3Regional disparities and economic rebalancing
46.Four days after the cancellation of the three electrification schemes in the Midlands, south Wales and Lake District, the Secretary of State and Mayor of London jointly announced an agreement in principle to fund the Crossrail 2 project in the capital, at a cost then estimated at around £30 billion at 2014 prices.55 This reignited an intense debate about apparent disparities in rail infrastructure investment between London and other regions.56 Below we consider what the official data show and how imbalances should be addressed, particularly in the context of the Government’s long-standing intention to rebalance the economy away from London towards other regions.57
Are there disparities?
Past spending
47.Historic spending of public money by region is published in HM Treasury’s Country and Regional Analysis (CRA).58 Analysis of the CRA by the House of Commons Library shows that spending on the railway from 2012/13–2016/17 was substantially higher in London in absolute terms, at nearly £25 billion, than any other region; the next highest level of regional spending was in the North West of England, which received just under £5.5 billion in the same period:
Table 1: Public spending on the railway by region, 2012/13—2016/17
Source: House of Commons Library, February 2018
48.Given the capital’s geographical size and large population, it is unsurprising that there is more spending in absolute terms in London than other regions. The House of Commons Library’s analysis of CRA data on per capita rail spending in the regions of England in 2016/17, however, also demonstrates a substantial disparity between London (£773 per capita) and regions outside of the South East (ranging from East Midlands (£70) to the North West (£175)):
Table 2: Transport expenditure per head, England 2016/17
Source: House of Commons Library, February 2018
Analytical difficulties
49.Several arguments were put forward about the value of analysing regional investment in the railway in these ways. The DfT, for example, noted that:
It is extremely challenging when talking about a system or network such as the railway to accurately break down regional spending. Where the expenditure takes place on the railway is not always an accurate reflection of where the benefits are felt. An investment in one part of the country may improve the journeys of all the people passing through that area, providing network benefits that are difficult to account for.
The Department also emphasised the difficulty of analysing investment annually or even five-yearly, given that railway assets typically have a life-span of 25–40 years. It pointed out that there was inevitably a “cyclical nature to replacing them that does not lend itself to an even split of funding across all regions within every five-year control period.”59 It should be noted, however, that the Department has begun to acknowledge an issue with inequalities in regional transport investment, through publication of a “rebalancing toolkit” (discussed below).
50.To the extent that it accepted there were disparities with other regions, Transport for London (TfL) believed they were arguably justifiable. It claimed that London’s population density and high economic activity made transport infrastructure uniquely important in the capital. It noted that transport networks were particularly heavily used in and around London, and presented alternative, per road and rail passenger journey, figures, which showed that spending per journey made in London in 2015/16 (£6.94) was considerably below the Great Britain average (£10.31).60 It could be argued, however, that such high numbers of passenger journeys have themselves been facilitated by commensurate levels of infrastructure investment in London over many years.
Planned spending
51.IPPR North’s analysis of planned transport spending in the 2016 National Infrastructure and Construction Pipeline, published by the Infrastructure and Projects Authority (IPA), showed “a stark gap between London and the rest of the country”: £1,900 per capita planned in London from 2017 onwards, compared to £400 per capita in the North, for example.61
52.The Secretary of State responded to IPPR’s analysis by writing to all MPs on 12 December 2017, sharing analysis of the 2017 National Infrastructure and Construction Pipeline. This looked at planned transport infrastructure spending in the period 2017/18–2020/21. The Secretary of State told MPs that:
These figures show that the planned spending per head figure is within 33% of the national average for all nine English regions. Moreover, the overall figure for the three Northern regions (North West, North East, Yorkshire and Humber) is £1,039 per head, compared to £1,076 per head for the Middle regions (East of England, East Midlands and West Midlands) and £1,029 per head for the Southern regions (London, South East and South West).
53.Mr Grayling hoped this analysis would “help set the record straight”62, but in January 2018, IPPR North published a briefing on the Government’s analysis, which noted that, by excluding spending in the pipeline after 2020/21, it had omitted some £42.5 billion of planned investment, 40% (£19.8 billion) of which is earmarked for London. It argued that, while all the assumptions of the analysis “may have been applied accurately”, it was clear it produced a skewed result. 63 It noted that its own analysis of the 2017 pipeline, including planned spending after 2020/21, showed the same “huge disparity” between London and other regions.64
The views of regional transport bodies
54.The difficulties of measuring investment on a regional basis were to some extent accepted by the regional bodies. Maria Machancoses, Director of Midlands Connect, agreed that some of the benefits of investment in physical infrastructure in London will accrue in other places; just as investment in Birmingham will benefit the wider West Midlands, for example. She believed, however, that “figures on the disparity of investment, no matter which formula you look at—whether by the DFT or the Treasury—they all say that outside London it is just not working.” Her view was that this should be the starting point from which to “move forward”.65
55.It was clear that the regions’ dissatisfaction went far wider than the electrification debate. Frustration in the South West was eloquently described by Councillor Geoff Brown of Cornwall Council, Chair of the Peninsula Rail Taskforce (PRTF). The PRTF is a collaboration of Devon, Cornwall and Somerset local authorities, business people and academics set up in 2014 following the Dawlish sea wall rail line collapse.66 The Secretary of State has described the Dawlish sea wall as “the number one national transport priority”.67
56.Cllr Brown noted the difficulty the Taskforce had experienced in drawing rail infrastructure investment to the South West. He emphasised that, despite Mr Grayling’s description of Dawlish as the top priority, the PRTF’s report on the South West’s urgent rail infrastructure needs, including investment in Dawlish and the Somerset Levels, had been with the Department for some 15 months with no official response.68 Last month, Mr Grayling described improving performance on the Northern rail franchise as the Department’s “number one priority”.69
The “rebalancing toolkit”
57.Most of the regional transport bodies, and other witnesses, pointed to a fundamental issue: they believed regions outside of London were systematically disadvantaged by transport scheme appraisal methods.70 The DfT’s WebTAG guidance for transport scheme appraisal is based on HM Treasury’s “Green Book” approach, structuring proposals in five separate cases: strategic, economic, commercial, financial and management.71
58.Merseytravel, the transport arm of the Liverpool City Region Combined Authority, summed up the relative difficulty for some regions: it is much easier for highly-populated, economically successful places to prove the case for schemes in their area because the model has a bias towards schemes that exhibit strong levels of potential demand and/or high potential to relieve existing transport congestion.72 A range of witnesses believed this approach inevitably drew more investment to London and, unless the system could be altered to take greater account of wider economic benefits, the process would be inexorable. Put simply, less well-off regions would never be able to “catch up” and the intention to rebalance the economy would not be realised.73
59.The Department has begun to recognise this and take steps to address it. The Transport Investment Strategy, published in July 2017, made a commitment to develop a “rebalancing assessment toolkit, for use as part of the strategic assessment of future investment programmes.”74
60.The DfT’s rebalancing toolkit was published in December 2017. It is supplementary guidance on building the strategic case for transport investment. The guidance sets out a six-step “rebalancing framework” for transport projects, with a “check list of questions’” and examples of potential evidence to prove the rebalancing case. The guidance is explicitly “a live document and open to change”; it states that the Department “remains open to views on the scope and content”.75
61.Regional bodies broadly welcomed the toolkit. Mick Noone, Merseytravel’s Director of Integrated Transport, believed it gave “strategic direction” and “a number of ideas about how we can start proving that [regional transport infrastructure investment] can rebalance the economy”. However, he also had some concerns:
What it does not do, and where we think it is weak, is to drill down and give us more examples of the sorts of things, both qualitative and quantitative, that prove that this rebalancing will actually take place […] we need more information from the DfT as to what it expects from us in terms of how we produce the evidence—what sort of evidence they need and how we can get it and prove it.76
62.Maria Machancoses emphasised that the toolkit was supplementary, rather than intrinsic, to the strategic case, and was also concerned there was an expectation that toolkit analysis should be “consistent with the analysis in the economic case”. She felt this worked against the intention to weight appraisals more in favour of wider economic benefits. She was not clear whether use of the toolkit would be mandatory or when/whether it should be used.77 Barry White, Chief Executive of Transport for the North, told us that, while the current iteration of the toolkit enabled the regions to provide “useful context that could be considered as part of painting a picture”:
[…] if you want to rebalance the economy it should be much more at the heart of the formal consideration and the investment decision-making process. If we want to rebalance the UK economy, looking at transformational growth should be formalised as part of the process. The rebalancing toolkit does not get us there yet.78
63.We shared the concern expressed by regional bodies; it was not immediately clear to us what practical difference the rebalancing toolkit would make in its current form. Brian Etheridge confirmed the purpose of the toolkit was:
[…] to make sure that promoters, or anyone, including ourselves, have a much more rounded and coloured-in view of exactly what the business case is providing. The economic case provides for the strict BCR, but the strategic case looks at much wider societal benefits; it looks at the overall context of the development of the area and the economic appraisal of the plans of local authorities and LEPs. Those enable us to colour in a business case much more fully than just the BCR.79
We asked the Rail Minister for examples of the toolkit’s influence on the DfT’s transport investment decisions. He could not provide a specific example, emphasising that it was “relatively early days” for the approach.80
64.There are considerable difficulties in measuring transport infrastructure spending on a regional basis, particularly in relation to capital-intensive, complex networks with long-lived infrastructure assets such as the railways. We accept that capital spending in one part of the network can deliver benefits much further afield. We urge the Government to consider how it can better demonstrate the distribution of benefits. The evidence from regional transport bodies, however, was clear: decision-making processes and systems of scheme appraisal currently work against regions in need of regeneration, and they do not believe they are getting their fair share. If this situation is not more directly addressed, regional economic disparities will increase.
65.Current transport scheme appraisal methods disadvantage regions in need of economic regeneration. This is working against the Government’s intention to rebalance the economy. The current appraisal methods, which heavily weight journey time saved, will always favour London. The consequent transport investment increases economic activity and congestion. This appraisal method does not solve congestion but subsidises it. Appraisal methods should instead weight heavily the regeneration impacts of investment in transport in regions with spare economic capacity. We therefore strongly welcome the Government’s recognition of the issue, and its intention to address it. The Department’s “rebalancing toolkit” guidance is a welcome step in the right direction, but we are not yet confident that it will be sufficient to make a material difference.
66.We welcome the Department’s openness to ideas to improve the rebalancing toolkit. The Government must be more specific about the economic rebalancing effects it intends to achieve and how regions in need of regeneration can prove their cases and secure investment. People in regions like the North East and the South West, which have experienced relative under-investment in recent periods, must have a clear sense of what the Government is trying to achieve and be able to judge its success. We recommend the Department commit to reviewing the effectiveness of the toolkit in achieving the Government’s rebalancing aims; it should undertake and publish every two years analysis of the difference use of the toolkit has made in the Government’s regional transport investment decisions. We recommend that use of the toolkit be mandatory, and that information submitted using the toolkit in support of rebalancing cases for transport schemes be transparent and open to scrutiny. We are concerned that the toolkit’s status as supplementary guidance will limit its effectiveness; we recommend the Department initiate discussions with HM Treasury about how economic rebalancing can be made an intrinsic consideration in transport scheme appraisals, putting it at the heart of investment decisions rather than being merely an add on.
55 “Crossrail 2: a way forward”, DfT press release, 24 July 2017
56 See, for example, “Crossrail 2: Support by government ‘outrageous’ after northern snub”, BBC News, 25 July 2017
57 HM Government, Northern Powerhouse strategy, November 2016; HM Government, Midlands Engine strategy, March 2017
58 For latest data, see HM Treasury, Country and regional analysis: 2017, accessed 17 May 2018
62 Letter from the Rt Hon. Chris Grayling MP, Secretary of State for Transport, to all MPs, 12 December 2017 [not published]
63 IPPR North, Future Transport Investment in the North: a briefing on the Government’s new regional analysis of the National Infrastructure and Construction Pipeline, January 2018
66 Peninsula Rail Task Force, accessed 18 May 2018;
67 See, for example, HC Deb 27 February 2018, col 774
69 “Grayling: Improving Northern rail ‘number one priority’”, BBC News, 23 May 2018
70 See, for example, Merseytravel (INV0049); West Yorkshire Combined Authority (INV0041); Balfour Beatty (INV0002); Campaign For Better Transport (INV0051); IPPR North (INV0045)
71 DfT, Transport analysis guidance: WebTAG, accessed 18 May 2018; HM Treasury, The Green Book: appraisal and evaluation in central government, accessed 18 May 2018
73 Merseytravel (INV0049); West Yorkshire Combined Authority (INV0041); Balfour Beatty (INV0002); Campaign For Better Transport (INV0051); IPPR North (INV0045)
74 DfT, Transport Investment Strategy, July 2017
75 DfT, Strategic Case Supplementary Guidance Rebalancing Toolkit, December 2017
Published: 28 June 2018