Transport and the economy

Memorandum from ADEPT (TE 29)

1. Summary

1.1 ADEPT represents local authority strategic directors who are responsible for delivering public services that relate to the physical environment and the economy.

1.2. We strongly support the Government’s primary aims of reducing the public spending deficit and ensuring economic recovery. Indeed, we see sustainable economic recovery as a vital component of deficit reduction.

1.3 We consider that in order to achieve this there is a need to continue to invest in transport infrastructure; and in particular to recognise the key role of local authorities in its financing and delivery.

1.4 We support the central tenet of the Eddington study: that the performance of the UK’s transport networks is a crucial enabler of sustained productivity and competitiveness. However, we believe that some of his recommendations need revisiting, in particular, to give priority to the need to address the poor condition of existing assets, including local roads.

1.5 Priority for new transport schemes, including investment already planned but not committed should be given to those:

· with strong economic benefits,

· that support wider regeneration/growth strategies,

· that complete gaps in the network, where this unlocks economic benefits.

1.6 We are encouraged by Eddington’s analysis which suggests that whilst transport projects can offer remarkably high returns generally, some of the best projects are small scale, such as walking and cycling schemes, and schemes that tackle bottlenecks. Therefore some degree of rescheduling of "grands projets" would release resources for investment in network maintenance and smaller scale projects with potentially greater returns.

1.7 There is some interchangeability between capital and revenue spending. For highway maintenance, the most important balance is that between planned, preventative maintenance, and reactive repairs. If preventative maintenance on any asset is less than adequate, this can initiate a ‘vicious circle’ where reactive repairs soak up an ever increasing proportion of available preventative maintenance budgets

1.8. Whilst we acknowledge that cost-benefit analysis provides a very useful starting point for assessment of transport schemes, we agree with the Secretary of State that there is a need for discretion which recognises that there are other relevant factors affecting prioritisation.

1.9 Following the revocation and abolition of regional spatial strategies ADEPT considers that significant changes are needed to improve strategic planning at the national and sub-national levels. County and unitary councils should prepare strategic spatial plans through robust partnerships at functional geographic levels. Investment in local infrastructure, for much of which county and unitary authorities are responsible, will be key to their delivery

1.10 We recognise, of course, the difficult spending decisions that lie ahead, but we also believe that through reducing bureaucracy, eliminating inefficiencies, taking a cross-agency approach to public spending at all levels and a willingness to explore alternative sources of funding, there is a way forward that balances the need for spending and investment and the need to cut the budget deficit.

2. ADEPT

2.1 The Association of Directors of Environment, Economy, Planning & Transport (ADEPT) represents local authority Strategic Directors who manage some of the most pressing issues facing the UK today. ADEPT membership is drawn from all four

corners of the United Kingdom. Operating at the strategic tier of local government they are responsible for delivering public services that relate to the physical environment and the economy.

2.2 At the local level, ADEPT members, with their wide-ranging briefs, will have a key

role in supporting and helping to deliver sustainable economic growth and quality of

life throughout the country. We do this from a perspective of deep experience in delivering services in the context of politically driven ambitions and priorities and an understanding of the views and interests of our communities. Our approach is to focus on efficiencies and offer solutions rather then agonise over problems.

2.3 We strongly support the Government’s primary aims of reducing the public spending deficit and ensuring economic recovery. Indeed, we see sustainable economic recovery as a vital component of deficit reduction.

2.4 ADEPT considers that in order to achieve this there is a need to continue to invest in transport infrastructure; and in particular to recognise the key role of local authorities in its financing and delivery. In our view, investment in local transport infrastructure is not an option but a pre-requisite for supporting sustainable economic growth.

3. The Economic Impacts of Transport

3.1 Eddington recognises that transport impacts on the economy in a number of different ways, which can be assessed through a series of micro economic drivers of growth: business efficiency, investment and innovation; agglomeration economies; labour markets; competition; trade; and globally mobile activity. Such impacts are made by improvements to the speed, cost, reliability, network coverage, comfort or safety of the journey. [1]

3.2 For example, he states that a 5 % reduction in travel time for all business travel on the roads could generate around £2.5 billion of cost savings – some 0.2 per cent of GDP. Delays and unreliability on the network have direct costs to people and businesses, increasing business costs and affecting productivity and innovation. Eliminating existing congestion on the road network, if that were ever feasible, would be worth some £7-8 billion of GDP per annum. Although the emphasis of this paper is on economic impacts, ADEPT would also wish to emphasise the beneficial effects of congestion reduction on air quality and carbon reduction.

3.3 On the basis of this and other similar evidence, ADEPT supports the central tenet of the study: that the performance of the UK’s transport networks is a crucial enabler of sustained productivity and competitiveness. However, we would wish to emphasise the significance of local transport in reaching this conclusion.

4. Local Transport

4.1 Local authorities are responsible for local roads, public transport, and car parks. Of the £22.6 billion spent by central and local government on transport in 2008/2009, nearly 54% was by local authorities. [2]

4.2 Their responsibility for roads embraces the construction, improvement, management and maintenance of highways in the interests of all road users including drivers of cars and goods vehicles, bus passengers, cyclists and pedestrians.

4.3 Local roads carry 68% of all road traffic (measured in vehicle km). Moreover, although the motorway and trunk road network carries the remaining 32%, nearly all of those trips begin or end on local roads also. In terms of road length nearly 97% of the GB road network is the responsibility of local highway authorities. [3]

4.4 Given the scale of the activity, it is disappointing that local transport does not have the same high profile as national and international transport, and its role in the national economy and in serving travellers is often undervalued. However, without good quality local transport infrastructure, the benefits of national level transport investment in, for example, reducing inter-city travel times would be undermined.

5. The Eddington Transport Study: Changes in Economic Conditions

5.1 Although the role of transport in the economy has not fundamentally changed since publication of Eddington’s report in December 2006, the demand for movement of people and goods in the short-term is clearly being affected by changes in the economic environment.

5.2 We therefore believe that some of his recommendations need revisiting. In particular, he considered that because the UK is already well connected, there were three strategic economic priorities for transport policy where "there are clear signals that (existing) networks are not performing" [4] :

· Congested and growing city catchments

· Key inter-urban corridors

· The key international gateways that are showing signs of increasing congestion and unreliability [5]

5.3 He did not appear to give similar priority to the need to address the poor condition of existing assets, including local roads.

6. Spending Priorities to Support Economic Growth

6.1 ADEPT considers that protection for funding to maintain existing assets, particularly the highway network and its future resilience, is the first priority. This position would appear to be supported by the Chancellor, who made the point in his

emergency budget statement that it does not make sense to allow the existing infrastructure to crumble.

6.2 At a local level, highway condition and road safety frequently feature at the top of residents’ complaints lists. The severe winter weather of 2008/9 and 2009/10 and the consequent peppering of the nation’s roads with potholes have served to highlight this as well as the vulnerability of the network.

6.3 Priority for new transport schemes should be given to those:

· with strong economic benefits,

· that support wider regeneration/growth strategies,

· that complete gaps in the network, where this unlocks economic benefits.

Investment already planned but not committed should also be assessed against these priorities where necessary.

6.4 New schemes may be large or small, but we concur with Eddington [6] in his view that High Speed Rail and other major rail improvement schemes should be subject to the same scrutiny and value for money tests as any other transport investment. At the very least, some degree of rescheduling of "grands projets" would release resources for investment in network maintenance and smaller scale projects with potentially greater returns.

6.5 We are therefore encouraged by Eddington’s further analysis which suggests that whilst transport projects can offer remarkably high returns generally, some of the best projects are small scale, such as walking and cycling schemes, and schemes that tackle bottlenecks. [7]

6.6 Significant reductions in overall investment would risk the loss of essential skills and capacity, both in the public and private sector, which will be needed when the economy allows headroom for expansion. Bearing in mind the long lead times associated with transport schemes, loss of capacity now would make it slower and more expensive to deliver investment later.

7. The Balance between Revenue and Capital Expenditure

7.1 In 2008/9 local authority investment in transport accounted for 24% of overall local authority capital spending – slightly less than on housing (25%) and slightly more than on education (23%) [8]

7.2 Approximately 56% of net local government transport expenditure is current spending on roads, revenue support for public transport, and concessionary fares, with some net income generated from car parking charges. The remaining 44% is capital, mainly invested in roads and public transport.

7.3 Although ADEPT supports the need for local authorities to retain flexibilities between sectors, it is concerned to protect as far as possible the overall level of local transport expenditure, including the avoidance of leakage from the sector entirely, rather than focus simply on the split between capital and revenue.

7.4 As we state above, ADEPT considers that protection for funding to maintain existing assets is the first priority. In the case of highway maintenance there is some

degree of flexibility in the definitions of capital and revenue expenditure. The key issue here is therefore not the balance between them, which the public may not understand or care about anyway, but between planned, preventative maintenance, and reactive repairs.

7.5 If preventative maintenance on any asset is less than adequate, this can initiate a ‘vicious circle’ where reactive repairs soak up an ever increasing proportion of available preventative maintenance budgets, compounding the problem by reducing still further the amount that can be spent on planned maintenance. (See Figure 1.)

7.6 The resulting deterioration in road condition and increase in reactive repairs have an impact on all road users and therefore on the economy generally in terms of increased vehicle running costs, increased journey times and decreased journey reliability, and ability and willingness to travel.

7.7 There is international evidence of these economic impacts and their links to inadequate road maintenance (although some are difficult to quantify). For example, research by the OECD [9] on the relationship between road user costs and road condition suggested that road user costs on a very poor condition road could be up to double those for a comparable journey on a very good road.

7.8 With public transport, there is similarly some interchangeability between capital and revenue expenditure. For example, investment in bus lanes, bus stops, real-time information systems and indeed in the vehicles themselves can help reduce

operating costs and therefore the need for revenue support. The appropriate balance between capital and revenue should be a matter for local appraisal.

8. Assessment Methodology

8.1 The Department for Transport has a cost benefit analysis model which produces for each major highway project a net present value. Local Highway Authorities are expected to use that model in assessing options for their major highway schemes, if they are seeking grant aid from DfT.

8.2 The Eddington Study appears strongly to endorse cost-benefit analysis, but expresses concern that "current methodologies do not reflect other potentially significant impacts on the economy. Assessments of overall benefits on a project-by-project basis could increase by up to 50% in some cases if new evidence concerning the importance of reliability and agglomerations were to be included in the appraisal of transport schemes…In addition, current methodologies do not fully encompass the environmental impact of projects." He therefore recommends that "transport strategy and appraisal should continue to develop as our understanding evolves, and in particular that the full range of effects should be incorporated into appraisal as a matter of urgency." [10]

8.3 Whilst we acknowledge that cost-benefit analysis provides a very useful starting point and we respect these aspirations, ADEPT’s experience over many years dating back to the Roskill Commission [11] is that over-emphasis on cost-benefit analysis can produce outcomes which don’t necessarily reflect social and environmental impacts, and it can be very complex. Therefore we agree with the Secretary of State that there is a need for discretion which recognises that there are other relevant factors affecting prioritisation, both locally and in terms of national ranking (or indeed between modes of transport). Public consultation and independent scrutiny are important elements of this decision-making process.

8.4 ADEPT research [12] shows that all areas can make a contribution to economic recovery, and we need to ensure that growth is supported as well as investment in declining areas. However, there is a clear risk that over-rigorous prioritisation on the basis of cost-benefit analysis could result in an increasing focus on a small number of areas of the country, where for example congestion problems are greatest.

8.5 Equally, we must avoid the trap of focusing only on under-performing city regions and other areas of the country with economic problems. This would be counter-productive and illusory as Eddington states [13] .

9. Future Strategic Planning Arrangements

9.1 Following the revocation and abolition of regional spatial strategies ADEPT considers that significant changes are needed to improve strategic planning at the national and sub-national levels.

9.2 A national framework for spatial planning, informed by local government practitioners and other relevant stakeholders, is needed to guide local areas on assisting delivery to meet national priorities and join up Government policy in areas of crucial importance.

9.3 ADEPT considers there is a need for a single tier of strategic spatial planning between national and local levels. County and unitary councils should prepare strategic spatial plans through robust partnerships at functional geographic levels. These councils have the expertise and knowledge of cross-boundary working on strategic matters and are also the providers of key infrastructure. The plans would identify and co-ordinate cross-boundary issues and provide a policy approach on key issues including transport and other infrastructure.

9.4 There is no "one-size-fits-all" solution to defining the geographic area of cross-boundary working, which will vary according to local circumstances and should reflect economic, social and environmental realities. This approach would seem to fit well with the Government’s initiative on LEPS.

9.5 Local infrastructure investment is key to the delivery of sustainable communities and economic recovery, and county and unitary authorities are responsible for delivering much of it. They have developed considerable expertise in preparing Local Transport Plans over the last decade. These are essentially medium-term investment programmes embracing highway maintenance, integrated transport packages and major local schemes.

9.6 County and unitary authorities often have to rely on developer contributions to fund transport infrastructure. Various models for securing such contributions are available, including securing site-specific infrastructure through planning obligations and using levies/tariffs for infrastructure that is needed to address the cumulative impact of new development. ADEPT supports both approaches but more needs to be done to ensure that necessary infrastructure is delivered.

9.7 ADEPT has expressed some specific concerns about the Community Infrastructure Levy (CIL) because in two-tier areas, County Councils are neither Charging Authorities nor Planning Authorities even though they provide a large proportion of the infrastructure. In the absence of effective safeguards, ADEPT considers that these strategic local authorities need to retain the power to secure such contributions via Section 106 and Section 278 agreements.

10. Creating Headroom

10.1 We recognise, of course, the difficult spending decisions that lie ahead, but we also believe that through reducing bureaucracy, eliminating inefficiencies, taking a cross-agency approach to public spending at all levels and a willingness to explore alternative sources of funding, there is a way forward that balances the need for spending and investment and the need to cut the budget deficit.

10.2 For example, there is real potential for:

· the Government to rationalise existing agencies and funding streams to reduce the administrative costs and central constraints on public service organisations that lead to sub-optimal outcomes and inefficiency;

· a much more collaborative ‘joint team’ approach with Government to deliver

major transport schemes;

· better joining up of Government policy to make it possible to deliver more efficiently in localities e.g. putting hospitals where there is good access;

· greater drive/direction for central agencies to pursue collaborative procurement with local government;

· protecting maintenance spend and planned asset management which will deliver efficiency savings

· focusing on behavioural change to make more efficient use of the transport infrastructure and reduce the need for investment;

· control of utilities to prevent them undermining efforts to manage and maintain highways and ensure full cost recovery;

· investment in high-speed broadband to maximise economic competitiveness, to reduce travel demands and to tackle digital exclusion and the growing digital divide.

September 2010