Transport and the economy

Memorandum from the Local Government Association (LGA)

Summary

Transport investment and the economy

· There remains a backlog of transport investment priorities largely due to underinvestment over a long period.

· Councils have identified priorities to reflect the needs of the local economy but they are severely constrained in addressing them.

· First, the institutional structure for transport in England is fragmented between different levels of government and different modes of transport and operating bodies: the LGA is advocating a radically different approach to planning and funding for infrastructure so a meaningful link can be forged with economic development at local level.

· Second, councils continue to be constrained in their ability to raise finance: unlocking this will be critical to delivering the infrastructure needed to support economic development.

Priorities for spend

· At local level, transport priorities should be determined locally alongside determination of other infrastructure needs.

· The Government’s proposed national planning framework (to cover all forms of development and setting out national economic, environmental and social priorities ) should be built from the bottom up to reflect the needs of local economies and to break down silos between Whitehall departments to produce a properly integrated national strategy.

Capital / revenue balance

· The revenue / capital balance is of less concern to councils than (a) the need for changes to the way capital funding is allocated at a local level and (b) the importance of enabling councils to raise funding.

· All capital investment for infrastructure should be devolved to the local level under control of councils who know how best to use it to support the local economy.

· Councils urgently need the freedom to develop new models of raising funding for essential infrastructure including transport.

Appraisal methodology

· A devolved and unified appraisal system which accurately reflects the costs and benefits of infrastructure investment, and allows comparison and integration with other development projects, is required if we are to make sure that that investment is targeted to deliver maximum value.

How will schemes be planned in the absence of regional bodies?

· The LGA believes that the sub-region provides the best framework for transport governance, and that such a geography based on labour markets areas is essential to move forward.

· This would mean aligning the transport planning function with funding decision-making at a level that reflects journey patterns and local economies. Councils working in partnership at sub-regional level would decide on successor arrangements to Regional Transport Boards.

EVIDENCE

Thank you for inviting the Local Government Association to submit written evidence to your enquiry.

The LGA is a voluntary membership body and our 422 member authorities cover every part of England and Wales. Together they represent over 50 million people and spend around £113 billion a year on local services. They include county councils, metropolitan district councils, English unitary authorities, London boroughs and shire district councils, along with fire authorities, police authorities, national park authorities and passenger transport authorities.

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. The prevailing view from most recent reports and commentators [1] is that, because the UK has under-resourced transport over the long term, a backlog of major investment needs remains, and the priorities identified by Eddington [as per the Committee’s brief i.e. "reducing congestion in urban areas, on key inter-urban corridors and at key international gateways (major ports and airports)"] continue to be salient today.

· E.g. The backlog of work relating to highways and roads maintenance (an issue close the local authorities’ hearts as Councils are responsible for the maintenance and up keep of more that 96% of the country’s highways and roads), for example, has been recently estimated as in excess of £9.5 billion. [2]

2. The economic potential in many places in England remains untapped because of transport issues.

· E.g. "Our transport links are very poor and we have a major problem with travel to labour markets. We are heavily reliant on improvements in transport for future growth." Hastings Council employee interview by LGA May 2010

· E.g. The old mill town of Burnley, roughly the same distance from Manchester as Reading is from London, has virtually no commuter rail traffic to the city; the connection barely exists… Burnley’s economy is languishing well behind that of Manchester, let alone the rest of England. [3]

3. Aligning transport plans and Local Development Frameworks with economic opportunities, councils have listed the sub-regional priorities for transport investment. There is a long list of transport investment priorities waiting in line as the vast backlog is chipped away at – or, more likely in the current economic circumstances – left in the queue.

· Example of priorities for transport investment identified across South East England [4] :

Ø Subject to confirmation by the outcome of the M25 South West Quadrant study, funding needs to be made available to take forward work that will develop detailed proposals for improving access to Heathrow Airport by public transport as part of a wider strategy designed to address pressure on the transport system in the M25 corridor.

Ø Detailed proposals to make more effective use of the existing highway capacity linking London and Dover/Channel Tunnel need to be prepared through partnership working.

Ø Funding should be made available to enable Dover District Council and its partners develop a detailed implementation strategy that enables access to the Port of Dover to be improved and to help realise local growth ambitions.

Ø The Department for Transport should commission further work in partnership with local authorities to bring forward a firm proposal for a ‘lower Thames crossing’.

Ø A commitment needs to be made through the High Level Output Specification for the Control Period commencing in 2014/15 that capacity issues at Oxford Station will be addressed and that the Western Section of East West Rail will be implemented.

Ø A commitment needs to be made by the Government to deliver the comprehensive strategy for the Great Western route.

Ø Funding should be made available to the unitary authorities in Berkshire in order to increase their joint capacity and capability to develop detailed proposals that support the Thames Valley economy.

Ø Funding should be made available to Oxfordshire County Council in order to increase its capacity and capability to develop detailed proposals that will enable the potential for Science Vale to be realised.

Ø Funding should be made available to the Partnership for Urban South Hampshire to support the development of detailed proposals to enable their implementation at the earliest opportunity.

Ø Funding should be made available to West Sussex County Council and Brighton and Hove Council to develop a detailed implementation strategy that will enable the regeneration potential of the coastal area to be realised.

Ø Funding should be made available, via the MKSM Executive, to develop detailed proposals for implementing the inter-urban bus/coach network.

4. There is likely to be a need for further work to identify priorities once the arbitrary structures of government regions give way to the more meaningful areas defined by Local Economic Partnerships. This is because local priorities need to be planned alongside other infrastructure investment decisions at the sub-regional level – i.e. the level at which economies work. (This is not to undermine the work of the Regional Transport Boards, simply to say there may be a case for supplementing it once structures are aligned with local labour markets.)

5. The link between transport spending and economic growth is not adequately reflected in current decision making processes. SEE BOX. The LGA is advocating a radically different approach to planning and funding for infrastructure to give councils more flexibility to target investment most effectively. (This is discussed in more detail under How will schemes be planned in the absence of regional bodies and following the revocation and abolition of regional spatial strategies? below.)

The link between transport spending and economic growth

A fundamental problem remains: bodies responsible for transport decision making do not have a sufficient handle on all the policy and funding levers they need to deliver an integrated transport strategy effectively for a coherent geographical area. The institutional structure for transport in England is split vertically between different levels of government, and horizontally between different modes of transport and operating bodies. In any one area there will be a complex web of interactions with the potential for mismatched objectives and ‘silo’ management. Prosperous Communities II – vive la devolution (LGA 20007) sets out the issues in some detail. The key is that the bodies responsible for transport decision making do not have a sufficient handle on all the policy and funding levers they need to deliver an integrated transport strategy effectively for a coherent geographical area. The case was also made by the Eddington Study, which emphasises that existing agencies have limited incentives to consider travel options across modes or the interactions between user groups (HMT 2006 p256).

From Breaking the Gridlock LGA 2007

6. The other key point to make about how current conditions have, or have not, changed since the Eddington Report, is that, of course, funding (local authority budget specifically) is under extreme pressure – a position which has changed, but on the other hand councils continue to be constrained in their ability to raise finance – a position which has not changed. Unlocking this potential will be critical to making progress (covered in more detail under How should the balance between revenue and capital expenditure be altered? below).

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?

7. Local There is no one type of transport which should be prioritised – rather, each area (probably at sub-regional level), should prioritise their transport investment needs alongside their other infrastructure investment needs, allowing for comparison and integration with other development projects to make sure that that investment is targeted to deliver maximum value for money.

8. Projects of national significance / significance for more than one sub-region Despite having one of the most centralised planning systems of all advanced economies, we have long suffered from departmentalism and incoherence at the national level. Councils have long called for a national framework that provides certainty about national infrastructure projects. The government has committed to a consolidated national planning framework covering all forms of development and setting out national economic, environmental and social priorities. It is essential both that that framework is built from the bottom up to reflect the needs of local economies and that it breaks down silos between Whitehall departments to produce a properly integrated national strategy.

National infrastructure projects will have significant impacts on the local communities in close proximity to the development. Councils have an important role to play in making sure that their communities’ interests are represented in consideration of national scale schemes. The consultation and assessment processes required will place significant extraordinary resource burdens in comparison to normal business of a Local Planning Authority. This could be resourced by requiring the scheme promoter to pay for the cost of the council carrying out a local impact assessment.

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

9. The revenue / capital balance is of less concern to councils than (a) the need for changes to the way capital funding is allocated at a local level to support development for all infrastructure and (b) the critical importance of enabling councils to raise funding / removing constraints to them doing so. Taking these in turn:

10. Single capital pot The LGA is currently campaigning for a radically different approach to funding for infrastructure, advocating place-based budgets to include a single capital pot. These arguments are made in detail in Place-based budgets: the future governance of local public services and in Funding and planning for infrastructure (published by the LGA).

11. Removing constraints to allow councils to raise funding In times of constrained public spending, it is unlikely we will see significant increases in funding for roads in the near future. We therefore urgently need the freedom to develop new models of raising funding for essential infrastructure including roads. This includes models whereby councils can use their assets and future revenue streams to support infrastructure development and attract higher levels of investment from the private sector.

12. The specific issue arising for roads is the potential for using toll roads to support finance of expansion.

13. The paper Funding and planning for infrastructure also discusses other means by which councils could use or have used to support financing for instance congestion charging, charging for road use, Nottingham’s Workplace Parking Levy, Newcastle City Council’s £21m of prudential borrowing investment through a 1.2 per cent increase in council tax agreed in consultation with tax payers and the Tyne and Wear Integrated Transport Authority (ITA) Tyne Tunnel financed without recourse to government funding (the £260m project is predicted to be self-financing with all debt serviced through income from tolls). The paper explains how councils are often frustrated by the requirement to satisfy central government of the case for implementing these models.

Are the current methods for assessing proposed transport schemes satisfactory?

14. Investing in infrastructure can and should deliver significant benefits and future savings in terms of public health, safety, pollution and crime reduction. Currently, however, these are not given sufficient weight in investment appraisal methodologies, and sometimes are not reflected at all. This means that current appraisal systems may not lead to the best allocation of resources.

15. The Cabinet Office’s recent report on Urban Transport illustrated the point. It quantified the economic consequences of traffic congestion – which investment appraisal measures – at around £11 billion per year in urban areas. But the costs to society of poor air quality, ill health, and road accidents are each of a similar level, totalling at least £40 billion. Transport also contributes to negative experiences of urban streets and public spaces which whilst so far unquantifiable, are of major concern to those who live and work in cities. [5] The report found that current appraisal methodologies prioritise congestion relief (time savings to motorists) over other objectives such as health. This skews investment decisions and leads to mis-allocation of resources.

NATA (New Approach to Transport Appraisal) is the framework DfT uses to help inform major decisions about regulations, policy and investment

Ø Local authorities bidding for capital funding have to demonstrate the case for transport schemes against five criteria

Ø Value for money is the main criterion guiding scheme appraisal. Strategic fit; Financial; Commercial and Delivery criteria are also taken into account

Judgements about value for money are informed by benefit cost ratios and qualitative evidence about the impact of a scheme.

Ø Carbon, physical fitness, noise, and accidents are quantitatively monetised. However, factors such as condition of walking and cycling environments, accessibility, air quality, ambience and townscape are not included in BCRs

Ø Some of these factors are qualitatively assessed, and a judgement is made as to whether these are sufficiently large to change value for money rankings.

Ø However, it is more difficult to take account of qualitative factors in value for money assessments

Ø This means schemes which significantly benefit or impact walking and cycling are not equally prioritised compared to other schemes, skewing investment decisions

(From: Cabinet Office report on Urban Transport 2009

16. A recent report from Defra estimated that air pollution causes annual health costs of roughly £15 billion to UK citizens. Factoring air quality into decisions about how to reach climate change targets results in policy solutions with even greater benefits to society - £24 billion of additional savings could be made by 2050 from tackling climate change and air quality together [6] .

17. A devolved and unified appraisal system which accurately reflects the costs and benefits of infrastructure investment, and allows comparison and integration with other development projects is required if we are to make sure that that investment is targeted to deliver maximum value for money.

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

18. The Local Government Group recognises good infrastructure networks are crucial to economic recovery, attracting jobs and investment to our towns and cities.

19. Decisions about investment in infrastructure, including transport, need to be made locally so that integrated transport strategy can be delivered effectively for coherent geographical areas, considering travel options across modes of transport or the interactions between user groups.

20. This will require a radically different approach to planning and funding for infrastructure to give councils more flexibility to target investment most effectively. All capital investment for infrastructure should be devolved to the local level under control of councils who know how best to use it to support the local economy.

21. This would mean aligning the transport planning function with funding decision making at a level that reflects journey patterns and local economies. Councils working in partnership at sub-regional level would decide on successor arrangements to Regional Transport Boards (where local authorities took responsibility for collective decision making on identifying strategic investment priorities for transport) and any collective arrangements for local transport planning functions.

September 2010