestion on the roads. It has environmental benefits, not just in terms of carbon but in terms of nitrogen dioxide. It also has benefits in terms of road safety because taking HGVs off the roads can help improve road safety. So there are all sorts of reasons why we are prepared and supportive of efforts to shift from road to rail where this is practical and environmentally sustainable. That is why we are investing in the Strategic Freight Network and that is why we have safeguarded the modal shift grants.

Q525 Iain Stewart: I would like to return to forecasting passenger numbers in the future, by any mode. All the assumptions and modelling is that we are all going to be moving around more in the future, for business, leisure, freight, for everything. When you are assessing the cost-benefit ratio for specific projects, do you factor in a "what if" scenario? Say the cost of energy goes up significantly or technological change means that we don’t need to move around as much, commuting from home to work. Do you factor in those scenarios when assessing the cost-benefit ratios of specific projects?

Mrs Villiers: I might refer to Tera on that, as our expert on the economic analysis, if that is okay, Chair.

Tera Allas: I am the Chief Economist for the Department for Transport. Specifically in answer to your question, we use the DECC oil price forecasts and derive from that petrol and diesel prices; and we use all of the different scenarios they provide to do sensitivities around the impacts of those costs, both on demand and people’s cost of driving. That gets incorporated into the sensitivity analysis of cost benefits. In terms of passenger numbers, similarly, depending slightly on the situation, it’s a very big driver, of course, of the overall benefits of any particular scheme. But in our guidance we ask people to do very precise sensitivity analysis around that as well and very much encourage people to look for the break points, as it were, in terms of what you would have to have for this scheme to be a positive or a negative.

Q526 Iain Stewart: In all the projects that you assess, you assess the CBR and it is not always just taking the best case scenario. You will take the main point of the likelihood of-

Tera Allas: Absolutely not. The formal guidance that we provide in NATA is very carefully judged to be the kind of central scenario based on all the evidence we can get from other Departments but also from external academic stakeholders and others who have expert opinions in the field. It absolutely is trying to get to the best possible central scenario. That doesn’t mean that those numbers will be correct, because there is huge uncertainty about even just economic growth rates on a per annum basis, and obviously about oil prices. That is why sensitivity analysis is so important in judging the quality of the outputs of the modelling and the cost-benefit analysis.

Q527 Chair: Can such modelling incorporate vision and things such as regional policy and wanting to change areas, to create opportunities? Can that be done in that mechanism?

Mrs Villiers: The processes of economic appraisal and NATA are a very useful aid to decisionmaking. They are very useful, in particular, in ensuring a degree of consistency between looking at different competing projects, but they don’t include everything. They are not the last word, and they are just part of the range of factors that a Government has to take into account in the decisions that it makes. On top of the economic appraisal one obviously has to look at broader goals about north-south balance, regional equity and social justice. There are a whole range of things which, no matter how hard you try, you can’t capture and turn into a number or even put a qualitative assessment on for an economic appraisal. In terms of the debate on economic appraisal, I think people have misunderstood its role. It’s just one part of the decisionmaking process. It can help Ministers to make decisions, but it is not going to be the be-all and end-all. There are a whole range of issues that we have to look at in addition to an economic appraisal.

Q528 Julian Sturdy: Could we go to bus services? I know we are jumping about a lot at the moment. I do apologise for that, Minister.

Mrs Villiers: No, no.

Julian Sturdy: Rural bus services have been under the spotlight recently for a number of different reasons. Do you believe that community transport groups can play a role in delivering the vital links that the rural communities need and, more importantly, how does the Local Sustainable Transport Fund feed into that?

Mrs Villiers: Community transport is hugely important. Demand-responsive transport can be particularly important in rural areas. I have in mind particularly some great examples. For example, the Little Red Bus Company which operates around Harrogate has done some tremendous work in bringing together different sorts of transport. Transport operators in different parts of the public sector are bringing them together and dealing with them together to create a network. There are other examples across the country that show the value of involving the voluntary sector in community transport also. We do hope that that kind of project is certainly something that could be supported by our Local Sustainable Transport Fund and this will be driven in part by the bids we get from local authorities. If they are interested in using the fund to support those kinds of projects, then we will happily consider their bids. The way we structure the fund to include revenue and capital funding will make it easier for that kind of project to get support from it.

Q529 Julian Sturdy: Will the bids will have to come in through local authorities then? They won’t come from outside?

Mrs Villiers: That is my understanding, but we do very much encourage local authorities to engage with the business community and with the voluntary sector as well. We are going to be producing more guidance fairly soon on how the process is going to work, but I am certain that a bid from a local authority will only be strengthened by links with business and links with the voluntary sector.

Q530 Julie Hilling: Staying with buses, I want to ask you this directly. In terms of the cuts to BSOG, what cuts do you think there will be in services related to that?

Mrs Villiers: The bus operators have indicated that they believe they can absorb the cuts to BSOG without fare increases. In terms of the impact on services, we can’t tell with complete certainty what the impact on services will be, but we did our very best to minimise the cuts to BSOG. It was something that we discussed at length throughout the spending review. We very much recognise the importance of bus services, particularly in rural areas and for those on low incomes. Again, this was a difficult decision that we had to take in order to address the crisis in the public finances. But we will continue to support local authorities through the Formula Grant and through our Local Sustainable Transport Fund to help them deliver the bus services and any subsidies that they feel are appropriate in their local area.

Q531 Julie Hilling: We also heard some very alarming evidence from a previous witness around the effect of the cuts in support for concessionary fares and the effect that that’s going to have on services. What effect do you think the cut in support for concessionary fares will have?

Mrs Villiers: You will appreciate that the Government has confirmed that the Concessionary Fares Scheme itself is being preserved and people’s entitlements are not being cut. But, yes, we are seeking to reduce the administrative costs of the scheme and to make sure that it operates fairly. Essentially, a large part of the changes we are seeking to make is to ensure that no bus operator is being overpaid in relation to the scheme. We’re continuing to work on that. We believe that it is possible to make significant savings and we believe that there is a case for reform to make those savings, to make sure that the administrative support for the scheme goes to the right people and the right places.

Q532 Julie Hilling: You have referred to cuts in administrative costs, What we were told was that the cuts to the support would have a very bad effect on services. So I am just wondering if you could tell us a little bit more about those cuts, because what you are saying doesn’t seem to match up with what the bus operators said.

Mrs Villiers: This is a very live issue. My colleague Norman Baker is very focused on this, working with the local authorities and with the bus operators to try and ensure that we resolve this in a way that’s fair. All I can say is that the changes we are seeking to make now are to remedy a situation where it seems in the past that certain operators have been overpaid, but, as I say, in terms of getting the solution right, getting the answer right, we will be working carefully to try and ensure that we minimise any impact on bus services.

Q533 Julie Hilling: Can I just ask one last question, because it does seem that, with an increase in rail fares, the 4% reduction in passengers you are talking about is potentially going to be people who have a lesser income that are being driven off the train service. The alternative that they are most likely to turn to would be bus services and, again, it looks like we are hitting probably the poorest in terms of a reduction in bus services. Have you looked in the modelling at that and whether that’s true, because it just seems like the poorest are going to be suffering most with these cuts coming through again?

Mrs Villiers: Certainly, in the considerations throughout the spending review process, we were very aware of the social impact of changes to support for bus services. It was something that we very much took on board, it was the subject of lengthy discussions and that is one of the reasons why we have sought to keep to a minimum the cuts to BSOG. If you will remember, the speculation before was that BSOG was going to go altogether. I wish we hadn’t had to make the cuts we’ve had to make, but they are a lot more moderate than was expected. We felt that it simply was inevitable that that budget-a significant element of our departmental spending-had to play a part in addressing the crisis in the public finances. If we could have found an alternative way we would have done, but it just seemed impossible to make the cuts that we needed to make without some impact on BSOG.

Q534 Chair: Buses can be vital to enable people to get to work. Has that been considered properly in your policies on cutting revenue support for buses?

Mrs Villiers: Certainly the social impact of the changes that are made in the CSR in relation to buses is something of which we have been very aware and on which we have focused. The use of buses by low income groups and the role buses play in connectivity in rural areas and in relation to people seeking work were all factors which we had very much on our minds in the difficult decisions that we had to take on the CSR.

Q535 Chair: What did the appraisal show in relation to people’s ability to get to work when they depend on buses to take them there?

Mrs Villiers: Tracey, here, was very much focused on the analysis that underlay the CRS. I don’t know if there is anything that you think you could add on this.

Q536 Chair: Do you have information-if you don’t have it now, I think we would like to have it-on what specific appraisal was done in relation to buses in enabling people to get to work and what the conclusions were?

Tracey Waltho: We certainly looked at the impact on the likely level of service provision and fares.

Q537 Chair: Specifically in relation to getting people to work?

Tracey Waltho: No; that was looking more generically. I will have to go back and look at whether there was more detail on getting people to work.

Chair: I think we would like information, please, on what work was done and what the conclusion was, specifically on enabling people to get to work.

Q538 Steve Baker: On buses, in rejecting road charging, did you consider the ability of buses to price cars off the road? It just strikes me that if a bus is fully loaded with people, in an environment of road charging, it would actually price cars off the road and encourage the use of bus transport. Did we consider that situation?

Mrs Villiers: In making an overall decision on road pricing, certainly we considered how it would operate in practice. We decided that that’s not the right option to pursue. For example, on the debate on the proposed Manchester congestion charge, I am sure there was a lot of discussion about whether congestion charging there would encourage people to use buses. Of course, a similar debate took place in London in advance of the introduction of the congestion charge, where I believe one of the consequences has been a shift from the car on to buses-that has certainly been the result in London. If there were charging schemes introduced elsewhere maybe that would be the impact, but we are not convinced of the merits of a national road pricing scheme.

Q539 Gavin Shuker: Obviously you have a role as the Minister for Aviation amongst your big portfolio of things that you have to deal with. Aside from cancelling the runways at Heathrow and Stansted, what work have you carried out that will improve passenger experience and our competitiveness with regard to air?

Mrs Villiers: We are focusing on a number of issues. First of all, we have signalled the intention to reform the way airports are regulated to have a much stronger focus on passengers and also to modernise the regulatory system, which at the moment is very focused on a big exercise every five years to set price controls. That is very important but it limits the flexibility of the regulator to react throughout that five-yearly period. By moving to a licence system, the regulator is going to be able to be much nimbler in responding to issues around passenger facilities and queueing times. In addition to that, we have established the South East Airports Task Force to engage with industry on how we improve the operational effectiveness of airports in the south-east and use the capacity that we have in a capacity- constrained environment in the most efficient way possible.

In terms of improving the passenger experience, one of our focuses has been on security. We believe, of course, that passenger security is paramount, but with reform of the system we believe that it’s going to be possible to even enhance levels of security but also deliver them in a more efficient and passengerfriendly way. So we have a programme which we are planning to consult on in the new year to move to an outcome riskbased approach to security where the Government continues to set demanding standards and very high standards for security but gives industry more flexibility in how those are delivered. Another issue that we need to grapple with to improve our airports and the experience at them is border queues. This is something that the aviation industry has repeatedly highlighted as a problem. So we are working with the Home Office on that. We are also looking to the future in terms of developing our overall aviation strategy and the means by which we will provide the bigger picture. We will be publishing a scoping document early next year on our overall aviation strategy, and we will be looking for contributions from a wide range of stakeholders from the aviation industry, environmentalists and community groups.

Q540 Gavin Shuker: I have a couple of points to pick out from that comprehensive answer. Which airports do you consider are in the south-east, really simply?

Mrs Villiers: The major airports in the south-east are Heathrow, Gatwick and Stansted. Then, in addition, one has Southend, Manston, Luton and City. I’m not sure if I have the right examples.

Q541 Gavin Shuker: We all breathed a sigh of relief when you said Luton. With regard to the discussions on the South East Airports Task Force, we have had a witness, whose name I forget, who said that he had wanted to be part of the discussions there. Are you confident that the South East Airports Task Force is consulting widely enough?

Mrs Villiers: We are encouraging the task force to engage widely. The Department has a lot of other stakeholder groups which are broader than the task force. We had to trade off creating a group which was small enough to be effective against the concerns of everyone who wanted to be involved. It simply wasn’t possible to accommodate all the people who wanted to be on the task force and maintain it at a size which is workable, but we invited the Airport Operators Association to take part so we are getting the perspective which goes beyond Heathrow, Gatwick and Stansted as well.

Q542 Gavin Shuker: How actively are you, as a Minister, engaging with that task force?

Mrs Villiers: I chair it and I am engaging with the work that is under way on a number of different work streams. So it’s an important task for me personally.

Q543 Gavin Shuker: Just briefly, on air passenger duty, what are the Government's plans with regard to APD?

Mrs Villiers: Obviously this is a Treasury matter, so it would be more appropriate for you to talk to Justine Greening about this, who is the lead on this at the Treasury. The Department for Transport has been providing data and analysis to assist the Treasury in assessing the different options.

Q544 Chair: The Department must have a view on the impact of air passenger duty on airports and travel. Are you telling me you don’t have any view at all?

Mrs Villiers: Certainly we have a view on air passenger duty generally and it’s-

Q545 Chair: What is that view?

Mrs Villiers: The reality is that air passenger duty provides a significant amount of income for the Exchequer and it would be difficult to fill that hole with alternative sources of income. Air passenger duty is a part of the way in which we are continuing to fund schools, hospitals and transport systems.

Q546 Chair: From a transport point of view, what impact does it have on aviation?

Mrs Villiers: Obviously, it will have an impact on the choices people make in terms of their holiday and travel plans, yes. Yes, it has an impact and that sort of analysis-

Q547 Chair: So what are the views that you passed to the Treasury in relation to the impact of air passenger duty on aviation?

Mrs Villiers: Certainly, my understanding is that where the Treasury asked for information on how different scenarios and options would work, then we have supplied analysis of what the impact might be on aviation.

Q548 Chair: Are you saying that your Department does not express a view on the impact of air passenger duty on aviation?

Mrs Villiers: No, I am not saying that at all.

Q549 Chair: So what is the view that you passed to the Treasury-not the analysis, a policy view? What information did you give? What views have you passed?

Mrs Villiers: In terms of the impact, what we have been working on with the Treasury in their options for change is what the impact would be on the aviation industry. That is one of the most important inputs we have had so that the Treasury, when they make their decision on what they do with air passenger duty, will have data and projections that we have provided on the impact on aviation. Absolutely-that is a key role for us in this process. They make the decision.

Q550 Chair: What is the current assessment that you have made?

Mrs Villiers: I don’t quite understand the question. Obviously APD has an impact on people.

Q551 Chair: Come on, come on. Minister, you are in charge of this area.

Mrs Villiers : But the-

Chair: Would you let me ask you the question? You might not wish to reply but you cannot tell this Committee that as the Minister responsible you have not made an assessment of the impact of air passenger duty on aviation. We have heard representations, particularly from regional airports, that they believe that air passenger duty is damaging to them. You cannot tell me that you as a Department have not expressed a view to the Treasury on that.

Mrs Villiers: Of course we have a view.

Q552 Chair: So what is the view you have expressed?

Mrs Villiers: The view is that of course air passenger duty has an impact on aviation, but the public finances-

Q553 Chair: No, Minister. That is an issue that Government has to have in its mind when taking overall decisions. I am asking you now, as the Minister responsible for this area, what view have you expressed to the Treasury about the impact of air passenger duty on regional airports?

Mrs Villiers: If you are talking about regional airports specifically, in terms of the analysis of the differential impact of APD on regional airports, certainly that is something I have discussed directly with Justine Greening, and I am sure-

Q554 Chair: What have you said? You’ve told us you’ve discussed it. Now, what have you said? Do you consider it damaging or not damaging?

Mrs Villiers: Certainly, APD has an impact on passenger choices. If you tax something, then it has an impact on the industry and passengers who are affected. I personally emphasised to colleagues at the Treasury, in terms of whatever reforms they are going to make to air passenger duty, or indeed decisions they take on levels of air passenger duty, that it is vitally important to take into account the impact on regional airports, because of the pivotal role regional airports can play in their regional economies. It’s something I have raised repeatedly.

Q555 Mr Leech: I have just a very quick follow-up on that and then I want to move on to another area. Would you accept that there is a case to look at variable APD in terms of the growth of regional airports and trying to encourage planes to travel to regional airports rather than airports in the south-east?

Mrs Villiers: It’s certainly not impossible to envisage a situation where there could be a more significant tax on Heathrow or airports in the south-east. It’s not something that is inconceivable, but ultimately that will be a matter for the Treasury to decide, not the Department for Transport.

Q556 Mr Leech: I thought that might be the case. Moving on to NATA, in opposition, both yourself and Norman Baker were fairly critical of the NATA process and the coalition Government has issued a review of the NATA process. A number of our witnesses, including Manchester Airport, have argued that there should be a greater emphasis on the real economy, the regeneration and wider economic benefits. Do you agree that that needs to have more of a focus in the appraisal system?

Mrs Villiers: Certainly, the broader appraisal system does take into account some wider economic benefits.

Q557 Mr Leech: They were suggesting that it needs more of a focus on that real economy.

Mrs Villiers: I certainly think assessment of wider economic benefits is a very important part of the process and I would happily look at their ideas for enhancing the weight given to those wider economic benefits. I think they are important.

Q558 Mr Leech: In terms of the actual potential changes in the appraisal process, is there any area of the appraisal process to which there should be less attention than there currently is, and what impact would that have on the appraisal process?

Mrs Villiers: Certainly, there is one change that has already been made, which is to downgrade the importance of increases in fuel duty, whereas they were previously deducted from the cost of a project. I think that will give them far too much weight, particularly in an era where we are trying to encourage people to cut down fuel and to cut emissions. That has already started to be used. I can understand a lot of the environmentalists’ concerns about the value of small time savings, so that is something that we are considering in relation to the announcement we will be making next year on a reformed NATA. My understanding is that probably the approach we are going to be taking is that those small time savings could still be there as a line but they will be separated out so that Ministers, when they take a decision, can decide how much weight to give them. I think that hopefully should provide some reassurance for some of the environmentalists. There are other factors where I think we can probably upgrade the importance of different factors. For example, we need to get better at measuring the benefits generated by more reliable transport services. That is not something that NATA is currently very good at assessing, and there is real scope for placing more emphasis on that. A lot of those changes might help enhance the business case for public transport projects.

Q559 Mr Leech: Is the real cost of carbon going to have a bigger focus than it currently does?

Mrs Villiers: Certainly, the early change we have made is to use the new higher DECC values for carbon. They informed the decisions that were made on the CSR, so we have already taken steps on that. Also, it is probably worth emphasising on the appraisal process as a whole that we will have the announcement next year about an upgrade, but the systems are continually under assessment. I think, in the future, we will probably find even more and better ways to give greater weight to climate change impacts and other important issues.

Q560 Mr Leech: Finally, do we have a deadline for when the appraisal process will have been changed and when the announcement is going to be made?

Mrs Villiers: I think it is April 2011.

Tera Allas: As the Minister has just explained, it is a continual process. But the specific changes that she has already mentioned have already been made. The other changes we are looking to make by April 2011, but there will continue to be other things that we will want to look at and improve on in terms of monetising and including impacts for several years to come, so it will not ever be fully, fully finalised. We can get you a schedule, if you would be interested in the specifics, and when we are expecting them to be definitively part of the NATA guidance.

Mr Leech: I think that would be helpful, yes. Thank you.

Q561 Chair: What plans do you have for subnational arrangements in dealing with transport? The Secretary of State has indicated to us before that Local Enterprise Partnerships on their own are not going to be sufficient. Is there any further thinking on that? In fact, he did say to us that he thought a different arrangement would be in place by the end of the Parliament. Can you tell us what you are thinking about and if we have really got to wait until the end of the Parliament to have such arrangements?

Mrs Villiers: I think, as we discussed in the Westminster Hall debate, although it may be the end of the Parliament by the time a formal system is set up, that doesn’t mean that in the interim we won’t be engaging closely with local authorities and LEPs. The worries the Secretary of State has about LEPs at the moment is that they are relatively small geographic units. This Committee will well appreciate that in getting the right transport solutions often it makes sense to look at a relatively large geographic area. But there is every possibility, with LEPs getting together and cooperating in terms of proposals on transport and transport planning, that we will be able to a develop a process where they can have a really significant input into decisions made on which projects to prioritise. We really do see a valuable role for engagement with LEPs in determining how scarce public sector funding is allocated.

Q562 Chair: The issue of concern is not to do with local roads or local transport issues: it is to do with more strategic schemes. It has been generally acknowledged that the current situation is not adequate-certainly not at the moment. So you are saying that you would look to make arrangements between LEPs and local authorities, and that process would develop?

Mrs Villiers: That seems to be the best way forward. The idea of a completely separate additional structural on top I don’t think is what is being contemplated here. It is in tune with the CLG bottomup approach. What we want to see though, to get the best decisionmaking, is LEPs starting to work together so that they can start looking at these bigger strategic issues which can affect a wideranging area. I was always particularly interested in travel-to-work areas. LEPs getting together on that kind of basis I think could be very positive in enabling them to take the right transport decisions and help us make decisions about allocation of funding as well.

Chair: Thank you. I know that you are anxious to go to a conference, so I think we will release you now. Thank you very much for coming.