Transport and the economy

Memorandum from the East of England Development Agency

Summary of Key points

· This document provides technical evidence from the East of England Development Agency (EEDA) to inform the Transport Select Committee inquiry entitled ‘Transport and the Economy’.

· This document seeks to provide evidenced answers to the five questions set by the Select Committee, drawing on evidence developed by EEDA and its partners in the East of England over the last four years.

· The evidence presented in this document points to the following key conclusions:

1. T here has been a change in the UK ’s economic conditions since the publication of the Eddington Report (2006) , with a continued growth in Gross Value Added, Gross Domestic Product and employment over the period to 2008, followed by a more recent decline.

2. Transport spending has been impacted by the decline in economic growth from 2008 to 2010, firstly through a reduction in consumer and business spending on transport and , more recently, through a reduction in planned Government spending on transport.

3. The evidence presented in our submission demonstrates that the four key priorities for transport spending should now be:

o Targeted road improvements and better use of the road network;

o Improvements to the rail network to enhance capacity, speed and frequency of services;

o Reducing the demand for road based travel through demand management, travel planning and local schemes; and

o Increased implementation of ‘non-transport’ measures that have a transport benefit.

4. It is important that there are some freedoms and flexibilities in the balance of capital / revenue funding provided to transport authorities. This will allow them to better match transport funding to their own specific circumstances and to better address their local economic challenges.

5. Whilst ‘satisfactory’, the current system of transport appraisal does have some faults which could be improved by:

o Incorporating the valuation of a wider range of benefits traditionally outside transport appraisal, such as health benefits;

o Reducing the weight attached to the aggregated value of individual’s small time-savings that may not be perceptible or used productively;

o Reducing the level of appraisal required for smaller schemes, reducing the need for resource intensive model-based assessments.

6. With the abolition of regional bodies and processes, significant challenges remain around sub-national transport decision-making, business involvement, and ensuring that transport spending is targeted at projects that contribute to sustainable economic growth but minimise environmental, and other, negative impacts.

1. Introduction

1.1 The East of England Development Agency’s (EEDA) mission is to improve the economy of the East of England. Whilst EEDA’s economic development responsibilities and functions will soon be transferred to other bodies, including the proposed Local Enterprise Partnerships, EEDA’s Transport Team has developed a comprehensive technical evidence base regarding the impact of transport on economic growth that is appropriate to share with the Transport Select Committee for the purposes of this specific inquiry.

1.2 EEDA has provided evidenced answers below to the specific questions set by the Transport Select Committee, using case studies of projects that EEDA has been directly involved with in the East of England over the last five years to illustrate key points.

2. Changes in economic conditions and its impact on transport spending

2.1 The Select Committee has set the following question: ‘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?’

2.2 Since the publication of the Eddington Report in December 2006, there have been some significant changes in the UK’s economic conditions. Key indicators for assessing these changing economic conditions are:

· Gross Domestic Product (GDP) - the total monetary value of all goods and services produced domestically by a country;

· Gross Value Added (GVA) – the value added represented by that part of production which is the actual contribution of an enterprise to the economy. Value added is calculated by deducting total value of input from the total value of output during a reference period;

· Employment – The percentage of working age population (16-64) in employment.

2.3 Table 1 identifies how these indicators have changed from the pre-Eddington period to today (2004 to 2010).

Table 1: UK economic indicators before / since publication of Eddington Report (2006)

* GVA and GDP indices calculated using 2004 as base year

2.4 The evidence presented in Table 1 indicates that the UK’s GDP, GVA and employment growth trajectories have indeed changed since the publication of Eddington. The growth in the economy that was observed during and following the preparation and publication of the Eddington Report appeared to continue to 2008, however in the last two years (2009 - 2010), there has been a reduction in economic growth, as demonstrated by the measured GVA, GDP and employment rate indicators presented above.

2.5 In order to identify any possible direct or indirect impacts that this had on transport spending, it is necessary to examine trends in key transport indicators over the same time period, as presented in Table 2.

Table 2: Changes in national transport indicators

* Indices calculated using 2004 as base year

2.6 Table 2 shows that whilst transport activity appeared to grow in the middle part of the decade, the most recent two years for which there are full records available (2008 and 2009) have seen a reduction in some transport activity. Most notably, road traffic ( and in particular HGV) and air passenger movements, which showed strong growth through the early and mid part of the decade have begun to fall. This suggests there is a correlation between the recent economic slowdown and the reduction in transport activity, and indicates that the relationship between these two variables is still significant.

2.7 It is necessary to define ‘transport spending’ in to order to actually determine the impact of economic changes on ‘transport spending’. We have assumed therefore that ‘transport spending’ can refer to ‘individual’ (ie : household) spending on transport, ‘private sector’ (ie : business, developers etc) spending on transport, and ‘public sector’ spending on transport (most notably infrastructure).

2.8 The trends in Table 2 would suggest that individual (household) spending on transport increased throughout the period 2004-2008. This is supported by the UK Household Spending Report 2009 [1] , which identified an increase in household expenditure on transport from an average of £60.70 per week over the period 2003-2006, to an average of £62.00 per week in the period 2006-2008.

2.9 However, although this data set is not available for more recent years since 2008, the data in Table 2 suggests that household spending on transport has declined in this later period, demonstrated by reduced vehicle kilometres by car, reduced UK fuel duty receipts and reduced numbers of air passengers. It is intuitive to suggest this is as result of the impacts of worsening economic conditions occurring over the same period.

2.10 In a similar way to households, private sector spending on transport appeared to also increase from 2004 to 2008 and then decline. The level of HGV traffic in Table 2 actually suggests that businesses (at least those in freight and logistics) reduced transport intensity (measur ed by vehicle kilometres) by 10 percent from 2 007 to 2009.

2.11 However, as identified in Table 3, public sector spending on transport has continued to grow throughout the period 2004 to 2009. It is only from 2010 onwards (due to recent Government decisions on spending cuts for which there are no equivalent statistics yet available) that significant reductions in public sector transport are likely to occur.

Table 3: UK Identifiable public expenditure on transport, 2004/05 to 2009/ 10

Source: HM Treasury [2]

2.12 In conclusion, there has been a change in the UK ’s economic conditions since the publication of the Eddington Report, most notably a reduction in economic growth, and this has reflected on transport spending, firstly through consumer and business spending on transport, and more recently, through a reduction in planned Government spending on transport.

2.13 In our case study area, the East of England differs slightly from the national figures. Table 4 provides information on the experienced GVA growth in the East of England over the period 2004 to 2008. The indexed figure indicates that this growth has been slightly higher to 2008 than the national growth.

Table 4: East of England GVA growth [3]

* Indices calculated using 2004 as base year

2.14 With regards to transport, whilst not all the comparative indicators are available at a regional level, it is interesting to note that the East of England has the lowest percentage of households with no cars and alongside the South East region has the highest percentage of households with two or more cars, [4] indicating a potentially higher reliance and therefore spending on private vehicles, compared to other UK regions.

2.15 Furthermore, the East of England has a regional accessibility value (ease of reaching a major economic centre) of 59 minutes. This is considerably higher than the UK average of 44 minutes, indicating a relatively low accessibility score. Recent analysis has also identified that the East of England’s accessibility score is the fourth lowest among global comparator regions that are competing directly for mobile investment. This supports the previously held view that infrastructure can be a key success factor for regional economies. [5]

2.16 Transport in the East of England is also important to the wider economic performance of UK plc. As a gateway region, there are significant through-movements on key corridors in the region to and from destinations elsewhere in the UK including on the A14 and Felixstowe to Nuneaton rail routes. The performance of routes such as these clearly has wider, national, economic consequences.

2.1 7 Further information on the economic vitality of ‘ transport sector ’ firms at a UK and a regional level is presented in Table 5. This information is derived from the Regional Short-Term I ndicators project, which was developed to provide a quarterly index measurement of regional economic performance in each sector, including a measurement of the performa nce of the transport s ector .

Table 5: Index of t ransport s ector economic performance

Source: Regional Short-Term Indicators project [6]

2.18 Th e data from Table 5 suggests that in the UK, the performance of the transport sector (derived from indicators reflecting volume and turnover in the land transport, water transport, air transport and transport support sectors) continued to grow to Quarter 2 of 2008, then declined sharply. The East of England’s Transport Sector gave a stronger performance over this period, and remained stronger than the UK average even as the recession took hold , despite also falling . This possibly reflects the higher percentage of transport industry jobs in the East of England, particularly those connected with ports and freight.

3. Prioritisation of transport spending to support economic growth

3.1 The Select Committee has set the following question: ‘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?’

3.2 The East of England Transport Economic Evidence Study (TEES), published by EEDA in September 2008, provided an evidence-based approach to identifying how and where transport constraints impact on economic growth, and where spending should be prioritised at a sub-national level (in this case the East of England) to maximise economic return from transport growth.

3.3 The TEES used DfT-approved economic appraisal methodology and outputs from the DfT-approved East of England Transport Model (incorporating both road and rail suites) to identify the costs of constraints and relative benefits of different policy scenarios. Although the work was undertaken prior to the downturn, the methodology adopted and key conclusions remain valid.

3.4 The TEES report showed that transport constraints in the East of England are currently costing the UK economy and consumers £1bn per annum. This is forecast to grow to £2.2bn per annum by 2021. Furthermore, the TEES tested a range of alternative transport investment scenarios to identify economic returns on investment. Table 6 identifies the broad benefits that could be accrued from different infrastructure policy scenarios.

Table 6: Economic benefits of the key TEES scenario tests

Source: East of England Transport Economic Evidence Study [7]

3.5 TEES identified that the following transport interventions should be prioritised in order to maximise economic growth:

· Targeted road improvements – Funding for road development should be concentrated on relieving ‘bottlenecks’ on the strategic road network, and making best use of the existing highway assets, not a widescale road building programme. Whilst TEES did examine large-scale highway building programmes firstly through a scenario test of the impacts of the Draft East of England Plan schemes (at the time), and secondly a scenario test of additional highway capacity enhancements on a number of the major radial routes in the region (scenarios 1 and 2 in Table 6 above), it was demonstrated that at best this only actually addressed 8-15 percent of the total regional costs of congestion and did not offer the best value for money.

· Rail – TEES tested a scenario where rail capacity on radial routes to London across the region was increased by 50 percent (scenario 3 in Table 6 above). The benefits from this test outweighed benefits from all other tests (including the highway capacity growth scenario) giving a one year benefit of £119million and a total benefit of £4.7billion over the 60 year appraisal period.

· Reducing demand – Further tests undertaken as part of the TEES work (but not illustrated in Table 6 above) looked at the potential economic benefits of measures to reduce demand for transport, both through fiscal pricing and travel planning. The tests indicated that measures that reduce demand for travel should also be prioritised.

3.6 These three priority areas for investment are explored further below using further specific evidence from the East of England.

Targeted improvements and making better use of the road network

3.7 The Eddington report identified that targeting pinch-points on the strategic road network would have significant economic benefits, and as outlined above, this has been validated at a strategic sub-national level by the East of England TEES report. EEDA has developed further evidence on some of these specific ‘pinch-point’ schemes to illustrate the validity of this conclusion.

3.8 One example is the A11, which is a dual carriageway highway from the A14 in Cambridgeshire to Norwich, except for a nine mile section of single-carriageway which experiences significant congestion and delay. The most recent estimation of the benefit cost ratio for the scheme by the Highways Agency, calculating the ratio between costs and ‘conventional benefits’ is estimated to be 21:1, an extremely high return on investment for a transport project which is directly related to the significant reduction in travel times and delays that the scheme provides [8] . In addition, the A11 Wider Economic Impacts Study [9] , published by EEDA, GO-East and Norfolk County Council in 2008 identified that upgrading would have significant wider economic benefits of an additional 20 percent of the benefits beyond the traditionally calculated economic benefits, through impacts such as increased agglomeration and access to labour markets for employers.

3.9 In the East of England region, the A5-M1 link road and the A14 Ellington to Fen Ditton scheme are the two other key examples where there is a strong economic rationale for addressing particular locational transport bottlenecks on the strategic road network. The EEDA A5-M1 Link Road Economic Impact Report [10] identified that the alleviation of the transport bottleneck and congestion on the A5 through Dunstable by the construction of an alternative route would generate economic benefits of £748million (in return for estimated present value of costs of £135million).

3.10 In addition to capacity enhancements at targeted bottlenecks, there are economic benefits that could be accrued from making better use of the existing network. An example from the East of England is the Intelligent Traffic Management system recently installed on the A14 by the Highways Agency. This project provided real-time traffic information to drivers on the A14 to better inform them and manage traffic flows to reduce the economic and safety impacts of incidents. The business case [11] for this project has demonstrated an economic benefit cost ratio of 2.74, which is classed by the DfT to be high value for money. [12]

3.11 Although making best use of our existing assets and targeted capacity enhancements should be a key priority, the maintenance of our transport infrastructure remains critical. Although this is of obvious relevance to key trunk routes, the role of supporting local networks on which longer distance freight and passenger journeys start and finish should also not be neglected given the importance of end-to-end transport provision.

3.12 Equally, and as recognised by Eddington, network resilience is key to a successful economy; the resilience benefits of transport spending should also therefore be a key consideration. Research undertaken in the East of England via the previous Government’s ‘Delivering a Sustainable Transport System’ (DaSTS) initiative proposed a methodology for identifying resilience hotspots [13] . A similar approach could usefully be applied nationally to identify key locations for transport spending which ensure resilience benefits are realised.

Rail

3.13 The TEES report suggested that investing in the rail network would have significant economic returns, particularly where there are still incremental improvements that could be made in terms of speed and capacity. The TEES report suggested that in the East of England, an increase in capacity on the Great Eastern Main Line would cause the most significant uplift in productivity of all the radial rail routes in the East of England. In order to examine this further, EEDA has recently published a report examining the potential economic benefits that could be accrued from developing this rail route. [14]

3.14 The research demonstrated that over the standard 60 year appraisal period, economic benefits of £3.3billion could be realised from a range of improvements on the Great Eastern Main Line, including increased journey speed, increased line capacity and reduced overcrowding.

Reducing demand (travel planning and local schemes)

3.15 Economic efficiencies due to congestion are the result of an imbalance between the demand for transport and the supply of capacity. The evidence presented above shows that supply-side measures are important but it is also important to examine demand side measures too.

3.16 The TEES work looked at the economic impacts of reducing traffic levels in particular economic hotspots, including the three cities of Peterborough, Cambridge and Norwich, and the London Arc constellation of medium-sized towns. The results showed at a basic level that if traffic levels could be reduced by 10 percent in the three cities above, then economic benefits of £21million per annum could be realised. Furthermore, a similar level of traffic reduction in the London Arc zone of south Hertfordshire and south west Essex would generate economic benefits of £53million per annum.

3.17 Following these encouraging early results, EEDA examined further the economic benefits of travel planning to include all trips (not just those on the strategic road network). The results showed that implementing travel planning in the East of England so as to cause a 3 percent reduction in vehicle kilometres on the region’s roads (including up to 5 percent reduction in peak periods) could have economic benefits of up to £200million per annum. [15] These economic benefits comprise £150million from decongestion benefits and £50million wider benefits such as agglomeration and labour market benefits.

3.18 The merits of prioritising spend on low-cost but high-impact local level schemes are further supported by evidence from the ‘Sustainable Travel Towns’ demonstration project. The Department for Transport sponsored three towns in England to take forward an advanced programme of travel planning, one of which was Peterborough in the East of England, but also including Darlington and Worcester. The combined results from the projects, which focussed on workplace and school travel planning, personal travel planning and sustainable travel awareness campaigns, demonstrated that travel planning in this instance reduced car driver trips by 9 percent and car driver distance by 5-7 percent, whilst increasing cycling by 26-30 percent and bus patronage by 10-22 percent. The programme cost £15million over five years in the three towns, with a conservatively estimated cost benefit ratio of around 4.5 (congestion only). [16]

3.19 In addition to the ‘softer’ elements of demand management discussed above, there is a wealth of evidence on the potential impacts of harder, fiscal, approaches to demand management available from Cambridgeshire County Council’s work under the DfT’s former Transport Innovation Fund initiative [17] .

3.20 This evidence suggests significant value for money and further expansion of these types of measures across the country to address transport’s economic issues.

Non-transport measures

3.21 In addition to the investment on the three categories of direct transport schemes outlined above, ‘non-transport’ spend that improves the productivity of travel time, or replaces travel time with productive time that could benefit the economy is also very important to consider. There are a number of examples of this, for example, expansion of the broadband and public Wi-Fi network and increased facilities for home or hub-based working.

3.22 A consortium of EEDA and local authorities has recently invested in Wi-Fi provision on Norwich to London Trains. In a research report by the University of East Anglia, it was demonstrated that rail customers, particularly business users, would value these types of measure:

"Broadband Access (Wi-Fi) and plug sockets for laptops and mobiles are the two main features which passengers believe it would be a big bonus for them if they are available on-board." [18]

University of East Anglia / Shaping Norfolk’s Future

3.23 EEDA supported the installation of Wi-Fi on trains because the TEES report provided evidence to suggest that of all the rail lines in the East of England, investment in measures to reduce the costs associated with journeys on the Great Eastern Main Line would have the highest benefits in terms of economic productivity. The business case for installation of Wi-Fi utilised the results from a research study conducted by the Institute of Transport Studies in Leeds. Through analysis of responses to a range of scenarios, it was possible to estimate the value that passengers put upon the provision of Wi-Fi as an additional service improvement. This study concluded the values of time per hour to the user outlined in Table 6.

Table 6: The benefits of Wi-Fi provision on trains

Source: EEDA Wi-Fi Business Case [1]

3.24 Using these findings, it was possible to calculate in the business case for Wi-Fi on Norwich to London trains on the Great Eastern Main line that there would be productivity benefits to users of £0.84million in the first year alone arising from the installation of Wi-Fi, with a five-year benefit of £5.6million. This represents a significant economic benefit, and good value for money (as the capital cost of installation was £346,000).25 We would therefore recommend that Government and other policy makers should prioritise non-transport measures that aid productivity, such as this. In this instance, a specific recommendation would be that rail franchise specifications demand the installation of Wi-Fi and other wireless communication’s facilities on trains to increase the productivity of travel time, and that policy makers seek to secure Wi-Fi provision across the public transport networks including on buses and coaches.

4. Balancing revenue and capital expenditure

4.1 The Select Committee has set the following question: ‘How should the balance between revenue and capital expenditure be altered?’

4.2 In order to respond to this question, it is necessary to reflect on the responses to the previous question.

4.3 Whilst supply-side capacity enhancement schemes rely to a large extent on capital funding, it is increasingly necessary to provide revenue funding for the range of travel planning and sustainable transport measures that demonstrate high value for money, and often address the demand for travel.

4.4 It would be advantageous for local authorities to be able to have greater flexibility over the funding they receive, in order to match the funding to their own specific circumstances and to address their local economic objectives. A priority for one local authority may be a major scheme requiring large capital investment, whilst another local authority may prefer to implement a wide-scale smarter travel programme that needs large amounts of revenue funding. We would therefore suggest that DfT provides local authorities with the freedoms and flexibilities to determine how they receive their funding, including considering how best to support local smaller major schemes that historically may have been too costly for funding from ‘block’ allocations but possibly too small to compete with some of the larger scale schemes traditionally funded via the RFA.

4.5 In addition, it is worth noting that capital investment could actually lead to revenue streams for local authorities, most notably through pricing mechanisms. The work undertaken by Cambridgeshire County Council [2] for the now-abolished Transport Innovation Fund demonstrated that investment in a congestion charging scheme would have generated revenue for the local authority that could potentially have been reinvested back into transport.

5. Assessing transport schemes

5.1 The Select Committee has set the following question: ‘Are the current methods for assessing proposed transport schemes satisfactory?’

5.2 The current methods for assessing transport schemes are defined by the New Approach to Transport Appraisal process, as outlined on the Department for Transport’s Webtag guidance [3] . This requires the consideration of transport’s contribution to five objectives (Environment, Economy, Safety, Accessibility and Integration) which when considered together provide the decision-maker with the information needed to reach a considered judgement on the value of a project.

5.3 In order to answer the question, it is necessary to identify the advantages and disadvantages of the current methods.

5.4 We regard the advantages of the current methodology to be that it:

· Is quantifiable - It is based largely on quantified analysis, which in turn is based on scientific and mathematical analytical techniques. This ensures a strong rigour is employed.

· Allows monetary valuation of benefits – By requiring as much as possible a monetary valuation of the economic worth of schemes, it allows the costs of the scheme to be compared to the benefits of the schemes. This is extremely useful in establishing whether a scheme is good value for money.

· Enables comparison between schemes – The development of the appraisal summary table (as well as the monetary valuation of costs and benefits) allows comparisons to be made between schemes, which is particularly important when prioritising transport measures. In this ‘age of austerity’ where there is limited funding available, this is a particularly important feature of the current system that allows identification of those schemes that provide particularly good value for money.

· Is well established – Whilst arguably not a reason for continuing with it, the current system is well understood by the transport planning profession. A new system where monetary valuation is not required would give funding bodies less confidence that transport schemes could provide demonstrable value for money, and also require a retraining of a large section of transport planners in any new system.

· Incorporates a degree of flexibility – Where some impacts cannot be monetised, the appraisal summary table gives decision makers the information required to trade-off monetised impacts against non-monetised impacts (such as biodiversity etc).

5.5 We regard the disadvantages of the current methodology to be that it:

· Is biased towards some transport modes – The measurement and aggregation of small time savings can arguably take on a disproportionate value, which means that some highway schemes appear to perform better than would otherwise be the case. Furthermore, the assumption within NATA that fuel-related taxation revenues are a benefit can also significantly enhance the business case for road schemes but can be detrimental to the relative performance of public transport schemes.

· Incorporates long appraisal periods – Whilst some transport schemes have long life-spans, such as road and rail infrastructure, that continue to have a residual value over 60 years (the suggested NATA appraisal period), it is extremely difficult to forecast travel patterns and demand over a 60 year period and thus appraise what the benefits of those schemes will be in the latter years of the appraisal period. We simply do not know what the world will look like in 60 years time. Furthermore, it is arguably not appropriate to compare the cost, benefits and value for money of ‘long-life’ capital infrastructure schemes (funded in the short term with payback periods of 60 years) against more modern demand management and generally revenue-funded transport interventions (with lower capital costs but ongoing revenue costs) over the same time period.

· Is unable to capture all benefits – As alluded to earlier, some of the benefits of a number of transport interventions have benefits and impacts not covered or monetised in the NATA process. Walking and cycling, for example, may have significant benefits for health, and therefore widespread cycling and walking could provide financial benefits for the National Health Service, and for employers where healthier staff are more productive. It is difficult however, to isolate and monetise these impacts, so they are not considered, however important a contributory factor they might be, so the Committee may wish to consider how links to the wider Government agenda can best be reflected in transport appraisal. It is also questionable as to whether the carbon reduction benefits are accurately considered within the NATA process.

· Is onerous – The current system relies on the existence and use of transport models. Although probably the most rigorous and mathematically accurate method available to transport planners, models are onerous and expensive to run and continuously need updating.

5.6 In response to the question, the current system is probably ‘satisfactory’, but it could be improved by:

· incorporating a wider range of benefits, such as health benefits;

· reducing the weighting towards the aggregated value of individual’s small time-savings, as these may not be perceptible or used productively; and

· reducing the level of appraisal required for smaller or local schemes to avoid the resource intensive modelling required for a full NATA appraisal.

6. Planning future transport schemes without regional structures and strategies

6.1 The Select Committee has set the following question: ‘How will schemes be planned in the absence of regional bodies and following the revocation and abolition of regional spatial strategies?’

6.2 In addressing this question we consider it is worthwhile to reflect on the system that was in operation prior to the 2010 General Election and then to consider some of the issues that any new or replacement system will need to address.

Prior to the 2010 General Election

6.3 In England the Regional Assemblies and the Regional Development Agencies (RDAs) were respectively responsible for developing the Regional Spatial Strategy and Regional Transport Strategy, and the Regional Economic Strategy which typically includes transport/economic policies and goals. Together these provided an overview of how spatial transport and planning over the relevant region should contribute to social, economic and environmental challenges.

6.4 Transport interventions on the ‘National Networks’ in each region were primarily driven by the Department for Transport (DfT) with the Highways Agency in the case of roads, and by DfT with Network Rail in the case of rail. In both of these latter cases, however, regional bodies had a strong influencing and evidence-building role to help make the case for key interventions that were aligned with the now revoked regional strategies outlined above. One example in the East of England would be the Felixstowe to Nuneaton rail freight enhancements.

6.5 However, in the case of what was previously defined as the ‘City and Regional Networks’, the regional bodies had an even more direct role with a key task being to identify and prioritise major scheme (>£5m illion ) spend on these networks through the Regional Funding A dvice (RFA) to Government.

6.6 Although the detailed process varied slightly on a region-by-region basis, the broad approach adopted was broadly similar. In summary, the approach adopted in the East of England was:

· The Department for Transport provided an indicative allocation of transport funding for spend on major schemes on the City and Regional Networks over a set period of time;

· The Regional Assembly and Regional Develo pment Agency, working with the local t ransport a uthorities and the East of England’s Regional Transport Forum, developed a policy framework (based on national, regional and local policies for transport) and an appraisal mechanism against which proposed interventions could be developed and assessed;

· Scheme promoters (i e local authorities, Highways Agency and to some extent Network Rail) put forward transport schemes that they considered addressed the policies in the policy framework as candidates for funding via the RFA;

· The performance of the schemes was then assessed against the policy / appraisal framework to test ‘policy-fit’ and also to assess factors such as deliverability and the robustness of cost estimates;

· The performance of all of the candidate interventions was then considered by the Local Authorities via the Regional Transport Forum and Regional Assembly, and by the RDA Board, with final recommendations on the region’s transport priorities taken to the Regional Partnership Group (RPG) made up of businesses, local authorities, delivery organisations and the regional bodies. The RPG then submitted the agreed priorities to Government for their final approval.

6.7 A further task of regional bodies wa s the regional co ordination of the previous Government’s ‘Delivering a Sustainable Transport System’ programme (DaSTS). In the East of England, the process was led by the East of England Development Agency [4] .

6.8 In addition to these formal roles, the regional bodes co-ordinated activity on a wide range of other transport issues, for example , leading on research, intelligence and evidence building, and integrating strategic transport decisions with planning policies and economic development (which transcend local authority boundaries). It is important to note that natural transport corridors, travel for work areas, and economic geographies do not stop at local authority boundaries. Intelligence development, strategy and decisions on major transport schemes is often required over wider geographical areas, and this is where sub-national bodies can add value.

6.9 In addition, strong sub-national bodies and alliances can lobby effectively at a European level on other significant transport priorities to lever in further funding for transport. In the East of England one such example was to secure TEN-T funding from the European Commission for the Felixstowe to Nuneaton Railway enhancement. Businesses in particular have been able to input into regional processes via the Regional Development Agency and other regional business groups, and it i s important that their views continue to be heard in sub-national decision making on transport.

Post-2010 General Election

6.10 With the abolition of the r egional bodies and revocation of the regional strategies, the key challenge is to ensure that any new systems put in place learn from experiences under the former regionally-based transport planning mechanisms. We have identified a number of key issues and learning points that the Committee may wish to consider. These are:

· Previously DfT tasked the regional bodies with identifying sub-national transport priorities – with the abolition of this intermediate tier it is currently unclear how major transport sub-national priorities will be identified. Although these could be put forward by local authorities and the Local Enterprise Partnerships this could create significant difficulties for DfT who could potentially have to liaise with and assess priorities across a much greater number of geographic areas;

· With the former RFA system, local authorities had some degree of certainty up to 10 years in advance whether their scheme would be likely to be funded. They were therefore in a stronger position as to whether to take the risk to invest funds into developing a scheme to full business case (which can cost hundreds of thousands of pounds). Any new system would need to recognise the importance of providing as much certainty as possible to scheme promoters to minimise risks of costly abortive spend;

· With the abolition of the regional tier, in many areas there are currently no clear leading sub-national authorities to provide the evidence for and prioritise (at a strategic level) transport schemes that were previously classed as ‘regional schemes’. One potential group of bodies that could fulfil these duties could be the Local Enterprise Partnerships (LEP s ) that are being formed t o replace RDA s. It has been suggested by the Secretary of State for Transport that a consortia of LEPs could take on an economic prioritisation role for transport:

"I hope that there may be an opportunity to encourage them [LEPs] to work together in appropriate groupings to look at transport issues on a sub-national basis around natural geographical areas that are relevant from a transport infrastructure point of view"

Philip Hammond, Secretary of State, DfT (July 2010) [5]

· The delegation of transport roles and responsibilities to LEPs raises a number of potential challenges. Issues to consider include:

o Greater clarity is required on the resources that will be available to LEPs for them to take forward transport planning work and undertake sub-national strategy-making and prioritisation exercises previously led by the regional bodies and their staff;

o Greater clarity is also required on the formal roles that LEPs will play with regard to transport. Private sector organisations emphasise the importance of LEPs having real purchase on transport planning and investment given the importance of access to markets and talent. Businesses have consistently stated that good transport infrastructure is a key priority;

o There may ultimately be geographic gaps in coverage, where some parts of the country are not covered by a LEP. The treatment of transport issues in these locations would need to be considered;

o There could be a misalignment between LEPs that are based on functional economic geographies and other statutory transport authorities, such as local highway authorities and Integrated Transport Authorities that may work to administrative or other boundaries. There will be a need for effective working relationships between institutional arrangements working on different geographic bases.

· A specific advantage of LEPs is that they could directly include the private sector perspective in transport decision making, which is vital in order to allow the private sector to contribute to supplementing the public funds for transport. The CBI’s submission to Government regarding the 2010 Spending Review ‘Galvanising Growth’ states that:

"Given the need to increase total infrastructure investment, new sources of private investment will be needed in areas hitherto funded directly from the public spending and this in turn will require new funding models to be explored. We see particular value in the following……more sophisticated approach to user charges…tax increment financing…asset management…"

CBI (September 2010) [6]

· Given the above, o ne option for public funding might be to operate a system similar to the former RFA but to allocate funds to the ‘new’ economic geographies on a formulaic basis. However devising an appropriate formula would be challenging with a danger that the biggest authorities or LEPs would get more funding rather than this being focussed on where the need is greatest, wh ere the return on investment could be maximised.

September 2010