Transport and the economy

Memorandum from Merseytravel (TE15)

1 Introduction

1.1 Merseytravel welcomes the Transport Select Committee’s inquiry into ‘Transport and the Economy’. The publication of the Eddington Report marked a step change in the way that government viewed transport and its role. Instead of simply perceived as being a means of moving people from A to B, the wider of contribution of transport, especially in terms of economic development, was really for the first time given the attention it deserved.

1.2 The publication of the Eddington report, alongside the Stern report on climate change, meant that there was an opportunity to integrate, in policy terms, local, regional and national transport with economic, social and environmental objectives. More recently, the costs and other disbenefits of congestion have been measured by the Cabinet Office report, ‘An Analysis of Urban Transport’, amongst other studies. Together, these reports demonstrate the central role that transport plays.

1.3 Unfortunately, the opportunity of integrating transport into wider policy development has yet to be fully realised and this means that transport is still not allowed to play its full role.

1.4 Merseytravel is the combined Passenger Transport Executive (PTE) and Integrated Transport Authority (ITA) for Merseyside, and is the public sector body responsible for the coordination of public transport across the Liverpool city region with the exception of Halton. Working with our partners across the Districts and the business community, our objective is to produce a fully integrated transport system which is accessible to all.

2 Issues

2.1 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?

(a) The changing nature of the UK’s economic position, and the downturn, should be viewed as a short term issue in terms of transport provision. The long term trend is for increasing demand for travel and this should not be ignored in the debates regarding the future requirements for all modes of transport.

(b) It is disappointing that the Government has already ruled out certain transport policies, such as road pricing, without an examination of their impacts and how any revenue generated could be used. Without such a cross-modal approach to transport, any facilitation of economic, social and environmental improvements could be hampered.

(c) Clearly, a lack of accessible and efficient transport links present a real barrier to economic growth and investment. This, in turn, can contribute towards worklessness and social exclusion. Research has shown that better coordination and integration in our transport networks can have a sustained impact on their usage and, in turn, on the economic performance of our city regions (see for example Centre for Cities, ‘On the Move’, see www.centreforcities.org/onthemove).

(d) As an economic enabler, effective transport infrastructure connects people to jobs and markets, benefiting businesses and potential employees, and helping to tackle worklessness and unleash the skills potential of many people on the peripheries of our towns and cities. Effective transport infrastructure creates greater opportunities for businesses by opening up new markets and increasing competition and productivity. In addition, investment in transport infrastructure can also directly support jobs and boost local economies.

(e) New legislation has been passed since the publication of the Eddington report which also needs to be reflected in the provision of transport and in the calculation of its contributions. The recent Equalities Act introduced a new duty to carry out Equality Impact Assessments as well as the need to demonstrate that due consideration of the socio-economic impacts of decisions and spending have been given.

(f) Eddington adopted a blanket approach that all passengers enjoyed the same access to transport and that all passengers had the ability to pay the full, including environmental, cost of that transport. This is clearly not the case and in the current economic setting this inability to access and pay has become even more marked.

(g) So the economic discussion also has to be concerned with barriers to accessing transport and these impact on already disadvantaged groups and communities. This makes consideration of the bus network a key policy area as this remains the most used form of public transport.

(h) In addition, work by the Joseph Rowntree Foundation shows that the high cost of transport imposes barriers, especially on the young, to work, education and training opportunities.

(i) In an era of reduced budgets Merseytravel recognises the need to be more creative in the use of funding whilst maintaining a focus on reducing economic and social inequalities. This means delivering on the smarter choices agenda but also communicating the business benefits of initiatives such as Neighbourhood Travel Teams, Personalised Journey Planning and more targeted support such as WorkWise which encourages the widespread adoption of smarter working practices.

(j) Public transport connects people to jobs, services, friends, family, education and leisure – particularly those on the lowest incomes, more than half of who do not have access to a car. Again, equality of access has to be a key consideration.

(k) Alongside this when new developments are being planned there is often a failure to properly consider transport requirements. Merseytravel considers that the only way for transport and land use planning to be fully integrated, especially now that regional strategies have been abolished, is for PTEs where they exist to be made statutory consultees in the planning process at a local level.

(l) Taken together these issues illustrate some of the steps which need to be taken if economic improvements are to be made and transport is to play its role in securing those improvements.

2.2 What type of transport spending should be prioritised, in the context of an overall spending reduction, in order to best support regional and national economic growth?

(a) There is not a single answer to the question as such decisions should be made locally. In some areas, infrastructure provision will be required, in others the emphasis may need to be on supported services. The spending should be focused on where it delivers the greatest economic, social and environmental benefits. This is an issue picked up in section 2.4.

(b) However, for such policies to be established requires clarity over decision-making structures, the level of resources available and sources of funds. This means that clarity is provided on issues such as Local Enterprise Partnerships (LEPs) and the Regional Growth Fund (RGF) as a matter of priority.

(c) Unfortunately, we fear that those projects most at risk appear to those in the North of England. However, as spending per head on transport is already lower in the North than it is in London then to reduce spending still further would appear to undermine the rebalancing of the economy for which the Government is striving.

(d) Clarity on issues such as the balance between taxpayers and farepayers on the price of rail tickets will help to establish the level of spending available elsewhere in the transport sector.

(e) The principle of using the RGF to leverage private sector investment is one that Merseytravel supports and it is clear that certain parts of the country are more heavily dependent on public sector spending than others. As the Government will recognise, the RGF cannot be a substitute for a genuinely strategic and properly funded approach to economic development and regeneration policy and so further information is required regarding how the RGF is intended to integrate with other policy instruments and funding streams.

(f) We need to understand the role that public sector funding in transport plays. It is not simply about the provision of infrastructure but it can also be an enabler of private sector investment. Whilst the private sector may not always readily see the returns that can be made from transport projects, partly because of the timescales involved, public sector funding can attract development to an area. The ability of transport to connect people, for instance giving business access to a workforce or communities access to health, education and leisure facilities, means that development becomes viable and attractive to the private sector. It is these connections that help developers to make a return on their investment.

(g) The ability to pump-prime for the private sector investment needs to be reflected in the appraisal of transport projects (see Section 2.4).

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

(a) Again, this is a decision that should be made locally but for such decisions to be really effective this requires greater local control over total funds. For instance, greater flexibility on revenue spending and more say over how funds can be raised and spent.

(b) PTE revenue spend is increasingly dominated by funding the free off-peak bus pass for older and disabled people. There are concerns that, alongside the grant that the Government provides for the pass being cut, the element of direct grant that PTEs receive for the scheme could be removed and pooled together with the general funding received by local authorities. All these proposals directly threaten the sustainability of concessionary fares.

(c) There is a lack of clarity over revenue budgets too. The Bus Service Operators Grant (BSOG) is being reviewed and we hope the decisions taken around the Spending Review on 20th October will set out the current and future plans for BSOG, which plays a valuable role in the delivery of affordable bus services.

(d) The legal requirement for PTEs to fund the national concessionary fares scheme will doubtless remain in place meaning that should there be any further pressure placed on revenue funding then the other services provided by PTEs will be further squeezed. This could mean that groups such as young people and job seekers who require access to transport having to pay more for the service and/or facing cutbacks in services. This would run counter to the requirements of the Equalities Act and would hit economic development in the areas concerned.

2.4 Are the current methods for assessing proposed transport schemes satisfactory?

(a) It is widely recognised that the NATA system of appraisal is in need of work and we welcome the Government’s commitment to its review. We believe that this should be a matter of priority for the DfT.

(b) Some good work has already been undertaken by the likes of the Campaign for Better Transport on the reform of NATA but what is clear is that climate change priorities and carbon reduction have to be more fully reflected in the appraisal methods.

(c) However, more emphasis is also required on the agglomeration benefits of transport projects in their appraisal, including their ability to leverage in private sector finance but also attract wider private sector investment to an area. Transport projects can, in effect, pump-prime an area for private sector investment. The expected delivery outcomes of the project, as assessed, should reflect real economic needs and requirements, for instance the projects’ ability to support sectors in the local economy.

(d) Appraisal methods should also ensure that major investments are supported by ‘soft measures’/smarter choices such smartcard ticketing facilities, rather than simply being stand-alone, largely capital projects.

(e) The proposed Green Infrastructure Bank could assist in the revision of project appraisal methods and one of the immediate tasks for the Bank should be for it to look at basis upon which it supports projects.

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

(a) Merseytravel is currently involved in the preparation of a LEP for the Liverpool City Region and we believe that such a body might provide a mechanism for some sort of wider strategic authority. However, how LEPs relate to one another or ‘compete’ for funding is not yet clear.

(b) In addition, until LEPs are up and running we may be in a position where private sector investment is being postponed or possibly even cancelled. Anecdotal evidence suggests that developers are not willing to make investment for fear of legal challenge now that regional strategies have been abolished. This obviously runs counter to the need to encourage economic growth and job creation.

(c) The speed with which a new system can be agreed and implemented is the key.

We are also concerned that those local authorities (or city regions or LEPs) that are best able to facilitate private sector investment are likely to benefit at the expense of those areas less able to facilitate such involvement.

This would appear to be a regressive approach and so further information on the criteria by which decisions on funding will be made and how some degree of ‘equality’ between areas will be ensured in the absence of any formal structure between the local (or LEP) and national levels. Furthermore, there is also a risk that the RGF could be seen as a centralising process, rather than a localising one, with the final decision resting with ministers on the advice of the Independent Approval Panel.

(d) In essence, there is a risk of finance being attracted to areas with an existing robust private sector and or existing transport links, rather than helping to spread growth and rebalance the economy.

(e) The abolition of the regional strategies also means that the ability of a larger geographical area to plan for infrastructure requirements and balance completing needs has been removed. If, as has been speculated, larger LEPs, for instance those following existing county council boundaries, are rejected, then this problem will persist.

3 Overall

3.1 As a Grant Thornton report for pteg concludes ‘the economic logic for investment in local transport and improved inter-regional connectivity remains’ (‘Government Spending Cuts: Scenarios for Future Transport Funding’).

3.2 The task facing us is to allow local control over finance so that travel opportunities can be opened up but policy needs to ensure that travel choices are not just given to those that already have them.

3.3 The system of appraisal also needs to be reviewed so that it actually reflects the economic and environmental benefits of

September 2010