Public Accounts - Minutes of EvidenceHC 747

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Oral Evidence

Taken before the Committee of Public Accounts

on Wednesday 28 November 2012

Members present:

Margaret Hodge (Chair)

Mr Richard Bacon

Guto Bebb

Jackie Doyle-Price

Meg Hillier

Fiona Mactaggart

Austin Mitchell

Nick Smith

Ian Swales

Justin Tomlinson


Amyas Morse, Comptroller and Auditor General, National Audit Office, Gabrielle Cohen, Assistant Auditor General, NAO, Geraldine Barker, Director, NAO, and Marius Gallaher, Alternate Treasury Officer of Accounts, HM Treasury, were in attendance.


Funding for local transport: an overview (HC 629)

Examination of Witnesses

Witnesses: Stephen Glaister, Director, RAC Foundation, Councillor David Sparks OBE, Vice-Chairman, Local Government Association, and Tony Travers, Director, London School of Economics, gave evidence.

Q1 Chair: Welcome. Thank you for agreeing to help us this afternoon. Some of you may not be familiar with the way we do this. We are here to hold the accounting officer and the Department to account on issues around the funding of local transport, but we find it really helpful to have a brief session before with people who know what it is all about at the front line. That is what you are here for. There is no attempt to catch you out or anything. We want to hear what you think are the key issues we should focus on in the subsequent hearing with the accounting officer. I shall start with you, David. From your perspective, what do you feel we ought to look at this afternoon?

Councillor Sparks: From your point of view as a Public Accounts Committee, you need to take into account that the devolution, for want of a better expression, of money-it is not a full devolution of money in relation to transport-can lead, although I am not saying it will, to a more efficient and more effective use of the money. It could be more effective because it would enable local authorities, local enterprise partnerships and a variety of different sub-regional regeneration agencies to use the money on highways investment and other transport infrastructure.

Q2 Chair: Sorry to interrupt, but are you talking about the block grant money or the proposals to devolve all the specific grant moneys?

Councillor Sparks: The proposals to devolve major schemes to a local level.

Q3 Chair: So it is not the block grant. I have a concern about the block grant money and taking away the ring fencing, which I can see from a local authority’s point of view gives you flexibility, but if you are doing that with a cut in the budget, how on earth is anybody going to know whether you spend it on transport infrastructure?

Councillor Sparks: No, I am not arguing that point at all.

Q4 Chair: Do you have an answer to that point? Do you think that all the local authorities will spend the moneys on transport infrastructure?

Councillor Sparks: I think you will find a variation in different local authorities, depending on the circumstances of that local authority and the attitudes of the local authorities.

Q5 Chair: Does the LGA monitor it? Have you got any idea? Do you do anything to give anybody any idea? They are big sums of money; £1.2 billion goes un-ring-fenced now, clearly to a purpose. Is the LGA going to monitor that?

Councillor Sparks: The LGA monitors what local authorities spend the money on over a period of time, yes, but the fundamental point that you are getting at, in terms of will local authorities spend the money on highways if it is not ring-fenced, the honest answer to that question-my honest answer based on experience-is that overall, yes, but not necessarily exclusively so. I am being absolutely honest.

Q6 Chair: Stephen, do you want to give us your perspective on all this, and any other issues?

Stephen Glaister: On that specific point, a lot of people are concerned about the net effect of the overall reduction in local authority budgets in the round being put up against the increasing liabilities under their statutory requirements, giving them no freedom at all to spend what many people regard as a reasonable amount on the day to day maintenance of the highway network. That is just arithmetic. Giving them discretion does not help them very much, because they have not got any money. That is obviously a product of the current situation. It may not be a long-term issue.

In terms of your initial question on the big issues, apart from that one-I am an expert in economic appraisal and assessing value for money-it is the obvious contrast between the Government devolving power to make decisions to new transport bodies or other local authorities without devolving all the money, so that raises the question of how the centre and your Committee can preserve a degree of scrutiny on good value for money and what mechanisms are put in place under this new regime when, as you have said yourself in previous Reports, the methods of appraisal are in some cases quite sketchy, particularly for the money that goes through the DCLG side, and also the Department for Transport side. There is a remark to that effect in the NAO Report. There is nothing wrong with that, but there have to be decent routines in place to get a way of judging.

Q7 Chair: I agree with you, and I think this is at the heart of what we are going to be talking about this afternoon. What do you see, with all your experience, as the best way of filling what at present looks like a gap?

Stephen Glaister: If you are going to take a view from the centre about whether different authorities are getting good value for Exchequer money, there must be some consistency in the way that the appraisals are done. Some of the Department’s guidance documents say, "We would like to leave discretion to local authorities to decide what methodology they are going to use to make these judgments." That is fine. As long as they are asking the right questions, it is fine, but lots of different authorities have appointed different consultants who have used different methods to answer the same question, so you end up not really being able to compare the results. That is of course an old problem with public finance. The Treasury has had a long-term interest in this, which is why, occasionally in the past, the Treasury has laid down very rigid techniques for project appraisal, because they want to make comparisons across authorities. It is undesirable to be rigid, but on the other hand, it allows you to really compare on a common basis what is happening here with what is happening over there.

Q8 Mr Bacon: There is no reason why you cannot have a simple template that is rigid and also allow people to evaluate in other ways locally if they want to, is there?

Stephen Glaister: Clearly, they can have their own appraisals, but I would suggest that you have to have something that you understand on a common basis centrally.

Q9 Chair: Any other issues?

Stephen Glaister: Not for the moment.

Chair: Tony?

Tony Travers: I think the statistics in the NAO Report more or less speak for themselves. They are very clear. The thing is that local government revenue spending on transport is part of the wider local government settlement. If we are looking at transport or social services or, indeed, anything else that local government does, as the total is pushed down there is inevitably competition between each of those subsets of services. It is impossible, particularly on the revenue spending side, to see transport spending in isolation from all the other things that local government is doing, all of which are being pressed down at the same time. Inevitably, local authorities will give priority to social care most particularly and, to some extent, to local environmental provision. Therefore, as the overall total falls, transport is probably more vulnerable on balance than, say, social care.

Councillor Sparks: We need to qualify this. There is a massive difference in the real political world that we are operating in now, and we need to take that into account. The main game in town at the moment with local authorities is the ability to gain outside funding for a whole variety of reasons. Transport funding in particular is now overwhelmingly linked with regeneration. It is linked with regeneration because we have firm partnerships, through local enterprise partnerships, with the private sector, whose view of regeneration and the role of local authorities is overwhelmingly either transport or skills. For example, in the Black Country, a perfect and recent case in point is the decision to invest in a new Jaguar plant adjacent to the M54. One of the key factors in getting that investment was three local authorities-South Staffordshire district, Staffordshire county council and Wolverhampton city-coming together to put in a joint bid for major infrastructure works on the M54.

The same thing goes for European funding. If a local authority can get outside money to do things that it would not be able to afford through the revenue funding in terms of council tax, they will do it. In terms of controls, the pressure on local government funding as a result of the 28% overall cut is such that every single penny is monitored. It might be that not every single penny is spent the way you might want it to be spent, but the one thing that is definitely the case now is that it is accounted for.

Q10 Chair: The LGA did this survey, where they said that you needed £10 billion to bring your roads back up to scratch. The annual local authority road maintenance-ALARM-survey is what I have seen. Do you all stand by that?

Stephen Glaister: That survey is done by the Aggregate Industries Alliance. I think it is a well done survey, going back for 10 or 15 years on a fairly consistent basis.

Q11 Chair: That is really revenue money, isn’t it? Going back to that argument, I can see that you get a big capital scheme like that and then pull out all the stops and try to get capital money from Europe. But the day to day maintenance and enhancement of your local road infrastructure depends on local money, and that is going to be squeezed. What thoughts do you have on that?

Councillor Sparks: Well, in the period you have just mentioned, there has been a reduction in the cost of filling the average pothole by 25%. I can reel off all kinds of statistics, if you are interested in them. The fundamental point is that one of the by-products of having to hit these targets in terms of cuts is that you become more efficient in what you spend.

Stephen Glaister: That of course is true, but the fact remains that whether you believe it is £10 billion, £11 billion or £9 billion, surveys indicate a really severe backlog of maintenance requirements in some parts of the country.

Councillor Sparks: Which we would absolutely agree with; that is exactly the case.

Stephen Glaister: And the weather seems to be getting worse, from a roads maintenance point of view; the water and the rain are doing more damage. The costs are going up and traffic is going up. There is a real problem about putting that right.

Councillor Sparks: Yes, but the more that money is devolved down to the local level, the more chance that you are going to get potholes in the road filled and so on, because you can see it if you are at a local level. You cannot see it if you are in Whitehall, unless you have fantastic vision and can look 200 miles up to Dudley. You need to be in Dudley to know where you need to do the work.

Q12 Meg Hillier: This is interesting, because I was somewhere outside my constituency, outside London, and we heard about streetlights being turned off. I would have thought that in that particular narrow, dark street, if you were the local authority, elected locally, you would not have turned the streetlights off, because it would be the dumbest thing. It was massively unpopular, but it had happened because there must have been an imperative to save money. Surely with potholes too, one of the reasons they don’t get filled in is that it is expensive to redo the roads, so you get the odd patch job. Surely that would still apply locally? I can see what you are saying, but it doesn’t always work out like that, does it?

Councillor Sparks: The thing about streetlights is that, in reality, not many local authorities have cut their streetlights off, as it were. It is more a case of selective shutting down of streetlights, where you are just lighting up a rural area with a field, or it is possible to have streetlights where you can theoretically reduce the amount of power, but you do not disproportionately reduce the amount of illumination.

Q13 Meg Hillier: But rather than getting hooked on streetlights, the point is that you would have thought the local voice there would have been enough, because even if only a few people were affected in a few particular streets, they would have been annoyed enough to make a big noise about it. You might expect the same with potholes, and therefore you might expect more local decision making, but local decisions can be perverse, because there can be an overall imperative. If you want to do a brand new resurface of some roads in the town centre, that is where the money will go, rather than on potholes in suburban streets.

Councillor Sparks: Ah, but potholes, along with emptying bins, are one of the major indicators to the local population as to whether the council are doing the job. If you do not fill the potholes, ultimately, you will suffer at the ballot box.

Q14 Nick Smith: Mr Sparks, my postbag contains lots of letters complaining about parking and its management by councils-albeit in Wales, but I know that it is happening in parts of England too. Do you have any data, please, on the sort of income that is being collected from parking by councils across England?

Councillor Sparks: I do not have it at hand, but we have got it. I have an interesting point in relation to that, quoting my own council in Dudley. Dudley and Sandwell were the last local authorities-the last mets-to introduce parking charges. The reason why we had to introduce parking charges was that central Government insisted we introduced them, because if we did not, they were going to cut our transport grant. So we reluctantly introduced parking charges and then increased them. We have had continually to increase them since, in order to make up for the cuts we have had to our budgets. We have very little freedom to manoeuvre.

Q15 Nick Smith: Are you spending that parking income on roads or other local transport initiatives?

Councillor Sparks: If you are talking about fines, it is hypothecated so that they have to be spent on transport uses. If you are talking about general town centre car parks, that goes into general revenue.

Nick Smith: Income goes into revenue, but fines are hypothecated.

Councillor Sparks: Yes.

Q16 Chair: Tony, have you got some idea, country-wide, as to how much? That is not covered in the Report-the income that local authorities receive through parking to supplement their transport.

Tony Travers: I do not have the numbers to hand, but they are available. In fairness, in the NAO Report, the way public sector accounting works, income from fines and charges would count as a negative and will actually push down spending. I think I am right in saying that you have to have a gross and net way of looking at expenditure.

What I would say in answer to Mr Smith is that, inevitably, local authorities faced with the pressures we are discussing will put up fees and charges if they can, and not only for things related to transport. Indeed, there has been a series of reports from the Audit Commission and elsewhere encouraging them to do so-to maximise income from fees and charges as a way of sustaining income at a time when other resources are either constrained or falling. It is inevitable, and not only for transport, that wherever local authorities can maximise the income from fees and charges, they will do so, as indeed happens with rail fares on the national rail network.

Stephen Glaister: As I understand the legislation, it is not open to local authorities to raise money for other purposes through parking charges.

Tony Travers: As David said, money raised from these kinds of income sources has to be spent on transport, but of course other transport spending could be reduced accordingly.

Stephen Glaister: Money raised from charges to manage parking-to manage traffic-has to be spent on traffic, on the whole. But you cannot raise the charges in order to fund other things.

Councillor Sparks: No, but the essential point is that if you have an overall pressure on your budget, it is inevitably going to influence your decision as to whether you increase car parking charges. Most people will be reluctant to increase car parking charges. Some people will not be, but most people will be and therefore you would only do it reluctantly.

Q17 Nick Smith: I am trying to understand the detail. As I understand it, parking penalties or parking fine income is hypothecated and spent on transport, but income from car parking does not have to be spent on transport and could well be spent on any other local government priority.

Councillor Sparks: No. When you are framing your budget, you will be looking at dozens of things. The honest answer is that you will look at increasing car parking charges to alleviate the overall pressures on the budget. You will spend the money on transport-related areas, and that will be money that you would otherwise have had to spend from council tax income. That then means, ipso facto, that car parking charges are going up in order to keep council tax down.

Justin Tomlinson: I spent 10 years as a councillor agonising over council tax budgets. In the old days it was a bit like the golden goose; you could basically get away with raising car parking charges, subject to the electorate being pretty annoyed with you for putting them up. The problem now, as high streets have suffered due to the internet, and there are regional and district shopping centres, is that councils are having to cut car parking charges, partly to protect their town centres and partly because now local rates have been decentralised, if you lose your high street you will lose that other source of income. It has actually blunted that instrument.

Q18 Chair: Can I ask Tony Travers this question? We will come to it in the main session. There is an accountability issue, which Stephen Glaister alluded to. We are not going to be able to follow the DfT pound into transport expenditure on the ground, as far as I can see from what I read in the Report. What, in your view, is the policy problem and answer there?

Tony Travers: Clearly, once the money is within local government, under the arrangements hitherto the money could have been followed, I suppose, through Audit Commission reporting, value for money and so on. As we all know, however, that is going to stop or has already stopped with the abolition of that part of the Audit Commission’s function. From here on, I think it will be more difficult, unless individual auditors choose to look at how transport resources are used across the board in some way. That will be more difficult in the new world. The NAO report makes the point that it will rely on local government accountability mechanisms. The more interesting question in some ways, given what has already been said about the transfer of some capital resources to local enterprise partnerships or to their transport analogues, however that turns out, is that those bodies are still developing and how their accountability mechanisms will work is very much open for debate.

Q19 Fiona Mactaggart: One of the things I heard from a chief executive of a local authority in the Thames Valley Economic Partnership is that this money is being devolved. They can spend it on what they like but the approval mechanism has been set and is intensely bureaucratic for really quite small sums. That does not sound as though the LEPs have the freedom to spend that you might have led us to believe.

Tony Travers: David probably knows more about this than I do. The performance of LEPs varies widely, inevitably. They are new institutions. Some of them are much more developed and function much more effectively than others. The question of how they handle transport resources will vary from LEP to LEP.

Councillor Sparks: Perhaps I can help. We were discussing it this week in Blackpool. The exact situation is that it will not be the local enterprise partnership that administers the implementation of transport in their area. It will be a local transport board established by the local enterprise partnership. That local transport board, at the moment, will be looking at how it will implement, govern and monitor the whole thing in relation to transport. It will not be the local enterprise partnership itself. The local transport board will be made up of the private sector and, probably, the cabinet members for transport of the local authorities concerned. Whether it will be bureaucratic or not is a big fear.

Q20 Chair: Who audits LEPs?

Tony Travers: I don’t know. It will depend, I assume, on their corporate structure. Any money going in from the public sector will be auditable in the normal way. The way the institution itself is audited is not something I know about, I am afraid.

Stephen Glaister: The additional question is who will audit the transport bodies, which are different.

Q21 Chair: Quite. Once we know who audits LEPs we might have a hint as to who audits the transport bodies.

Stephen Glaister: But it won’t be the same answer, necessarily. They are not coterminous. They are geographically the same but the constitution is not quite the same thing.

Councillor Sparks: It is the local transport boards.

Q22 Chair: Who audits it?

Councillor Sparks: I don’t know, but they are the bodies that are being established. It is a specific body-the local transport board-of which 36 out of 39 are established with their geographical areas. Of the three that are not, one is in London and the other two are in the West Midlands: Greater Birmingham and Staffordshire and Greater Birmingham and Worcestershire.

Q23 Jackie Doyle-Price: The particular pocket I am worried about is the local sustainable transport fund. We see that the Government dished out about £77 million in the last financial year. My biggest concern is that local authorities submit their bids-I think the criteria on which they are judged are quite woolly, to be frank-and once the money is out of the door the Government is not keeping an eye on what it is being spent on. Do any of you have any examples of where that is being spent and delivering some real goods?

Councillor Sparks: No. But we can definitely supply some examples.

Q24 Chair: It would be helpful to have those in a week or so. Is that all right?

Councillor Sparks: Yes.

Q25 Guto Bebb: In addition to your comments about the local enterprise partnerships and the transport boards, you also stated that the local authorities would be desperate to attract funding towards the capital that has been devolved from the centre. You mentioned Europe; you mentioned commercial funding and so forth. The concern I have is that, if you extract funding from other sources, does that mean that your priorities would change in accordance with the fact that funding is forthcoming from those other sources, rather than the priorities necessary in terms of the demands of the locality?

Councillor Sparks: No, because when you talk about major transport infrastructure, you are talking about projects that have been well documented and well established, usually, in some form or other, in a strategic planning process that has involved several local authorities, and maybe shire councils if it is a two-tier area. It will not be something opportunistic, it will be a well established strategy.

Q26 Guto Bebb: So the availability of additional finance will not influence your priorities?

Councillor Sparks: No, because it will be separate money, which will be for an objective that will be widely accepted. More to the point-this is a very interesting point and a real subject of debate in this current round of cutbacks-there is a school of thought now that says that if you are facing a financial haemorrhage as a local authority, the traditional approach of the authority in terms of having adult social care, children’s care, so on and so forth at the top of the priority list, and totally neglecting things such as transport, is now being challenged. A lot of authorities are now saying that if they are not going to be able to totally protect what they want to do in terms of adult social care and so on, one of their major tasks is to try to regenerate the community and provide jobs. It is not inevitably the case that, in the current circumstances, transport will be downgraded, especially if there is money available for major schemes.

Stephen Glaister: To touch on an issue that worries me, the infrastructure that was in the husbandry of the RDAs in the past, which is a lot of really big infrastructure, will span, I imagine, several LEPs or transport bodies in the future-I think about the A12, and some of the railways if they are devolved. The question is, who will look after them, and who will look at the wider picture beyond their parochial interest?

Q27 Meg Hillier: I was going to ask about that. With everything from those big projects there are smaller boundary issues. You have got your local transport board looking at an area but, actually, the bus route that most people use, or a small road or a network of roads cuts across boundaries. Are you confident that that has been thought through by the Department? If you were in our shoes, what would you be asking them?

Stephen Glaister: I would ask them that question. I am talking about things that are not national-they are not in the national roads programme-but they are big. After all, the Highways Agency has only a small proportion of the major roads. I mentioned the example of the A12, which runs from London all the way out to Felixstowe, which is a road of regional significance but it is not a national road. Who is looking after the investment needs of that particular scheme?

Q28 Meg Hillier: Councillor Sparks, how are you going to be making sure that there is not a cliff-edge to fall off between transport boards? You say that you are going great guns in setting yours up in the Black Country, but have you had those discussions with neighbouring boards? Is it going to be very bureaucratic? Is it solvable?

Councillor Sparks: This is a very good question. I will answer it empirically and say what the situation is in the West Midlands and elsewhere. Then I will answer it politically.

The empirical situation is that local enterprise partnerships are getting together to cover geographical areas greater than those that they have responsibility for. In the West Midlands, for example, there is a classic case, which is led by the Department for Transport-or the Government-which now insists that the Greater Birmingham LEP area, which includes Birmingham, Solihull and the area from Lichfield down to Bromsgrove, links in with the Black Country LEP area, because only by doing that can you begin to cover the area that transport actually services. You will find that this will be repeated elsewhere in the country. What is really interesting is that in Greater Manchester, West Yorkshire and perhaps Merseyside, you have the coincidence of a combined authority and a local enterprise partnership, which will probably mean that that will be more effectively integrated.

Politically, there is a division. I cannot come on several occasions to give evidence to Select Committees on behalf of, and in favour of, regional development agencies, and, when I am asked a question about regional development agencies, say that there is not a vacuum. There has to be a huge question mark about how we deliver major projects. I do not think that local enterprise partnerships will be sufficiently strong to be able to take the place of the regional development agencies, or something similar. They do not have the coverage, they do not have the resources and they do not have the expertise.

Tony Travers: I want to bring some of these debates together. A number of separate things are happening here at once, particularly, but not only, in transport. The total amount of resource available is declining at the same time that there is the devolution of some elements of that-some of them to local authorities, some not. New institutions are coming into existence. Their precise mode of operation varies from place to place, and will continue to vary as they evolve. As David said, some areas of local government are developing their own local, combined authorities. So there are a number of things moving at once. It will work well in some places-within a well developed metropolitan area it will work reasonably well-but in others there may be nothing, or very much less. So there are several different things happening at once.

Chair: Right. This is what we have in almost every Department. Thank you very much indeed. That was really clear and really helpful. We are all immensely grateful to you for coming and helping us.

Examination of Witnesses

Witnesses: Philip Rutnam, Permanent Secretary, Department for Transport, and John Dowie, Director of Local Directorate, Department for Transport, gave evidence.

Q29 Chair: Welcome. It is difficult to know where to start, so I will just jump in and see where we go. I will just say to you that I think there are two major issues. One is the quantum of money available, and whether it will meet your objectives. The second is how you are going to account to us and others for expenditure.

The Report tells us that £1.2 billion goes through local authorities. Somewhere in the Report, and I hope you know about this, it says that the transport block grant is going up from £350 million in 2011-12 to £450 million in 2014-15, but highways maintenance is going down from £804 million-I have seen two figures in the Report, but let us take that one-to something around £707 million. That says to me that you want different things to happen. First, am I right that you want different things to happen with your money-our money? Secondly, how on earth are you going to be able to tell us that it has happened?

Philip Rutnam: I shall try to answer all the questions. First, the way I would look at it is that there is a total amount of funding that we make available to local authorities-I am talking about local authorities outside London-and in the current year, that is of the order of £2 billion. Within that, I would draw a key distinction between funds that are ring-fenced for specific purposes, and those that are not ring-fenced, where the local authority has freedom as to how they use the funds. The £1.2 billion you referred to, which I think is made up of the highways maintenance block and the integrated transport block, are not ring-fenced funds. They are capital moneys. The local authorities are therefore free to use those funds for capital on transport or for capital on other activities.

Q30 Chair: On old people’s homes or children centres?

Philip Rutnam: They have freedom to how they use them. While we are talking about the quantum-

Q31 Chair: We will come back to the quantum. Just try to deal with the question. You raised the integrated transport block grant from £350 million to £450 million. Sorry, if my figures are a bit wrong, but they are about right. You reduced the highways maintenance from £804 million to £707 million. That says to me that you had a different purpose in mind. I am really interested in what your purpose was in doing those switches, and how will you be able to tell us you achieved it?

Philip Rutnam: The paths are a bit more complicated than that. For the integrated transport block, it starts at £350 million. It will go to £450 million by 2014-15, but it has gone down in between. It goes £350 million, £320 million, £320 million then back up to £450 million.

Q32 Chair: Answer the question please, Mr Rutnam.

Philip Rutnam: On the purpose-

Q33 Chair: I said that the fact that you have done that says to me that you have had a change in policy objective, which I want to understand. I then want to understand how you are going to assure Parliament that that money has been used for the policy objectives you had for the future.

Philip Rutnam: The overriding policy objective that we have had in this area is to do our best in very difficult fiscal circumstances.

Q34 Chair: No, why did you change the transport block grant? It went up. Why did the highways maintenance stuff go down? That must have been transport related. They are both capital. You must have had an objective in mind.

Philip Rutnam: I do not think that the highways maintenance block went up.

Q35 Chair: No, it went down. I know. I am telling you.

John Dowie: I can help the Committee, because I was around for part of those discussions at the time. In the case of the highways maintenance block, there was a view taken on the back of work done by the Audit Commission, for example, for other parties looking at scope for efficiency in the local government sector, that there was scope to achieve the same or better outputs with less expenditure on highways maintenance.

Q36 Chair: Why did the integrated transport block-

John Dowie: The integrated transport block is buying something different. That is additions to the network. They are very small-scale additions, for example, pedestrian crossings, but they are additions. That is a block that we feel more comfortable varying over time.

Q37 Chair: Thank you for that. That is an answer to my first question. The second question was how you will be able to assure Parliament that the money you have chosen to go in those two areas is actually being used in the way that you want it.

Philip Rutnam: We see a clear distinction between our responsibilities to Parliament in relation to funding that is ring fenced, when we are determined that it will be used for the purpose that has been identified and when we have quite complex systems-I can go through them-for seeking to ensure that we get good value for money for all that and can account directly to Parliament for the way in which every pound is used.

Q38 Chair: Okay, let us come back to that.

Philip Rutnam: And from the funding that is not ring fenced, where-consistent with the Government’s general approach to accountability for funding to local authorities that is not ring fenced-we do not seek to follow through every pound or how it is used in relation to those blocks.

Q39 Chair: So you don’t give a damn. We are getting to the heart of the issue. You have taken these policy decisions. You wanted more pedestrian crossings. You also took a policy decision that you thought that actually the same amount of highways maintenance could be delivered for £100 million less or thereabouts. You took those policy decisions, yet you are saying, "Actually, we are not going to monitor that." You are not going to be able to tell Parliament whether or not the money has been spent in the way you decided you wanted to, and you do not see that as part of your responsibility.

Philip Rutnam: I do not think that that is fair. I expect that the way in which we allocate funding to local authorities will have some influence on the decisions they make, but it is not a binding influence. It is up to them.

Q40 Chair: We hope it does, because you have told them that you want to spend more on one and less on another. I am asking how you are going to monitor, and tell us about that.

Philip Rutnam: First of all, I would expect that the way in which we allocate in non-ring fenced funding to local authorities will have some influence, but that is not the same as saying that local authorities must spend the money in that way. That is a decision for the local authority, for the elected members and ultimately for the electorate to whom they are accountable.

Q41 Chair: We are going to come back to this. It is at the heart of what we want to talk about. I really do need better answers. Either you have got to tell us straight that, "We don’t give a toss where it is spent," which sounds to me like what the Government are telling us, or you will tell us how you will monitor it. Just have a think about it, and then we will come back.

Sitting suspended for a Division in the House.

On resuming-

Q42 Chair: We will restart. We find that the sessions are better when we have fewer Members, so let’s see how it goes.

Let’s have another go at this. You explained your purpose to me-thank you Mr Dowie. Now explain to me how you are going to ensure that the money is used to that purpose. How are you going to monitor that? It is all about accountability.

Philip Rutnam: I absolutely agree that it is all about accountability. It is absolutely not the case that we ether consider we have complete accountability for everything, or, as you put it, Chair, we don’t give a toss. Of course we care about the use of funds, but we have to care about it in a framework where the local authority is the entity that is ultimately making decisions about how it uses the funds and is accountable to its electorate.

Q43 Chair: I accept that entirely. I do not think that there is anybody around the table who does not accept that there has to be local authority accountability. It is a debate we have with other Departments: you, as the Department for Transport, are also accountable to us, and to Parliament through us, for ensuring that money is spent on the purpose for which it was intended.

Philip Rutnam: The things we can do, and are doing, which go to achieving our purpose but within the framework of accountability I have just talked about, are driving up transparency about how local authorities use their funds, and what results they deliver-

Q44 Chair: Are you going to collect data from that?

Philip Rutnam: Data is a key part of that, absolutely.

Q45 Chair: Are you going to collect it?

Philip Rutnam: We do collect data.

Q46 Chair: Will you be able to come back here in two years’ time and tell us?

Philip Rutnam: A lot of the data has to be collected in partnership with the local authorities, unless we are going to impose new mandatory requirements on them, which the Government does not want to do. The best way forward, often, is to work in partnership with local authorities, which in general-particularly the people who work on transport in local authorities, I might say-also want to see better results for transport

Q47 Chair: I am going to interrupt you again. I accept all that, but we, Parliament, will want to see. If you are going to say that you will monitor the use of this money and ensure it is used for its purpose by working with local authorities to collect data, that is another answer I can accept. I then want to know whether you guys are going to be able to come here and say to us that you gave a £350 million or £450 million block grant for integrated transport, and you think that, although you gave them £700 million for high-risk maintenance, they should have achieved the same quality or quantity. Are you going to be able to give us that assurance?

Philip Rutnam: I won’t be able to trace how that £300 million or £700 million has been spent. What we do seek to do is, first of all, to measure what local authorities-they are required to do this-spend their money on, and secondly to measure the outcomes and results they have achieved.

Q48 Ian Swales: Can we test this? As usual, the best way to do that is with an extreme example. You give a council £10 million to spend on capital projects for transport, but it spends none of it on transport, and decides to spend it all on an old people’s home and various other projects. What happens? What is the process then? Do you say, "Ok, fine, that is all about localism," in which case, why do we bother hypothecating the capital budget any more? We might as well just say, "Okay, council X gets £100 million and it can do what it likes." If that is the new way of doing things, are we actually wasting time with the pretence that you are allocating money for a specific purpose?

Philip Rutnam: I will come to your extreme example in a moment. Local authorities do not spend, and have not spent for many, many years, less on transport than the Government have given them. We give them £1.2 billion of unhypothecated capital for transport, and they spend £2.9 billion.

Q49 Chair: That is before the cuts.

Philip Rutnam: No, the data I am giving you are for the last financial year. We gave them £1.2 billion of unhypothecated capital. They spent, in aggregate, nearly £3 billion.

Q50 Chair: Is that right, Geraldine?

Geraldine Barker: That is correct, yes.

Q51 Chair: Is that 2011-12?

Geraldine Barker: Yes.

Philip Rutnam: I have never heard of the extreme example you gave coming to pass, but let me try to test it. The first answer-I accept that this may not be an answer that the Committee will like, but it is the answer that is consistent with Government policy-is that it is a matter for the local authority. The local authority has to make choices about its priorities, and the local authority is accountable to its electorate and, of course, accountable in various other ways through the law. It would not be an outcome I would want to see-far from it. It would be an outcome I would be very surprised to see.

Chair: But you are accountable to us, you see.

Q52 Austin Mitchell: But what can the local citizen do? If my axle is broken on a hole in the road, or something like that, what redress have I got? They are all going to come to me with the same lies, "It’s the Government’s fault," or, "They have cut the grant by this amount," or, "We’ve spent it on such and such." There is nothing that the average citizen can do.

Philip Rutnam: One thing that we can do to help the average citizen is to try to make sure that there is information available showing that there are many local authorities that are able to deliver roads in good condition with the resources that they have.

Q53 Austin Mitchell: And there are some that are not. That is the problem. Local control is a myth in the sense that you say-the authority is controllable by the electorate. It is not.

Philip Rutnam: I understand the concern, and I have to say that that is an issue that goes far wider than the question of transport. It goes to the whole system of local government.

Fiona Mactaggart: Absolutely.

Q54 Chair: It does, and we accept that, but the reason we are looking at transport is that we have that concern and we want to test it in transport.

Philip Rutnam: Well, it is a good case study. As I say, local authorities take the resources we have and they add to them.

Q55 Ian Swales: We have a process here which in a sense you are saying is meaningless, because local authorities can spend far less, and in practice they spend far more. What is the point of all the detailed work that you are doing and allocating amounts of money if it does not relate to what people spend?

Philip Rutnam: I would say that it is far from meaningless, because, to be honest, the extreme example that you have highlighted is not the reality.

Q56 Ian Swales: But you gave the opposite extreme example. You said that they are spending nearly three times as much money on transport as you are giving them.

Philip Rutnam: The funding we are doing is providing, first of all, a strong influence on the way in which local authorities choose to spend their resources. It is not a binding influence, but it is an influence. The fact that the money arrives in the local authority with an "integrated transport block" or "highways maintenance block" label on it is, I believe, a strong influence on the way in which it will be spent.

Q57 Ian Swales: But they tear off the label and throw it into a bucket with all the other things they get.

Philip Rutnam: In practice, we find they add to it. Secondly, the point about the transparency that we can get about what outcomes local authorities are delivering is critical. The third point I was going to make is about the work done by the Department with the Local Government Association and with local authorities on what is best practice in, for example, highways maintenance; how can you take the resources available in the whole system for highways maintenance and, notwithstanding the cuts, deliver the same results?

Q58 Chair: Let me tease this out a bit further. Are you, therefore, prescribing the data that you require from local authorities so that you can monitor and compare?

Philip Rutnam: We prescribe some data, and other data are developed as a result of co-operation.

Q59 Chair: Will you prescribe sufficient data for us to know that the money is being used for the purpose of the transfer?

Philip Rutnam: I believe we will have sufficient data. It is not the Government’s policy in general to impose additional restrictions on local authorities.

Q60 Chair: I know it isn’t. That is why I am asking whether you are going to get it. That is precisely the reason I am asking the question.

Philip Rutnam: Do I believe that we will have sufficient data to assess the performance of local authorities in delivering their transport outcomes over the next couple of years? Yes, I do. John, do you want to add to this?

John Dowie: One important way of looking at this is that the starting position, for some programmes, is that the Department has been incredibly prescriptive and hands-on in the bidding processes, and has been criticised considerably by local government for being so. For other programmes, such as the integrated blocks-this is not a new position post the election; this is of very long standing-the Department has been very hands-off. Through pursuing devolution of the former programmes-the hands-on ones-we have tried to respond to what we consider to be the valid criticism that we are being too prescriptive, but in a way that tries to ensure value for money, which ensures there will be transparent data available both publicly and to the Department, so we can continue to assess on a consistent basis across all the relevant authorities the value for money we are getting.

We have also come to the conclusion, because sometimes change is a helpful process for education, that perhaps we have been too hands-off in terms of some of those historic block programmes, and that we need to think, without tying them in string and making them complex and prescriptive-we do not want to make that mistake-how we can, whether through transparency and other tools, actually improve the degree of accountability, both our accountability and local government accountability.

Q61 Chair: I want to hear a little bit more about the data, but what for me is not transparent is getting every local authority to shovel out every invoice over 500 quid. That seems a waste of time. If that is what you mean by transparency, it will not serve the purpose that we think you need to satisfy us. I need to hear from you that the data you will get will allow us to sit here in two years’ time-and it will be us-saying, "Actually, you did get good value from your £450 million integrated transport block grant, and you did manage under the highways maintenance to get the same value, although the money was less."

Philip Rutnam: No doubt there is a case for requiring local authorities to release invoices, but that is not my primary interest. My primary interest is in getting information-data-that tells us, for example, which local authorities have spent what on roads; the nature or the condition of the roads that they have to look after; and the result of the way in which they have spent the money. Has that led to better roads over the course of two or three years, or has the money been wasted? That kind of data is what interests me, whether in relation to roads, subsidies to bus services, or other areas where they are making local choices.

Q62 Chair: Amyas?

Amyas Morse: To take that logic forward, suppose you have got that information and you are looking at the outcomes after whatever period it is, and you can see the picture developing. Let’s say there is an unsatisfactory picture. Will you take that into account in future funding decisions? What is the action that follows from having done this measurement?

Philip Rutnam: An unsatisfactory position in relation to an individual local authority, a group of local authorities or the whole-?

Amyas Morse: Make your choice.

Philip Rutnam: If it is an individual local authority-there are 152 highway authorities in the country and we deal with all of them. Increasingly, some of them are grouping together, so we can deal with groups of them. We therefore have conversations regularly with each of them. If we have data that show that an individual local authority is at the bottom of the pack in terms of the efficiency and effectiveness with which they are running their road system, we can have a direct conversation with them. Now, that may not lead to change. None the less, it goes back to my point about influence-we can have an influence. If that is not working or if it is a wider problem, we can then consider what more we might do to highlight the problem.

Visibility, transparency and the power of the cleansing effect of sunlight, if you like, can be very powerful. At the moment, where I think we would be reluctant to go is into direct intervention, which comes back to my point about trying to be very clear about what we are accountable for and what the local authorities are accountable for.

Q63 Chair: Two more things on accountability-do come in everybody else if you want to. It says in the Report that you have an early warning of failure-this is on page 36, paragraph 3.23. There are no minimum standards but "it will obtain early warning of failure or significant drops in local transport performance" and then you will intervene. I am interested in how on earth in this accountability framework you will get those early warnings of failure or significant drops in local transport performance such that you will then intervene. I accept you want it to be exceptional, but we often find that the exceptional shows that the system is strong enough. Explain that.

Philip Rutnam: My honest answer is that the core to it is having good-quality, meaningful data on spend and performance. There is data available, but there is more to be done both to make it comparable and consistent across local authorities and to make it more readily available. That is a key area of work for us over the coming months and year-an absolutely key area of work. As we develop what is described as an accountability system statement, which is really rather a long phrase for what is fundamentally about how we derive value from the resources Parliament gives us, getting better data and better transparency around data will be key.

Q64 Chair: Great. Good. We are on the same page. Will you instruct authorities to provide that data?

Philip Rutnam: I am not at present expecting to instruct authorities to provide that data. There are some areas where they are required to provide data. I am expecting in general, where it goes beyond existing statutory requirements-legal requirements-to work through a partnership with them. By and large, I would say that the local government community is keen to work in partnership. While there will be local authorities who are embarrassed by the results, there are many local authorities which want to use this as a way of driving their own performance and improving the reputation of the sector.

Q65 Ian Swales: The Report mentions on page 33 that the Department of Communities and Local Government collects data on nine different areas of transport. Are you working closely with them, both to avoid asking for data twice and also to co-ordinate your requirements with theirs so that local authorities’ reporting requirements are as straightforward as possible?

Philip Rutnam: We do work with CLG. I will ask John to say a bit about that in a moment. We are also working very closely with the Local Government Association.

Q66 Chair: What happens if someone refuses? I know it always sounds awful. I have absolutely no doubt that you are right and that most authorities will comply and do it in partnership. But we do a lot on exception-an academy that does not provide the data and you might find someone using a credit card in a way that they shouldn’t. It is that sort of analogy with another Department. If you get an authority which is not doing the business with you to enable you to do the correct monitoring, what weapon do you have in your armoury?

John Dowie: There are nine areas of statistics. The framework is the Department for Communities and Local Government. They are collected by statisticians who work for me. They are DFT statistics within an overall framework. Perhaps I can give the example of salt. Every example will be slightly different. Three or four winters ago it became apparent that over a long period of time the UK had grown short of stockpiles of salt. It became necessary to collect data in an emergency. It became apparent over successive winters that some authorities-a small minority-played a bit fast and loose, sometimes reporting, sometimes not. The procedure we reached on that was that if you did not provide data if you needed salt we did not give you any. That is an example where there was a clear incentive not to cut yourself out of the system.

Q67 Chair: But you will lose a little bit of that, because you are shovelling the money out without a ring fence. That is a good way of doing it, but it is more difficult when you shovel the money through the block grant and you want to see where it has gone.

Philip Rutnam: Can I give you another example? In the context of devolving the local authority majors programme, which hitherto has been run in a very centralised way from Horseferry road, over the four years of the spending review it is £1.8 billion. We are seeking to devolve it from 2015 onwards in the next spending review period.

We have said-Ministers have decided-that that spending review period will be allocated on a population basis, but we have issued guidance saying that we will be taking very careful account of what local authorities do by way of the quality of their appraisal, which we will be assessing, the quality of the evaluations that they do of projects, which, again, we will be keeping a close eye on, and the quality of their governance frameworks. That is strictly for the local transport bodies, rather than local authorities directly. We will be taking all those things into account and we may use those as an influence on how we move forward beyond the next spending review period. Bear it in mind that we do not always have to write things into legislation to identify ways to incentivise the sort of co-operative behaviour that we need to drive good performance.

Q68 Ian Swales: When it comes to roads, is population the right marker to use?

Philip Rutnam: For roads, the highway maintenance block is decided on road length and various other indicators.

Q69 Chair: I was going to ask you the question we asked before that nobody could answer. Who audits these new local transport bodies?

Philip Rutnam: First, can I be clear about the legal status of the local transport bodies? They can choose to be incorporated or not as they wish, but they have to have an accountable body for any public funding that they receive. My expectation is that the accountable body will usually be one of the local authorities-often the biggest local authority-in the area of the local transport body. That accountable body will be the entity responsible for handling public funds and will be subject to all the audit requirements that you are familiar with. If there is an additional audit requirement for the LTB, as indeed there is, I expect that typically it would be the auditor for the lead local auditor. It is all set out in some detail.

Q70 Chair: Geraldine, will you have access to all this stuff?

Geraldine Barker: We do not believe that we will have access to the LTB in terms of the decision making. We will be able to follow the money, but it will be part of the process of when they make decisions that we would not have access to.

Chair: Meg wants to ask a question about boundaries.

Q71 Meg Hillier: One of the challenges in accountability is that you shove the money out there and then, if you are setting up a Teesside local transport body, there is a cliff edge where you stop being Teesside and responsible for that and you become Tyneside and responsible for that. Who will ensure that there is not some silliness going on at the boundary, because it is not significant in voter terms and it is not significant to that local transport body? Are you going to ensure that there are not big clunking gaps in roadworks and planning?

Philip Rutnam: There are two issues. One is about co-operation across boundaries, such as for projects that may be relevant to more than one LTB. The second is the issues about the communities at the margin of the LTB area. On the first, I will take us back: There are 39 local enterprise partnerships, including London, so I am expecting that there will be 38 local transport bodies outside London. Each of those will need to have a relationship with us and be accountable to us for a wide range of things and we in turn will be accountable to you. If there are projects that are potentially more beneficial to a larger geographic area than just the LTB, I would expect that we would be able to have a dialogue with them about that, and I can tell you that we would want to have a dialogue with them about that. They may well identify that as a benefit in themselves.

I spent some time in the west midlands recently, and the LEP and the people who were likely to form part of the local transport body were certainly conscious of the need to work in a form of partnership with the black country, which has its own LEP. We will use our influence to try to get them to focus on the most valuable projects, even if they are at a larger geographic scale, and I actually foresee-not least, to be honest, because of the business influence coming through the LEPs-that they will often be interested in the things that can make the greatest economic impact.

Q72 Ian Swales: Are you choosing the footprint of the LTBs? Are you taking account of the footprints of the LEPs, which have arisen by assessment of economic commonality and so on? Are you actually taking notice of them, or are you imposing some different map on top?

Philip Rutnam: We asked the local authorities and LEPs to come forward with proposals for the geography of LTBs. We have received those proposals, and, by and large, that is something that local processes have managed to resolve.

John Dowie: And they have all built on the geography of the area.

Q73 Meg Hillier: That raises other questions, but I want to go back to the point you were just answering. Take the A3 in Hindhead. For years-decades-that was a problem, and it took a lot of time, effort and collaboration to get to the point we are at. I think it is tunnelled now, around the Devil’s Punch Bowl, isn’t it? That took a very long time under the old system; I am not sure I am convinced or reassured that, under the new system, with whole new bodies being set up, that sort of thing would be any better. Can you reassure me about that?

Philip Rutnam: Well, if we just take that example, that is actually a Highways Agency road, so that is part of the strategic road network.

Q74 Meg Hillier: But you can see the example, and the number of different bodies that were involved.

Philip Rutnam: I have to say, that was a very large-scale project and will be a challenge-

Meg Hillier: Perhaps it wasn’t the best example. I am a London MP, so forgive me, I do not have the local knowledge.

Q75 Chair: Who is responsible for the A12, which was the issue raised?

Philip Rutnam: The A12 is also a Highways Agency road, despite-

Q76 Chair: They said it wasn’t.

Philip Rutnam: I know, but it is a trunk road.

Q77 Meg Hillier: What about the A10-is that a Highways Agency road?

John Dowie: That’s not Highways Agency.

Q78 Meg Hillier: Well, the A10 is in Hackney, so let us take the A10 then. It does not work in London, but actually it is the A10 or the A1-that’s the Highways Agency too. Okay, well, I am sure that there is an example somewhere.

Philip Rutnam: There are examples.

John Dowie: I do have confidence that, once people have got used to the new system-and they will quickly get used to it once it is all settled-common sense will prevail in 95% of occasions.

Q79 Chair: Let me just put it to you, Mr Dowie, that I lived through the last era of public expenditure constraint, which was not as bad as this one, and if you are in local government and you have not got enough money, you try to pass the buck to another local authority, so common sense rather quickly goes away.

John Dowie: Can I just give examples of why I believe that common sense will prevail in virtually all occasions? There are quite a lot of examples from the previous system-the regional funding allocations-

Q80 Meg Hillier: But there was more money around. There’s none now.

John Dowie: Local authorities doing deals on cross-boundary schemes.

Q81 Meg Hillier: Okay, take a London example. I know that it is not quite parallel, but it is one I know well. At Finsbury Park interchange we had three boroughs coming together, one formerly led by the Chair, in fact. There were people who went along to meetings just to say no to things because they did not want any money coming out of their budget through a neighbouring borough, even though Finsbury Park was the second biggest interchange outside zone 1, although I am not sure whether that is still true. But that shows that there wasn’t always collaboration on these things.

Going back to the other point you raised about boundaries. You talked about people coming forward with their proposals. Let us say that Teesside decides on something, but they do not want a certain area of the region, and Tyneside does not either, and you end up sticking it on one or the other, it will not be the favoured community, will it? It could be the community that gets left out, because it is a small but not very important part to the main board. Have you really thought through the politics of that?

Philip Rutnam: I’m sorry, I don’t understand the question.

Q82 Meg Hillier: I cannot give a specific geographical example, because I am not so au fait with the area, but let us say that the Teesside LEP and local authorities come up with a proposal, but there is a bit that they do not really want to take on, maybe because they know that there is an expensive element, or maybe just because it is not a very big community and they do not feel that it is part of the wider community. If you have an argument between two neighbouring proposals about where that bit should go, you end up being the arbiter. Lines on maps can cause huge issues, and you end up sticking it with one or the other. But neither of them really wanted that community or that transport link. That bit would be at the bottom of their priorities, wouldn’t it? How do you stop that happening?

Philip Rutnam: John might want to comment on this and provide a better answer, but my observation would be that the truth is that there is no perfect system. There will always be boundaries and issues at boundaries. One thing about transport is that it operates at all sorts of different geographic scales, so you have to have institutional arrangements that operate at those different scales. One thing we are trying to achieve through the local transport bodies is to create a geography that is larger than the individual local authority. If we had devolved local authority major funding, for example, to all the individual transport authorities, the problem that you are talking about would have been multiplied many times over. We have gone for a geography of 38, so each of them has, on average, a population of 1.5 million. They are significant geographic and economic units. We are strongly encouraging them, and will continue to encourage them, to work in collaboration.

I want to come back to one other point, which is the influence of the LEP. I know that lots of questions are asked about LEPs. They are still evolving themselves, but from what I have seen of the better, stronger and more capable ones, they are very focused on the need to develop infrastructure. Transport is absolutely at the heart of their agendas, because it speaks so much to the business and economic development agenda. The best ones are developing an evidence base, which is actually a powerful way of influencing agendas, such as the one that you have talked about, which is bringing Teesside, Tyneside and Tyne and Wear closer together and identifying the projects. No doubt they may come to us and say that they need more funding for the projects that are likely to make the greatest difference.

Q83 Meg Hillier: Chair, may I move on to another issue? You may be able to correct me if I am not absolutely accurate. When the ILEA was abolished, every London local authority set up its own education body, and I think that most London had almost as many chief officers as the ILEA had had. Many more chief officer salary grades were created. In this case, what is going to stop that? Are people going to be made redundant from the transport body they are working for and reappointed to work for the new boards? Will there be redundancy payments? Have you looked into any of the costs of movement of people? We have seen a lot of this in the health service with people being made redundant and then getting jobs a few months later.

Philip Rutnam: We are not providing any funding for the secretariat costs of the local transport bodies.

Q84 Chair: Are you monitoring that?

Philip Rutnam: We will keep a very close eye on the development of the LTBs. We are not providing any funding for them. All local authorities, for the reasons you heard earlier, are under a lot of pressure to reduce costs. What we are encouraging them to do-I am seeing the ones that I have spoken to do this-is to find ways in which, for example, the secretariat for an LTB can be provided by a local authority. It is not creating another job. It is the transport director for X city council or X unitary authority, who is going to be the person helping to set up the LTB.

John Dowie: I want to expand on that, because I have long since regretted calling them local transport bodies. They are not bodies. They are actually a committee. It is just the existing people in the local authority-

Q85 Fiona Mactaggart: Committee of what?

John Dowie: Of the local authority transport people. We heard earlier that, in the black country, they are thinking of the cabinet members from the constituent local authorities coming together with representatives from the LEPs, so there will be private sector people, to discuss around a table such as this one what the priorities are for an area.

Q86 Chair: And to decide how to spend money. I will just put it on the record that we think that the NAO should therefore have access to them.

Philip Rutnam: As I understand it, under the arrangements that are coming into existence after we have dispensed with the Audit Commission, the NAO will have a much greater ability to trace and access the ring-fenced funding that we are providing to LTBs. That is my understanding.

Geraldine Barker: We think the position is still a bit ambiguous. There are two ways that that could be resolved. It could either be through the local audit Bill or by the DFT actually enshrining it in its guidance.

Gabrielle Cohen: The access to the local authorities is clear. It is the access to the LTBs.

John Dowie: Certainly, a key plank of our guidance to the LTBs on how we get assurance from them is transparency. They need to publish on the web and make information available to us.

Q87 Chair: If you take that issue away, we will put it in as a recommendation.

Philip Rutnam: We will.

Q88 Meg Hillier: Have you given any thought as to what these politicians will be paid? The North London Waste authority has a paid chair, and various other local government bodies have quite highly paid positions. Have you had feedback from them? I should have asked that earlier.

Philip Rutnam: These are not statutory entities, unlike waste authorities in some-

Q89 Chair: So can they not get paid?

Q90 Meg Hillier: Is there any special responsibility allowance? It is extra work for the cabinet member who has to chair it, no doubt.

Philip Rutnam: I am not sure-actually, I would say that it needs to be integrated into their existing programme of work, as it is an important aspect of their existing-

Q91 Meg Hillier: So that is official DFT policy?

Philip Rutnam: That would be my view as to the right way of taking this forward in an environment where all of us are facing constraints. It is about adding value at the level of the LTB. I cannot promise that-

Meg Hillier: I would certainly support that. It will be interesting to see in a year or two’s time if that is the case.

Chair: We will make sure that it is in the report.

Q92 Jackie Doyle-Price: What concerns me is that when money leaves a Department, it is actually spent on the purpose for which it was intended. I listened carefully to what you said earlier, which was, basically, as far as you are concerned, local authorities spend more on transport than you give them. That is a fair point, but it comes back to the issue of the challenging financial climate that local authorities find themselves in, and I do not think that it is quite as simple as you say.

I want to look at this through the prism of the local sustainable transport fund. That is the fund where local authorities have to bid for grants for specific projects, and if we look at appendix 4, it is summarised by the NAO as "projects that support economic growth and reduce carbon." Could you, just as an opening, say something about the criteria by which you assess those bids, and what sort of outcomes you are looking at from local authority bids for those projects?

John Dowie: There are a number of clear criteria that we set out in the bidding guidance. They were focused on economic growth and carbon as the two key issues, but there was also a set of subsidiary criteria that we also took into account. The bids that came in were assessed by my staff, but we brought in a panel of independent experts to look over them as well. We then put that information to Ministers who took the final decisions. We will then do monitoring-we are now doing monitoring, because all the approvals have been given-as they roll out these projects, and my people are heavily engaged with the various project teams in local authorities. We are about to publish guidance-I signed off the introduction-on the evaluation of these schemes so that we can assess the outputs they have produced. It is really important learning for us in terms of taking decisions in future spending reviews about how best to support this important agenda.

Q93 Jackie Doyle-Price: What you have just explained to me is a process for dishing out money. What outcomes are we looking at from this fund?

John Dowie: We are looking at, focusing on the two key issues, the extent to which their interventions-a mix of walking, cycling, buses and traffic management-are having a net effect on reducing projected carbon emissions in that local area. And we will be looking very carefully-this is an important, leading-edge area for us-at the extent to which these interventions are generating new jobs. That was a key priority which, in fact, Philip Hammond, who was the Secretary of State at that time, set for the programme.

Q94 Jackie Doyle-Price: My local authority got £5 million, and at the time, I was quite excited by this because I thought that it would unlock opportunities, but I have to say that, witnessing how that money has been spent, I have been less than impressed.

Their bid was based around journey planning to encourage more walking, cycling and bus journeys, as you said, but the money appears to have been spent on an awful lot of advertising. You can look at every bus in Thurrock and it will have a nice "Travel Thurrock" motif on it, which leads you to a website. If you go to that website, it says that the first 1,000 people to sign up will get a free pedometer, which I am not sure is what the Department intended when you dished out the money. But the really horrifying thing I found was that every year in Thurrock we have a pop festival. It has generally been funded by council tax, but this year we were told that it would not be funded by the council tax payer but by private sponsorship. Lo and behold, when I got there, the banners said "Sponsored by Travel Thurrock". Is that really an appropriate use of the money that you have dished out?

John Dowie: Of course I cannot comment on that specific case. Indeed, that specific case will be examined shortly.

Jackie Doyle-Price: I am glad to hear that.

Q95 Chair: How did it get through? That is the interesting thing.

John Dowie: There is quite a lot of evidence that-and this should be a minor part of the scheme-quite small sums of money spent on giving people information and introducing new users to bus services can be quite powerful in increasing demand, which then feeds into the fare box and makes it more attractive for bus operators to put on services. There is quite a lot of evidence-we did some demonstration projects in the last five to six years-that this really does work.

Q96 Jackie Doyle-Price: But this is the difficulty. If you are putting cycling, walking and bus journeys as one of the objectives of this, the tool for that is information and publicity. There are bus services, pathways and cycle ways, and we are not adding to that greatly. It is all about changing the service use. For me, as a constituency Member of Parliament, I have seen £5 million being given to the local authority, but a good chunk of that is used for the purpose of just developing information and advertising. That to me does not seem like an appropriate use of money from the Department for Transport. That might be one isolated example, but given that you have articulated that increasing use of other modes is an objective, can you perhaps give me some examples of other bids that have relied less on advertising and information than perhaps the one that I have just articulated?

John Dowie: Certainly, we gave out the money that was for an innovative part of the programme, as a mix of capital money and resource money. About 40% of the money was given out in the form of capital, so that would be for cycle ways, bus priority, and perhaps changing the urban traffic management system. As for the other 60%, part of that will go on targeted bus subsidies, perhaps to kick-start new commercial services and fill key gaps in the network. Only a relatively small proportion in a normal case would just be for publicity and personal travel planning, as the jargon calls it.

Q97 Jackie Doyle-Price: Yes, personal travel planning has been a big chunk of what they have been doing. The other interesting thing is that if you take the borough of Thurrock, all the bus services run by Ensign bus company have not a single pound of public money. There has been a concerted effort by that company to engage with the local authorities, so we can offer a non-subsidised bus service with full access if we do it this way rather than your way. If we are looking at having a better carbon footprint from public transport, isn’t it talking directly to operators rather than dishing out money through the local authorities, which are looking for other ways? If you have 40% on capital and 60% on revenue, there is a lot of discretion there for them to fund other activities. Quite frankly, any information booklet they produce, they could just stick Travel Thurrock on it.

Q98 Chair: What would be helpful for the report is if you look at that as an example and write to us about your take on it within a week. I know that it is putting a time pressure on you.

John Dowie: We are monitoring, so that is not bad.

Q99 Fiona Mactaggart: I wanted to raise with you the question that I asked before, which, in a way, is the opposite end of Jackie’s question. The concern in the Thames Valley is that the emphasis on systems, which is your new accountability mechanism described in this report, has created a delegation of quite complex systems for approving the disbursement of relatively small amounts of money, which add to the bureaucracy of doing that, and so the accountability is more about the system than about what the money achieves. That is a gripe that I am getting. Of course in the Thames Valley, we are keen on transport because we are the premier region for inward investment in the country and we know that business succeeds because they can get from my constituency to Heathrow. If we get the western rail link, they will get there even easier. Do you feel any resonance in this emphasis on your sending out systems, or requiring systems to disburse money, that are quite bureaucratically heavy for disbursing relatively small amounts of money from the local transport board or wherever?

Philip Rutnam: I think there is a bit of a tension here, between the thing you were talking about earlier, in terms of us making sure we can account to you-

Fiona Mactaggart: Yes, there is. Absolutely. We don’t always agree on this Committee.

Philip Rutnam: -for the money that we spend, particularly on ring-fenced areas, and the level of requirements that we impose on bodies that we are handing the money over to. I have to say that my general approach is to think that it is really important that we are clear about our requirements in terms of bodies that get ring-fenced funding from us, how they must run themselves and how they must assure us that they are delivering good value for money.

Take local authority majors, which is the area we are seeking to devolve now. It is the big area of funding that hitherto has been very centrally run in the Department, and by 2015 we want to have devolved it. The way that it used to be run was as a bidding process, where the local authority or whoever was putting together the proposal had to put a great deal of effort into making a bid. And that had all the-to be honest-gaming associated with the bidding process; the uncertainty in terms of outcome-"Would they, or would they not win the project?"; the risks that we had to manage, in terms of the scope for lobbying; and the need to ensure that our process for deciding on the use of resources was really the best process that maximises value for money. All those were risks that we had to manage, and the overhead-the cost-that it put on the local authorities was quite considerable.

It is a different sort of cost, to be honest, from the cost that the local authorities are going to face in future. What we are saying to them in future is that we will allocate you a certain amount of money; you won’t need to bid to us; and we will give you a significant level of discretion about how you use the money, but that is within a framework. Effectively, it is within a set of rules and you have got to abide by the rules. You have to evaluate and appraise. Going back to the point that Stephen Glaister was making earlier about consistency, we are saying that you need to appraise projects consistently. You have to meet the minimum standard for appraisal, which is the standard that we set out in what is known as WebTAG.

Q100 Fiona Mactaggart: What do you mean by "the standard that we set out"? I am in favour of consistency and of evaluation, and they should be done with transparency. But it sounds to me as though you are saying, "We are devolving to you the way we used to do it," and I think that is an unfair bureaucracy to devolve to local areas.

Philip Rutnam: We are devolving to them within a framework. We might well hear from them that they would like less of a framework. Let’s take the appraisal point. There is something called WebTAG, which is basically transport appraisal guidance on the web; we publish it. It is a rather funny acronym. We are saying, "You need to follow WebTAG. You need to assess the benefits of projects-the sorts of benefits that they will bring, in terms of reduced journey times or reduced emissions, and the benefits to the wider economy-in the same way and to the same standard that we would." We are setting that as a rule.

Now, to be honest, they might well not want to have that as a rule-some might-and they might want to make up their own approach to appraisal. Going back to the accountability point, however, because in this area I regard myself very clearly, and consistent with the Government policy, as being accountable for the value for money of this ring-fenced funding, we are setting some clear rules and minimum standards.

Q101 Fiona Mactaggart: I would be really interested to know the total number of rules that you are setting, because I think that it is only when you know what all the rules are that you can decide whether this is an appropriate level of bureaucracy. There is obviously some de minimis grant that we can presumably give out without passing every one of your rules. Am I right in thinking that?

Philip Rutnam: They will have significantly more freedom than they have had to date, but it is not unconstrained freedom. And if it would help, we can certainly send you-

Q102 Fiona Mactaggart: I an not suggesting that it should be unconstrained. I am just concerned that the constraints are inherited from something that is quite appropriate in Whitehall and which might be less appropriate at every stage, when it is happening in a local authority. I do not want not to be accountable. I have been in Whitehall, and I know how you have a perfectly engineered system and you want to give it to everybody else who is doing the system, but it does not always feel perfectly engineered at the other end of the tube.

Philip Rutnam: If I described it in a way that conveys accents, that is probably an over-prescriptive analysis of what we put in place. Obviously, we would be delighted to send the Committee a list of the requirements that we are setting.

Q103 Fiona Mactaggart: That is what I would like to see.

Philip Rutnam: To be honest, they are only the requirements that you would expect a well-run transport planning and investment body to abide by.

Fiona Mactaggart: I did have one other point that I wanted to make, which was different from this.

Q104 Jackie Doyle-Price: Again, it feels to be very processey and not outcome focused. If you are going to be serious about devolving to local authorities, they have got to plan their success by outcomes not conforming with your processes.

Q105 Fiona Mactaggart: Exactly. That is my concern.

Chair: And, Fiona, your other point.

Q106 Fiona Mactaggart: You pointed out that 95% of things work well and so on. I am interested in the moments when you have to intervene because of service failure. The obvious one was the salt supplies. I am wondering whether you have clarity about when you do that.

Philip Rutnam: That is a very fair question. My observation is that the Department deals well with specific cases. Salt, for example, which was an issue that emerged and then became a very serious problem, we dealt with very well. We now deal with salt very well. There is a well-established system for dealing with that contingency around winter. When I was looking at the history of this, in the run-up to the hearing, I think that we have dealt well with some other specific instances of failure, such as what happened with the Sheffield Supertram in the early part of the last decade. We seem to have dealt well on the whole with that.

The floods in Cumbria back in 2009 were a really exceptional weather event. It was a UK record for the wettest day ever in one place in November. We dealt very rapidly and effectively with both the specific failures of infrastructure in Cumbria and the lessons to be learnt from that.

Q107 Fiona Mactaggart: All after the event. I understand that, in something like a flood, you cannot do it perhaps before.

Philip Rutnam: Not all after the event but, to take the Cumbria example, obviously we dealt with the flood after the event, but we have learnt lessons from that. We have done work, for example, with the highway engineering community to improve the accreditation of engineers responsible for structures around highway networks. That is learning a lesson.

My general point would be that the Department deals well with these specific cases. We are close, by and large, to the local transport community, and we can deal well with things that go wrong. What we should reflect more on as we develop this thing called the accountability system statement is how we set out our framework for dealing with service failures, different types of failure. We face a different situation here from other Departments that are dealing with issues when there are clear, minimum national standards, for example, looking after vulnerable people, safeguarding children and so on. That is a different situation. We have a wide range of different services, and we typically do not have minimum prescribed standards. But there is more that we can do to define a framework for how we try to minimise failure, but also how we deal with it. What are the thresholds that would precipitate action?

Ian Swales: I want to raise a specific issue that links to what you have just been saying about service standards. The A66 is the main trunk road in the longitude in my part of the country. It is also the main trunk road through the Tees valley. There was a new junction to join the road to the airport about two years ago. Every time you get heavy rain, the road is closed at the point of this new junction. It has happened again this week. The road has been closed for two or three days, which is economically disastrous for the area. I would just like to know, in this brave new world, who is responsible for that and who pays to get it fixed.

Philip Rutnam: My understanding is that the A66 is a Highways Agency road.

Ian Swales: That is what I am told.

Philip Rutnam: The Highways Agency is just dealing with the current episode of flooding. My understanding, on the basis of the intelligence I had at mid-day, is that while across large parts of the HA network there were points under stress-for example, individual lane closures-the HA expected all the issues that they faced along the road network to be resolved by the end of today. That is just an answer on the specifics of what is happening now. In relation to the wider point, if that is a Highways Agency road, it is the Highways Agency that has got to fix it.

Q108 Ian Swales: Because it is a value-for-money thing, this is a piece of work that has been done in the past couple of years, so this is not an old road; this is a brand new junction. In terms of value for money-I guess this links to contracting, which is one of the issues that we have in the Committee a lot-I am not expecting you to solve this problem overnight, but what I am really interested in is whether the taxpayer has to pay for what looks like a faulty design or a faulty installation? In this new world, who is likely to end up paying for remediation that is clearly needed? That is probably at least the third time this year that road has been closed through flooding.

Philip Rutnam: The A66’s junction by Teesside airport? Can I come back to you separately on that?

Q109 Ian Swales: I would like a specific answer, but you were talking about service standards, and in principle if the Highways Agency or indeed any other branch of your organisation commissions work, do you contract in such a way that if that work is faulty it is the contractor’s responsibility to put it right?

Philip Rutnam: I am sorry not to be able to give you a more specific answer than this, but it will depend on the circumstances. It will depend what was in the contract. Was it the client’s fault for mis-specifying the contract or not getting the design of the works right-some parameter that the client is responsible for-or was it the contractor’s fault?

Q110 Ian Swales: In that case, the specifier would be the Highways Agency?

Philip Rutnam: It is more complex than that, and again I am sorry not to be able to give you a more specific answer. I believe that the in way in which the HA contracts to buy major road schemes there are significant elements of outcome. You ultimately want to see a certain level of flood avoidance, for example, in the contract. That is about as far as I can take it, I am afraid.

Ian Swales: I am obviously interested in that particular scheme, and I was called by the media about it yet again yesterday, but I also think that the Committee would be interested in value for money and to what extent the taxpayer is protected from problems of that nature.

Philip Rutnam: Absolutely.

Q111 Chair: Can I just bring you back finally to figure 3 on page 13, which is local authority spending on transport? Are you able to tell us how much of that is statutory and how much discretionary?

Philip Rutnam: That is a good question. The majority of the £1 billion for concessionary fares is certainly statutory. I am afraid that beyond that I cannot give you a breakdown now. I can either give you a general answer, or we can write to you following this hearing with a more specific answer.

Q112 Chair: I obviously got that the £1 billion concessionary fares are statutory, but the reason I am interested is because we are trying to look at how the world is going to cope with cuts, and how you are going to judge it. I will not hold you to it, but can you give us a ballpark figure? Out of that, what proportion would you reckon?

John Dowie: Perhaps I could make a connection with another part of the Report, which points out with a straight face that we have 300 transport duties.

Q113 Chair: I know. Completely bonkers, I thought. I was told that there were only a few that are really important.

John Dowie: Indeed. I think that is the point. The history, in which I deny any responsibility, is that transport has been rather liberal in handing out responsibilities.

Q114 Chair: Although I have to say to you that, when I thought about this-we are all bringing up constituencies-I am in a constituency where they are about to close one of my local hospitals and people who live on the poorest estate will have to take three different buses to get to the other hospital. The journey will take an hour and a half if everything goes smoothly, but more if there are bus cuts over the coming period. For elderly people wanting heart checks or needing cancer treatment once a week, that is going to be really important, and you have taken away that duty.

John Dowie: You will find that your local authority has a responsibility, through one of those 300 duties, to-

Chair: It doesn’t. You have taken it away, according to the Report.

John Dowie: Well, to take account of the interests of old age pensioners and disabled people-

Philip Rutnam: The statutory duty is there. What we have said is that, under the localist regime, we are not monitoring performance against a particular target.

Chair: I took that. I can see the tension. All I am saying to you is that on the ground, for these people-and it literally is the estate in my constituency with the greatest challenges-it will be an hour and a half if they are lucky, but it is likely to be longer. That means that, if the transport system does not work, they won’t go to the hospital for their regular appointments.

Q115 Jackie Doyle-Price: On that issue of the 300 statutory responsibilities, would it not be sensible to revisit all those and rationalise them? Frankly, if you have 300, how can you have a sensible assessment of priorities?

John Dowie: We did a review of those as part of a wider Communities and Local Government departmental exercise; that is when the clutter that had developed was brought to our attention. Local government was consulted in general-and this sums up the absurdity of the position-and from what they were saying, few of those were an imposition on them. So we have these 300 duties, which probably achieve relatively little.

Q116 Chair: A lot of them look very wide. Looking at that, you will tell us, but you are not able to now, which are statutory and which are discretionary, but what is the impact of the cuts going to be? That is what I really want to know.

Philip Rutnam: First, we undoubtedly face a challenging situation. We have done our best, as I think the Report recognises, to try to keep the funding that we provide to local government in the round roughly stable. So, over the four years, it is more or less flat in cash terms compared with where it was-there is a bit of down and a bit of up. However, the wider background is of course that the local government finance settlement-the formula grant that the DCLG distributes, covering revenue funding for local authorities in the round-is subject to very significant reductions.

Q117 Chair: Twenty-eight per cent.

Philip Rutnam: It is 28% over four years; it reduced by 10% last year compared with the previous year. As we were hearing from the earlier witnesses, that will put significant pressure on local authorities, particularly on their revenue funding-the resource side of the accounts-for transport. You will recognise that is where the biggest single statutory obligation sits, which is concessionary fares. The resource side of funding for local authorities on transport is particularly challenging.

There is obviously a lot of concern around highways maintenance, and the ability to maintain local roads in satisfactory condition. Back in the 1990s, when the country faced a similar fiscal situation, the experience was that reductions in highways maintenance were, in a sense, too easy a saving to make, and road condition deteriorated. I do not have an easy answer to that, but I would say a few things. First, we have tried to keep our funding for local authorities up, particularly on the capital side. Going back to that earlier conversation about highways maintenance, integrated transport and the like, you may think it is all going to be spent on old people’s homes, but we believe we can have some influence and we have tried to keep that up.

Secondly, we think it is really important-and we were hearing a bit about this from the earlier witnesses-to seize the opportunities that exist for driving significant efficiency gains in the way in which highway authorities get road maintenance done; I would include the Highways Agency in that context, and also local authorities. There are real opportunities here: I was looking into it, and there was an Audit Commission report back in 2011, which identified very wide variances in the amounts that local authorities spend, with factors of three, for example, between the best and worst performing local authorities in terms of the cost of clearing gullies on roads. Collaboration between local authorities and highway authorities is key to driving better value. One thing we have funded is something called the highways maintenance efficiency programme, which is working with the sector-the supply side and industry-and with highway authorities to identify ways in which much better value can be got on highways maintenance.

Just the other day, in London, the 33 boroughs, each of which is a highways authority, plus Transport for London, announced a new approach to procuring highway maintenance across the whole road network in London-borough, City of London and TfL-owned-so that instead of having something like 100 contracts let for highways maintenance, they are moving, over time, to four much larger contracts, with an estimated saving of something like 25%.

I am not saying that that answer is equally applicable to every part of the country-it is clearly directly relevant to metropolitan areas, and in shire counties with a large geography, it is a bit less applicable-but there is significant opportunity for driving efficiency gain in the way in which highways are managed and procured and for having, for example, more of a shared function between different local authorities, so that they are not all equally experts on street lighting, bridge maintenance and highways maintenance. All those are things to be looked at.

Q118 Chair: Have you modelled, in all this, two things? Have you modelled the level of expenditure against changes in accident rate?

Philip Rutnam: Accident rate?

Chair: If we don’t fill the holes and the roads get worse, more people will have various accidents.

Philip Rutnam: We model spend versus road condition. Those data are all on our website.

Chair: There must be some data around.

Philip Rutnam: I am afraid I don’t know about spend versus accident rate. It must be possible to do.

John Dowie: The problem is with the definition of an accident. It could be an axle breaking. We would not be collecting that information nationally.

Chair: I can’t believe there isn’t academic literature that models that.

Philip Rutnam: We have road safety data.

Amyas Morse: Might there be a way to model those that are reported to the police?

John Dowie: We have very comprehensive information on road casualty, so that is injuries.

Q119 Chair: You must be able to model it, because the other bit, which is why I asked about discretionary spend, is, if we find that most of this is statutory rather than discretionary, what are you going to do if they do not meet their statutory obligations, even taking away some of the rubbish 300 ones that they have?

John Dowie: Going back to the statutory duty, I fear that even if we were to write to you, we would not be telling you anything terribly useful. The statutory duty is to maintain the highway; it does not say anything about the standard at which they maintain it. The largest single element of that largest column in terms of highways will relate to a duty to maintain.

Q120 Chair: You don’t define it? You do not have a minimum standard?

John Dowie: There is a collaborative process through the United Kingdom road liaison group, which the Department, local government and the devolved Administrations participate in, which produces guidance on highway maintenance, bridge maintenance, street lights and traffic management. That is the Bible for the sector.

Q121 Chair: It is almost a pointless statutory duty.

Philip Rutnam: What we do not do is set a minimum standard that they have to meet.

Chair: Yes, but it is meaningless. It is like the library service one, which I used when I was a Minister, which says, "You will provide a library service", full stop. It is pretty meaningless.

Philip Rutnam: I am sure there will be interesting questions about how far they could go in allowing the roads to deteriorate before a court would find that they were in breach of their duty.

John Dowie: But we pursue better performance through other routes.

Q122 Chair: Have any of the organisations ever challenged it through the courts? RAC? I was just thinking about Stephen Glaister’s organisation.

Philip Rutnam: Not to my knowledge.

Q123 Austin Mitchell: This seems an obvious question. Why does figure 3, which we were just referring to, show local authorities spending £545 million on parking services? I mean, judging by the number of parking fines I have been paying up and down the country, particularly in Westminster, parking services must be run at an enormous profit.

Philip Rutnam: I have to say, I had the same question. Those, I think, are gross expenditure figures, so not net income.

Q124 Austin Mitchell: You mean it is not making a profit, overall?

Philip Rutnam: It is gross. They get income, which I think far exceeds £546 million.

John Dowie: Yes, it does.

Philip Rutnam: It is about £700 million or £800 million of income.

Q125 Austin Mitchell: So those are the costs. What is the income? It must be making a profit.

John Dowie: The income is approximately £300 million-in excess of that.

Austin Mitchell: Thank you. I am paying that.

Philip Rutnam: That includes fines and other levies.

Amyas Morse: I just want to make a point for your information. We are proposing to do a study, which will report at the end of next year, looking at maintenance expenditure across the whole of the network, strategic and local. That will let us benchmark. Hopefully, that will be interesting. It will be finished in about a year’s time, but it will be quite a useful thing to do.

Chair: Good. I think we are there. Thank you very much. We are looking forward to seeing you on the west coast main line.

Philip Rutnam: Indeed. Thank you.

Chair: Thank you for answering directly.

Prepared 1st February 2013