Transport and the economy

Memorandum from Stephen Plowden

Summary

Not all economic activities and growth are desirable. There is an urgent need to reduce unemployment and to redress the balance of the economy between economic sectors and geographical regions. However, this must be done in a way which gives pride of pace to reducing transport’s contribution to climate change and also helps to reduce the social injustices inherent in present transport arrangements.

It is very important to enforce speed limits properly; the best way is by fitting vehicles with variable speed limiters. New vehicles should be manufactured with these limiters, and a mass programme of retrofitting existing vehicle should be undertaken. This programme, which would be partly funded by the state, should be used to reduce unemployment.

Minimising the need to travel is an important way of reducing all the costs and nuisances of transport. Recent technical advances make it possible for many commuting and business journeys to be replaced by telecommunications. The government should ensure that all regions are well served by broadband and should also be prepared to help provide businesses or individual people with the necessary equipment.

To keep journeys short, and to ensure that when longer journeys are necessary they can be made by public transport, the facilities required for everyday living should be provided in every neighbourhood, and those too large or specialised for that to be possible should be located near public transport stops. These aims can be achieved by locating governmental facilities appropriately, by planning permission for private developments, and by using money from transport budgets to promote a suitable configuration of facilities. For example, facilities which are too small to be commercially viable, but are justified in terms of social cost-benefit, should be subsidised by money which would otherwise be spent on transport. .

Inadequate user rules mean that the existing roads are not being used to the best effect. The principal reforms required in towns are lower and better enforced speed limits, more reallocation of space away from cars to pedestrians, cyclists, buses and sometimes also goods vehicles, controls over non-residential off-street parking places. Lower, better enforced speed limits are needed on roads outside towns. A simple nationwide system of road pricing for lorries should be introduced, and there may be a case for road pricing for cars on motorways and selected A roads.

A modest programme of investment will be required to implement these management measures, which should sometimes be accompanied by relatively minor investment in new infrastructure. But until the reforms have been implemented and their effects observed, no case can be made for any general increase in road capacity. The national road programme should be scrapped.

These reforms to the user rules for roads would allow large cuts to be made to the huge and regressive subsidy now given to rail. It is probable that a substantial programme of individually relatively small railway improvements can be justified, but neither Crossrail nor HS2 can be. They both work against the restructuring of the economy that the government rightly seeks, and their huge costs, and, especially for HS2, environmental damage, are unacceptable.

The needs

1. I t is clear from the Transport Committee’s call for evidence that that both the Secretary of State for Transport and the Committee itself attach very great importance to encourag ing economic growth. Since the size of a country’ s economy is measured by GDP, it is presumably an increase in Britain ’s GDP that the Secretary of State and the Committee want to see. But GDP is not a measure of prosperity or welfare. It is only a (somewhat deficient) measure of economic activity , which can and often does include activities which are environmentally or socially undesirable. If the aim is to make Britain a better place to live in, both for its present inhabitants and for posterity, it is therefore very important to discriminate between economic activities and to select quite carefully the ones to be encouraged.

2. In the present economic circumstances the focus should be o n reducing the unemployment resulting both from the recession and from the severe and rapid cuts which, whether wisely or not, are being made to reduce the deficit. T here is also a need to rebalance the economy, both in terms of economic sectors and of geogra p hical regions, both in order t o reduce the risk of another financial crisis and also for wider social reasons. (It is to the new government’s credit that it has recognised this need, although unfortunately, as discussed in paragraphs 20 to 22 below, its two most important propos als fo r investment in transport work against it.) W e should also seek to minimise expenditure on transport in order to limit the need for damag ing cuts in other sector s.

3. These current concerns must be addressed in way s which take account of climate change, which is the greatest challenge of our times, and which also reduce the heavy social and environmental costs of transport and the injustices inherent in our prese nt transport arrangements. The injustice in road transport is that poor er people who have benefited least from the growth in car ownership and use, which has been the dominant trend of the last sixty years , have also suffered most from its adverse consequences. The mobility of people without cars has been markedly reduced by the decline in local bus services , the worsening of conditions for walking and cycling , and the trend for facilities of every kind to become larger in size but fewer in number and therefore harder to access except by car. A t the same time , poorer people, whether car owners or not, are disproportionately exposed to the danger, noise, air pollution and visual intrusion which the huge increase in motor traffic has brought about. In addition , the huge subsidies to rail (amounting to £5.2 b illio n last year according to the Economist of 18 th August) mostly benefit better off people and people in London and the south-east, the richest part of the country . Many poorer people rarely if ever take a train.

Short-term job creation

4. The most important of measures , discussed very briefly below, to manage transport better concern speed. The speed limits on most roads are too high , but whether the y are reduced or not the same problem of how best to enforce them arises. The best method is through variable speed limiters on the vehicle . (It is now compulsory for lorries and coaches to be fitted with top-speed limiters. Although top-speed limiters have proved very valuable , they do not enforce compliance with speed limits on roads of all c lasses as variable speed limiters would do.) Variable s peed limiters are of two kinds: driver- operated or externally activated. There is still work to be done in the development and testing of externally activated limiters, whereas the technology of driver-operated limiter s, which is virtually identical to that of cruise control , is fully established. We know that driver-operated speed limiters would work and what the extra cost of fitting them to new cars in the process of mass production would be , and we have a reasonable idea of what the cost of retrofitting cars already on the road would be.

5. All cars should be fitted with variable speed limiters. When externally activated limiters have been developed and approved, drivers who preferred them would be allowed to have them, but in the meantime cars should be fitted with driver-operated speed limiters . The responsibility of knowing what the speed limit on each road is would remain with the driver (subject, as at present, to the limits being properly signed) , although drivers who wanted the additional aid of GPS systems and computerized maps (when they become available) showing what the speed limits are on each section of road could of course buy and use them. The cost of fitting new vehicles with speed limiters would be borne by the manufacturer and passed on to the driver, just as hap pens w ith other ma n datory fe atures, such as exhausts and seat belts , at present. But the cost of retrofit is much higher and it would not be very fair to make owners pay the full cost of improving a vehicle which complied with all the regulations in force when it was bought, especially when most of the benefits of the improvement would accrue to other members of society rather than to the individual owner. There is therefore a good case for the state to contribute to the cost of retrofit.

6. The programme of retrofit would take several years , which is a good thing as high unemployment is also likely to be with us for years . The employment would be spread over all regions, and although some training would be required, the work should be suitable for most of the people who are now unemployed but seeking work. In our study Speed Control and Transport Policy , published by PSI in1996, Mayer Hillman and I showed that retrofitting the 23 million cars then on the road would pay very handsomely just in terms of crash and casualty reduction, without regard to the other important benefits that compliance with speed limits would bring. This finding must be even more true now. Our calculation assumed full employment, whereas a programme of retrofit sh ould be used to employ people who would otherwise be unemployed. In addition, the reduction of the official discount rate from 8% in 1996 to 3.5% today increase s the benefit/cost ratio.

Action in transport compared with action in other sectors

7. Conventional methods of regional planning, such as inducements to invest in those industries and regions most in need of it, and the location of the government’s own offices and of universities, research cent res , cultural facilities and so on , are like to be more important than transport policies in bring ing about the required rebalancing of the economy. Howev e r , transport measures could help to improve local commuting, especially for people without cars, who are most in need of help. The quality of the local environment can be an influential factor in deciding where businesses locate . T traffic is one of the biggest threats to that, so measures of traffic restraint could be important in that respect as well a s in others. There is also a gr e a t deal that can be do ne to reduce carbon emissions f r o m transport.

Reducing the need to travel

8 . The best way to reduce all the costs of transport , resource costs as well as environmental and social costs, is to find ways of satisfying the same journey purposes as at present while travelling less. The ideal would be to get rid of the need to travel altogether. Recent advances in telecommunications make this a real possibility for many commuting and business journeys. Personal computers and email have made it possible for many office workers to work at home one or more days a week. There seems to be a trend in this direction already ( I think there are some statistics on this but I have not had time to research it ). The trend is likely to grow spontaneously and it could also be encouraged by policy, including the reforms to the other modes discussed below. Both road and rail congestion could be substantially reduced in this way. Business travel could be reduced by t eleconferencing , which has now reached such a high stan dard that it as if the participants were in the same room. Business journeys account for 19% of long-distance car journeys in Britain , 22% of long-distance rail journeys and 58% of domestic air journeys, so teleconferencing could help significantly to reduce travel by all modes. ( 1 ) Government has a role to ensure that all regions, but especially those with the most severe problems of unemployment , are provid ed with broadband (this may be happening already) . In addition , there may be scope for helping businesses , and/or individuals who want to work from home , to obtain the necessary equipment.

9 . Land-use planning can be used to ensure that the facilities required for everyday living are located in each neighbourhood, thus allowing daily needs to be satisfied by short journeys. The shorter the journey, the more likely it is to be made by foot or by cycle . If a short journey is made by car, it still cause s less danger, pollution and other nuisance than a longer one. Facilities too large or specialised to be provided in each neighbourhood should be located close to public transport stops. Not only would this help travellers without cars, it also makes it more like ly that people who do have the option of a car will use public transport instead, so reducing all the costs and nuisances of car travel.

10 . Public organisations , such as the NHS, government departments and local authorities , should follow these principles in deciding the number, size and location of their own facilities. The same principles should guide p lanning authorities in deciding development applications made by private firms or people . L ocal authorities should also be given powers to subsidise facilities which are too small to be commercially self-supporting but which can be justified by a cost-benefit analysis taking account of environme ntal and social considerations. In effect, local authorities’ transport budgets should become accessibility budgets, allow ing money to be diverted from transport to land use where that would produce a better outcome.

Management before investment

11. At any time, but especially at times of financial stringency such as the present, it makes sense to ensure that the best use is being made of existing infrastructure before thinking of adding to it. That would be true of any economic sector, but especially of transport, where small schemes, such as bus priority measures, road safety schemes, cycle tracks, commonly show much higher benefit/cost ratios than major ones. Moreover, i f management measures do not work as expected, they can be altered, whereas new infrastructure is inflexible. This cons ide r ation is of especial importance at this time when there are major doubts about whether travel and traffic would grow even under a business-as-usual scenario with no attempt at restraint . The calculation of the benefits from major schemes usually relies heavily on the assumption of continuing growth.

12. In urban areas, the most important management measures , supplement ing policies to reduce the need to travel whic h we re discussed above , are lower and better enforced speed limits, the reallocation of road space away from cars in favor of pedestrians, cyclists and buses (and also, in certain circumstances, good vehicles) , and parking controls. Most urban car journeys, except perhaps some longer ones in London and other conurbations, are too short for increases in travel time resulting from lower speeds to deter much car travel. But , in addition to other environmental and safety gains, they would make cycling much safer. Danger is the most important reason why p eople who would like to cycle do not cycle now. The experience of towns, especially on the Continent, which have created safe and agreeable conditions for cycling s hows that the suppressed deman d is huge . Parking controls are potentially a very powerful and discriminating means of control which are now underused. In particular, there is a need to take control of private non-residential spaces, especially in central areas. The need is not so much to charge for these spaces as to reduce their number, which will require new legislation.

13. Eff ective measures of traffic restraint in towns would have some feedback effect on traffic levels on roads outside towns. The most important reform needed on these roads themselves is to reduce and enforce speed limits. In contrast to the situation in towns, this would have a profound effect on reducing car mileage, both by encouraging a shift to other modes and, which is probably more important, by checking and reversing the tendency for car journeys to become longer.

14. Many economists would put road pricing top of their list of manage m ent measures , but lower speeds are more important. If traffic volumes were reduced by pricing, speeds would go up . Higher speeds would lead to higher crash and casualty rates per vehicle mile , and also to higher rates of fuel consumption, CO2 emissions and noise. Lower speeds would have a similar effect as pricing on reducing vehicle mileage, but they would reduce crash and other rates very significantly as well .

15. It is possible , however, that when everything else had been done to reduce car mileage , there would still be an undue degree of congestion on some motorways and major A roads. If so, road pricing for cars could be considered on these roads. Because the network is limited, with few and clearly defined access points, implementation would be very easy . A drawback, however, is that the charges could encourage drivers to divert to other less suitable roads with higher crash rates . That should not happen to any significant degree if properly enforced speed lim its , lower than the limits on motorways and dual carriageways, were in place on the alternative routes.

16 . T he case for road pricing for lorries is mu ch stronger. The system should be kept very simple, with the charge per mile depend ing only on the physical characteristics of the vehicle , without regard to type of road, congestion or any other consideration. Because of its simplicity this system would be extremely easy to administer – Sweden used to have such arrangements but was forced to give them up when on join ing the EU. A mileage-related charge would act as a constant incentive to shippers and operators to consider such questions as: could I find a nearer suppl ier; c ould I send my goods by rail ; could I delay a shipment in order to achieve a higher load factor? I t would also encourage the development of urban systems of goods distribution organised on a town or area basis , and using vehicles specially designed or selected for the task, rather than by firms or products as at present. Th at could have important consequenc es for personal travel as well. The presence of unsuitable lor r ies is a major danger and deterrent to cyclists.

Investment

Supplementing management measure s

17 . Despite what the slogan "management before investment" may suggest, implementing the kind of management measures referred to above does of course require some investment . It costs something to put in a bus lane or to pedestrianise a shopping centre. There is also likely to be a need for some new infrastructure to supplement measures to make better use of the existing roads . Bus priority schemes may not always be enough; new busways may be required as well. A lthough cycling policy should concentrate on making it safer and more agreeable to cycle on ex isti n g road s , there is also likely to be a need to construct separate cycle paths or to provide bridges for bicycles over main roads, railways or canals. Restricting car parking in town centres may sometimes make sense only if park-and-ride car parks are built elsewhere.

Investment in roads

18 . The road programme has traditionally been inspired by the supposed need to cater for growing demand. This is no longer a sensible aim, even if perhaps it once was. No schemes designed to bring about a general increases in capacity should be considered until the required reforms to the regulatory and fiscal framework have been implemented and their effects observed. S ome local road building to serve new developments will be required and it is probably that some bypasses can also be justified.

Investment in rail

19 . Lower speeds and the other reforms to the rules for the use of the roads will give rise to some extra demand for rail travel. On the other hand , these reforms w ill also al low the huge sub s idies to rail to be reduced (though , to be fair to the people who have come to rely on them, th ey could be phased out only gradually ) , which would dampen demand. The number of rail journeys which could be replaced by telecommunications may be quite high, and there may also be considerable scope for substituting coach travel for rail.

20 . I would guess that the net effect of all these developments would be to reduce rather than increase the demand rail travel . E ven so, there could well be a case for all sorts of local rail investments, which cumulatively might come to quite a substantial programme.

But no case can be made for the two major schemes which dominate rail investment at the moment, Crossrail and HS2.

21 . I have alrea dy submitted a memo about Crossrail to the Committee , and I hope the reason why there has been no response is only that because of the summer recess members have not yet had a c hance to read it. To summarise drastically: a scheme which is designed to increase employment in the financial centres of central London obviously has no place in a strategy to reba la nce the economy both in terms of economic sectors and of geographical regions; even if spending £16 billion on rail investment in London could be justified, there are better ways of spending it.

22 . A high-speed rail network emanating from London would reinforce the unhealthy predominance of London and the south-east vis-à-vis other regions. Experience shows that improving communications between an economically strong region and a weaker one is at least as likely to suck activity out of the weaker one as to help it. To the extent that transport investment may have a part to play in redressing the UK ’s regional imbalance, it should take the form of improvements within each of the weaker regions, or possibly strengthening the connections between them, leaving out London . None of the other arguments for HS2, or for any other high-speed rail network Britain , stand up. In particular, high-speed rail will not reduce but increase carbon emissions from transport. It is a disquieting reflection on the way that policy is formed in Britain that these plans ever reached their current advanced stage of development.

Should the balance between revenue and capital expenditure be altered?

23. The balance should indeed be altered in favour of revenue expenditure, but as far as transport is concerned it would be better to abolish this distinction altogether. It may be necessary to have separate budgets for national transport expenditure and for each major local authority, but there should be no ring fencing or further divisions within these budgets. They should be allocated between projects, whether large or small, regardless of mode, according to their benefit-cost ratios, modified or reinforced as necessary by environmental and social factors not included in the cost-benefit calculations.

References

1. These statistics, which relate to the five-year period 2002 to 2006, are derived from Figures 2 and 4 of Long Distance Travel in Britain published by the Independent Transport Commission in March 2010. The ultimate source is the National Travel Survey.

September 2010