Transport and the economy

Memorandum from the Transport Research Laboratory (TRL) (TE 09)

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?

1. While the economic climate has changed, there is no evidence to suggest that the underlying relationships are any different. Transport investment needs to continue to support economic development, and it can be argued that for the required economic growth and development to be sustained to the necessary level transport investment needs to keep pace. There is a strong case for no diminution of investment, although there should be some reassessment of investment priorities; the current priorities may be correct, but that position should be tested.

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?

2. For roads, the biggest transport issue, related directly to the performance of the network and its ability to support economic growth, is the lack of predictability of travel times and the reliability of the road network. Intelligent Transport can substantially improve the efficiency of all parts of our transport system, while at the same time saving money, improving safety and contributing to carbon reductions. Intelligent Transport Systems (ITS) are already delivering significant benefits but they become even more attractive in times of budget restriction, offering "more for less" when compared with conventional transport solutions. Information and communication technologies can be applied to various modes of transport, in order to make them more efficient while minimising the negative effects on health, nature, the economy and quality of life. There are a number of technologies that are proven to address one or more transport challenges without the need for expensive new-built infrastructure. By employing information and telecommunication technologies, congestion can be eased, road safety improved and the environmental impact of transport can be reduced in times of financial constraint.

3. ITS is therefore a priority for investment: at a time when money is limited, technology can deliver consistent journey times, information services and informed demand management. Key application areas include urban traffic management and control, real-time travel information, managed motorways, adaptive traffic signal control, traffic management at roadworks, fleet management, travel planning, speed adaptation, in-vehicle safety devices, average speed cameras and congestion charging

How should the balance between revenue and capital expenditure be altered?

4. One of the key barriers to the effective delivery of transport schemes is the mismatched availability of capital and revenue funding at all levels of government, but particularly at the local authority level. Increases in capital funding have outstripped increases in revenue funding, which raises issues over how the operation, servicing and maintenance of new capital assets will be funded.

5. This issue has been widely discussed and documented. The availability of capital can be sufficient to fund transport projects, but there can be issues over how the operation, servicing and maintenance of these capital assets will be funded. Poor availability of revenue support can diminish the benefits associated with capital schemes, it can result in available funds being stretched thereby decreasing the quality of the scheme and increasing future revenue implications and ultimately revenue intensive schemes may be delayed or cancelled and/or easily funded capital schemes may replace more suitable revenue-based schemes. The viability of schemes such as Prudential Borrowing may be compromised by a lack of revenue to repay the debt and effective forward planning can be jeopardised by varying year-on-year revenue allocations from central government. Moreover, revenue payments from developer contributions for example tend to be of a short term nature, and the future of such schemes can be jeopardised when the funding stops. Sustainable transport schemes are particularly at risk because of their heavy reliance on revenue funding. Smaller or ‘soft’ schemes often require a high level of revenue funding, and are therefore notoriously difficult to finance (with both capital and revenue funding).

6. Recent reviews of transport and finance have focused upon addressing this problem by proposing ways in which local government can be strengthened to give local authorities more control over the way in which revenue and capital are spent. In the short term, as mentioned in DfT’s Second Local Transport Plan guidance, authorities should consider how revenue based transport spending which supports capital investment could be funded, with district auditor support, from the capital programme – one example might be to classify resources that are typically considered to be revenue resources, such as staff time, as capital through referring to staff time as an intellectual resource. In the longer term Local Government needs to make it easier for capital and revenue expenditure to be integrated, and to consider funding revenue-requiring activities from non-ring-fenced revenue support, or from funds raised locally. CfIT has proposed that the importance of transport revenue spending could perhaps be detailed in relation to the delivery of government objectives.

7. Innovative forms of funding transport projects have evolved as a way in which the gap between capital and revenue expenditure can be bridged. There is also the potential to increase levels of private investment, for example through planning gain and the formation of partnerships. Revenue raising approaches will be particularly effective if they take the form of hypothecated revenue – this is likely to increase the acceptability of the tax by directly linking it to the benefits of improved transport infrastructure.

8. The revenue problem can be viewed constructively through the development of local solutions, such as creating partnerships with revenue-rich, capital poor partners (e.g. bus operators), and strengthening the case internally for transport, for example by stressing its contribution to wider corporate and community objectives. The poor availability of revenue funding for highway maintenance is an issue which has gained particular prominence since the Comprehensive Spending Review 2007. Local authorities are tackling this problem in a number of ways, such as by investing in high quality materials to reduce revenue implications, undertaking joint procurement of services, and linking improvements to other agendas, such as the role that well maintained roads have in enhancing the local economy or improving quality of life or the efficiency of public services. Government needs to facilitate these kinds of initiatives to ensure a better balance between capital and revenue funding.

How will schemes be planned in the absence of regional bodies and following the revocation and abolition of regional spatial strategies?

9. A key issue that will need to be addressed is achieving integration between land use planning and transport planning. Transport and land use are closely inter-related. Although their planning, implementation and impact tend to operate at different temporal scales, it is crucially important that the transport impacts on land-use, as well as the land-use impacts on transport, are taken into account in the planning processes in order to ensure that the investments are sustainable in the longer term. This integration cannot be achieved at purely a local level since many of the influences will arise from outside local authority boundaries, and similar local initiatives may well have impact outside their boundaries.

10. Regional planning provides an important axis for co-ordinating and integrating transport and land use planning in a horizontal direction (between planning departments and organisations at a local level) and in a vertical direction (between planning guidance and policy at the national, regional and local levels). The removal of the regional ‘tier’ of governance will not significantly impact the vertical coordination, provide central government is able to deal satisfactorily directly with local government, but a mechanism must be found to replace the horizontal coordination function. Local authorities must therefore find ways to work together, and develop planning structures, that provide a context for investment in both land use and transport that are mutually supportive, and do not place one LA’s policies in unnecessary conflict with another. These arrangements could take the form of the proposed Local Enterprise Partnerships (LEPs) in the field of enterprise and economic development. There is a danger that these more ‘voluntary’ arrangements could put more rural communities, especially those in the hinterland of large conurbations, at a disadvantage and thus it will probably be necessary for Government to provide some guidance and recommended strategy for LA partnerships. This guidance should include the provision that transport and land use planning should take wider (sub)regional issues into account.

September 2010