Transport and the Economy

Further evidence from the Campaign for Better Transport (TE 79A)

1 This short submission updates our original submission to the Select Committee, in light of the announcements which followed on from the comprehensive spending review.

Local Sustainable Transport Fund should produce innovative results

2 We welcome the Government’s decision to make a separate fund available for sustainable interventions at a local level, particularly in that it supplies revenue funding. Whilst this will not make up for the sizeable cuts in other funding, it should encourage local authorities to trial new approaches, particularly where their application for a major scheme has been rejected (or where they had been working up a scheme but had not submitted a business case before the deadline).

Highways Agency programme is a welcome shift towards managing capacity

3 We welcome the Secretary of State’s decision to prioritise managing existing trunk road and motorway capacity over adding new capacity. Not only is this less costly, but, by smoothing traffic flows, it has the potential for long-term benefits, whereas road widening tends towards short-term gains offset by long-term deterioration as generated traffic outstrips the new supply.

4 We are pleased that the coalition has recognised that the A14 Ellington to Fen Ditton did not represent the best solution to congestion on the A14. We welcome the decision to cancel the project and to instead embark upon a proper, multi-modal, consideration of the Felixstowe – Midlands road-and-rail corridor. We hope that this will provide some useful opportunities for local people to feed in their suggestions for lower-cost, more sustainable solutions, such as upgrading the Felixstowe-Nuneaton rail freight line.

5 We are concerned about the decision to fast-track the A556 Knutsford to Bowdon road scheme. This road carries serious environmental impacts, both in local terms (it would have a severe impact on local green spaces) and nationally (in terms of greenhouse gas emissions). It is nowhere in planning terms, having had no draft orders published, nor undergone a public inquiry; indeed, the Highways Agency has only just announced a preferred route. We cannot believe that construction will have started, let alone finished, by 2014/15, and therefore cannot understand why it is being considered for funding in this spending review period.

Local authority programme offers false hope to councils

6 Whilst we support the Government’s plans to reassess the programme of local authority majors, we are concerned that the current programme encourages councils to continue spending money developing projects which stand next to no chance of receiving funding.

7 For instance, the development group has £600 million attached to it, but contains 22 schemes, several of which require central Government contributions of over £70 million apiece. The likelihood of, for instance, the £100 million Hastings – Bexhill Link Road, being approved in this spending review period is minimal. However, instead of admitting as much, the Government has offered false hope to councils, who will have no option but continuing developing their scheme.

8 This is particularly applicable to schemes in the pre-qualification group. In theory, schemes in this category could be elevated to the development group. In practice, however, the development group is over-subscribed (see above). We do not believe that any schemes could be brought forward from the pre-qualification group, because competition for its limited funds is already fierce.

9 It would have been preferable for the Government acknowledge that many of the schemes in the development and pre-qualification groups are not going to be built. This would have created political space for councils to rethink their proposals; to return to first principles and explore more affordable and sustainable solutions.

Choice of supported schemes is questionable

10 We have particular concerns about two of the schemes that the Government placed in the supported group. The first, the Heysham M6 Link Road, is being promoted by Lancashire County Council. The council plans to totally redesign it, and has said that this will result in material changes. It would therefore require a new planning application and public inquiry. Any revisions would need to be completed by the end of the year, giving the council around seven weeks to totally redesign a major scheme, consult the public, ascertain the costs, benefits and wider social impacts.

11 We fear that this timescale is too short, affords no time for consultation and is likely to result in substandard work. We also cannot understand how DfT plans to decide whether to approve the road by January. Analysing a major scheme business case normally takes around six months, but it took DfT and Lancashire CC five years to conclude the business case for this scheme. We simply do not believe that this can be done properly in the time currently allotted. Instead, this scheme, and any others which are being completely rethought, should be considered as part of the development group.

12 We are also sceptical of the benefits attributed by Halton Borough Council to the Mersey Gateway Bridge. Professor Wenban-Smith has highlighted a number of major inconsistencies in their business case, including that there will be no benefit to anyone, save the toll operators, for the first fourteen years. We are also concerned that efforts to reduce central Government contributions will result in further, substantial, PFI costs, and that assumptions of the likely toll charges are wildly optimistic. We enclose a copy of his short briefing, which, we believe, is a perfect example of how the flaws inherent in the current appraisal system operate.

Appraisal needs serious reform, not tinkering around the edges

13 There is serious confusion as to which version of the Department for Transport’s WebTAG guidance is in use. Over a year ago, the previous Government began revising WebTAG and NATA. However, because the proposed changes were not enacted before the pre-election purdah, many sections of WebTAG currently exist in two forms: an out-of-date original, and a reformed version in draft. Worryingly, it is those areas which were felt to be most urgently in need of reform which are disputed, because those are the sections where changes were proposed and new versions consulted on.

14 Given this confusion, there is a real need for the Government to clarify how it appraised transport schemes in the comprehensive spending review, and how it plans to appraise them when it decides which schemes should go ahead next year. Despite blanket media coverage of the comprehensive spending review, including in the specialist press, we were given little insight into what methodology was being employed to compare transport schemes, let alone how spending on transport was compared with spending on defence, health or education.

15 In our main submission, we outlined the case for reforming transport appraisal. The Government has continued to suggest that this long-awaited reform is imminent. Their Investment in Local Major Schemes, published concurrently with the Secretary of State’s more detailed post-spending review announcement, promised "to take forward the commitment in the Coalition Agreement to reform the way decisions are made on which transport projects to prioritise. The appraisal of local major schemes will be consistent with these proposals."

16 Transport appraisal is not an exact science. You will have already heard several experts outlining different ways in which they would reform the current system, as well as the difficulties which reaching agreement as to the optimum system. However, what is not in dispute are the myriad flaws in NATA and WebTAG, and the need for urgent reform to ensure that schemes which perform well in the appraisal process are those which best fit Government policies.

17 We believe that there is an urgent need for a comprehensive overhaul of transport appraisal, tackling issues of time savings, valuation of externalities, do minimum comparisons, treatment of fuel duty revenues, etc., all of which we outlined in more detail in our main submission. This is likely to materially alter benefit-cost ratios, which are still dominated by time savings and fuel duty revenues. We believe that getting appraisal right must be central to the Government’s plans for the coming year, so that the package of schemes which emerges out of the development group can be properly assessed for their benefits, costs and fit with Government policies.

Rail fare increases will restrict labour market and price people off the railways

18 We are very disappointed at the decision to increase the cap on regulated rail fare rises from RPI+1% to RPI+3% from 2012. Using the Office of Budget Responsibility’s RPI forecasts, this will lead to fares being 31% higher by the end of this Parliament in 2015. This is against a historical real term increase in rail fares of 55% between 1998 – 2008 (compared with an 18% real term decrease in the cost of motoring). [1]

19 There is a danger that this will be price people away from jobs in many city centres, restricting the labour market. Season tickets are already twice as high as other European countries and this situation will only get worse, affecting the competitiveness of London and other cities. [2]

20 Sample season ticket rises by 2015 include:

· Milton Keynes to London: £5,026 (increase from 2010 price: £1,194)

· Gillingham to London: £4,995 (increase from 2010 price: £1,187)

· Luton to London: £4,229 (increase from 2010 price: £1,005)

· High Wycombe to London: £3,605 (increase from 2010 price: £857)

21 There are also risks that could arise from failing to protect flexible fares. We understand that Virgin is planning to abolish all walk-on fares on some peak time services between London and Birmingham.

22 The Government’s forecast is that, as a result of the change to RPI+3%, there will be 4% fewer trips by rail than otherwise [3] , most of which would be expected to shift to road transport with consequent rises in congestion and carbon emissions. This is bad news for all transport users.

Cuts to bus support will force people into welfare-dependency

23 Bus services are a vital part of people’s lives. They are the most popular form of public transport, and are especially important in rural areas, and to people on low incomes. They have featured prominently in the Government’s welfare-to-work strategy, with Works and Pensions Secretary Iain Duncan Smith suggesting that jobseekers should "get on the bus" and look for work.

24 But bus services are under threat from three sides. Firstly cuts to local authority revenue grants have put pressure on local authority tendered services. Somerset County Council have just approved cuts to bus subsidies that they predict will lead to a 50% reduction in bus services across the county, with severe impacts on rural isolation and local businesses. [4] North Yorkshire County Council are proposing severe cuts to evening, weekend and holiday services and have reduced the times when concessionary passes can be used.

25 Secondly, changes to the valuation of average fares in the concessionary fares formula will cut the amount spent to provide concessionary fares. This would penalise longer-distance rural bus services and services in the larger cities that do not have integrated transport authorities. The DfT’s impact assessment suggests that this could result in 2.4% fewer trips by bus.

26 The third blow to bus services will be the cuts to bus service operators grant of 20% from 2012. If this is combined with moves away from being based on mileage, this could again affect rural bus services more. The Department for Transport estimate that the 20% cut to BSOG could result in:

· Fares increases and service mileage reductions of around 2% in rural areas

· Fares increases of around 1% and service mileage reductions of around 2% for small towns

· Fares increases and service mileage reductions of around 1% for larger non-metropolitan towns

· Fares increases of around 2% and service mileage reductions of around 1% in metropolitan areas. [5]

27 In combination, these cuts (which might appear relatively small in isolation) are likely to combine to form a triple whammy from which bus services, particularly in rural areas, will find it difficult to recover. The impact of these cuts will be especially felt by those out of work who are looking for a job. Two thirds of job seekers do not have a driving license or access to a car. [6] Research by the Social Exclusion Unit discovered that 38% of job seekers found transport was a major obstacle to their finding work. [7] People should be getting on the bus to find a job, but that depends on there being a bus to use in the first place.

Plans for lorry road user charging and rail reform need further work

28 We are disappointed that the Government has opted for a simple vignette system for lorry road user charging. We believe that there are sizeable benefits in a slightly more complex model, as suggested in our recent report, Lorry Road User Charging – A Way Forward for the UK. We looked at a number of different models, and concluded that the simple time-based model, as supported by Government, would not meet wider objectives, would raise enforcement issues, could run into EU limits on charging, and be costly to implement and run.

29 We are concerned that plans for rail restructuring would hinder rail freight without significantly benefiting the rail industry. The Government is currently considering regional sectorisation and vertical integration, but rail freight works best with a national network, because this tends towards an integrated network which can compete with national road freight. We believe that the impact on rail freight of these proposals should be better considered to ensure that rail freight remains competitive and a viable solution to trunk road and motorway congestion, greenhouse gas emissions and air quality issues.

UK needs to develop transport which supports a sustainable economy

30 In conclusion, we believe that getting transport right will be critical to engendering the conditions for a sustainable recovery. However, UK transport policy continues to fixate on long-distance movement of goods and people, rather than developing sustainable economic communities in our towns and cities.

31 Whilst the ability to move goods and services is important, it risks prioritising spending on inter-urban routes at the expense of our urban areas. As has been apparent for some while (it is cited in Eddington, for instance) at least 80% of congestion in the UK is in urban areas. But the majority of transport spending remains focused on inter-urban connectivity: bypasses, link roads, motorways, high-speed rail, intercity rail, etc.

32 Reversing this trend should be a vital goal for the coalition, in order to reverse the decline in our towns and cities by making them attractive places to live, work and shop; accessible to people, regardless of car ownership and income.

November 2010