Transport and the outcome of the comprehensive Spending Review

Evidence from Campaign for Better Transport (TSR 02)

Background

This briefing sets out our views on the Spending Review’s main implications for transport ahead of the Transport Committee’s evidence session with Philip Hammond.

Our primary concerns are:

· Rail fare rises will restrict the labour market and increase congestion and carbon

· Cuts to support for bus services will make it difficult for jobseekers to return to work, and will disproportionally affect rural communities

· Local authorities will waste scarce resources on further development of major road schemes which are very unlikely to be funded

Rail fares and capacity

Rail fare rises

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.

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 [1] and this situation will only get worse, affecting the competitiveness of London and other cities.

Examples season ticket rises 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)

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 [2] , most of which would be expected to shift to road transport with consequent rises in congestion and carbon emissions.

Rail fares regulation

Meanwhile, the Government has said that it will review ticketing regulation more generally. [3] This is welcome but this review could just allow train operating companies greater license to set fares with fewer fares being regulated. Although regulated fares are set to rise significantly above the inflation rate, unregulated standard class fares have risen much higher and are now on average 28% higher in real terms compared to 1995 compared to a 0.5% rise in regulated standard class fares. [4] There are also risks that could arise from failing to protect flexible fares, with Virgin currently planning to abolish all walk-on fares on some of its peak time services between London and Birmingham. [5]

Rail capacity and investment

The Government’s forthcoming statement on rail capacity and investment needs to provide clarity for the industry, particularly at a time of uncertainty with the McNulty review of value for money potentially leading to significant change.

On the McNulty review, the benefits of a national network need to be retained in any reorganisation whilst also facilitating more involvement of local authorities and others in local rail lines and measures to make it easier for such third parties to invest in rail and sponsor local improvements.

Support for bus services

Cuts in local authority revenue grants and end of rural bus subsidy

The cuts to local authority revenue funding and the end of the rural bus subsidy are already having an effect on local authorities’ support for bus services. We are collating more and more examples of local authorities cutting back support for bus services, particularly in rural areas.

For example, 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 [6] . North Yorkshire County Council are proposing severe cuts to evening, weekend and holiday services and reduced times that concessionary passes can be used. Surrey County Council has cut £800,000 in funding for school services and more than doubled the cost of the subsidised student travel card. [7]

We are discussing with Passenger Focus about how to ensure local authorities properly engage with local communities when planning cuts to services so that consultation is meaningful and the worst impacts of cuts can be minimised. The Department for Transport should not just say that this is a local issue but should make clear that they expect meaningful consultation with local communities when cuts are planned.

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. [8] Research by the Social Exclusion Unit discovered that 38% of job seekers found transport was a major obstacle to their finding work. [9] 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.

Changes to concessionary fare system

The Department for Transport’s consultation on changes to the concessionary fares regime and formula could add to the impact of cuts. In particular, changes to average fares in the formula will cut the amount spent to provide concessionary fares and could penalise longer-distance rural bus services and services in the larger cities that do not have integrated transport authorities.

The DfT’s impact assessment for the change suggests that this could result in 2.4% fewer trips by bus as operators reduce commercial services due to the decline in their reimbursement but this could be an underestimate due to the more severe impact in rural areas.

Future impact of cuts to bus service operators grant

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 [10]

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 from.

Local authority major transport schemes

The DfT have created three pools for the local authority major schemes – supported schemes, development schemes and pre-qualification schemes. Given the very tight squeeze on spending in this Parliament and the next, it is unlikely that many of these will be funded. The Department for Transport should make this clear and encourage local authorities to develop cheaper and higher-value alternatives.

"Best and final offers" from supported pool of schemes

The supported group is comprised of 10 schemes. There is £300 million available to fund them, but at present the central Government contribution needed totals £397 million, meaning that promoters need to find cuts of, on average, 25%. Two schemes, the Mersey Gateway and the Heysham-M6 link, make up 50% of the total cost (just over £200 million). By the end of 2010, promoters need to make a ‘best and final’ offer to DfT. DfT will decide by January 2011 whether to build them or to transfer them to the next pot – the development group.

Our particular concern is the rush to resubmit the Heysham M6 scheme. Lancashire County Council is redesigning the scheme from the ground up in search of cost savings. The council say that the scale of the changes mean they will have to submit a new application for planning permission. This includes potentially abandoning or scaling back mitigation measures, designed to ameliorate the worst impacts on air quality and local traffic.

Normally, analysis of major scheme business cases takes the better part of six months to conclude and it is doubtful that this process can be carried out in a matter of weeks. The Department for Transport should instead transfer this scheme to the development pool to allow for proper consideration of the changes.

Development and prequalification pools

The development group comprises 22 schemes, and has £600 million available. That leaves less than £30m per scheme. Several, including the Norwich Northern Distributor Road and Bexhill-Hastings Link Road, cost close to three times this amount.

The pre-qualification group contains the remaining 34 schemes. There is no budget available for these schemes, but several are currently estimated to cost well over £100m.

We are very concerned that the chances of funding these schemes is limited and that local authorities will be wasting money on further development of these schemes rather than looking to develop cheaper alternatives – some of which could, for instance, be funded through the new Local Sustainable Transport Fund. Spending considerable funds on developing these schemes could also take funding away from protecting bus services against cuts.

We are therefore calling on the Department for Transport to be clear to local authorities that these schemes are unlikely to be funded rather than giving the impression that they are still possible.

Local sustainable transport fund

The Local Sustainable Transport Fund is welcome – both in terms of the level of funding and the combination of capital and revenue funding it will provide. Local authorities will have only a small window of opportunity to bid for the Fund so it will be important that the DfT work with local authorities to develop the bids into effective programmes that can reduce congestion and carbon emissions from transport, particularly for larger and more ambitious schemes.

The Fund should also incentivise partnerships between local authorities, transport providers and third sector organisations.

November 2010