TRANSPORT COMMITTEE

Transport and the economy

TE 01 Borough of Newham TE 02 Royal Aeronautical Society TE 03 Richard Starling TE 04 Derek Halden TE 05 liftshare TE 06 FSB - Federation of Small Businesses TE 08 PACTS TE 09 TRL - Transport Research Laboratory TE 10 TfL - TE 11 Transport Watch TE 12 plc TE 13 Joint from Dr Greg Marsden and Professor Peter Mackie TE 14 Unite - the union TE 15 Merseytravel TE 17 Passenger Focus TE 18 CILT - The Chartered Institute of Logistics and Transport TE 19 Local Government Technical Advisers Group (TAG) TE 20 Rail Freight Group TE 21 Roger Vickerman TE 22 UK Major Ports Group TE 23 TravelWatch NorthWest TE 24 National Alliance Against Tolls TE 25 Airways' TE 26 VisitBritain TE 27 Independent transport commission TE 28 David Simmonds Consultancy Ltd TE 29 ADEPT TE 30 Wharf Weston TE 31 BAR UK TE 32 North of Tyne Transport Group TE 33 Norfolk Chamber of Commerce TE 34 "The Northern Way" TE 35 South Yorkshire Passenger Transport Executive TE 36 Edward Gibbins TE 37 Royal Town Planning Institute (RTPI) and the Transport Planning Society (TPS) TE 38 Transit Association (LRTA) TE 39 City Counci TE 40 FlyingMatters TE 41 RAC Foundation TE 42 The Hoseasons Group TE 44 The Transport Planning Society (TPS) TE 45 London First TE 46 James Morshead TE 47 Directors of Public Health for the West of Partnership Area TE 48 ASLEF TE 49 North West Rail Campaign TE 50 West of England Authorities TE 51 Oxfordshire County Council TE 52 PCS Union TE 53 Town and Country Planning Association TE 54 English Regional Development Agencies TE 55 Halton Borough Council TE 56 Dr David Metz TE 57 East of England Space for Ideas Forum of business leaders TE 58 Association of Greater Authorities and Intergrated Transport Authority TE 59 Economy on behalf of the East of England Development Agency (EEDA) TE 60 British Ports Association (BPA) TE 61 British Air Transport Association (BATA) TE 62 Centro TE 63 Living Streets TE 64 London TravelWatch TE 65 CBI TE 66 The Chartered Institution of Highways & Transportation (CIHT) TE 67 Associated British Ports TE 68 City of York Council TE 69 DB Schenker TE 70 Freight on Rail

Memorandum from the London Borough of Newham (TE 01)

1. Summary of key points

1.1 is set to become the capital’s economic powerhouse over the next decade. Over time, it will be the key strategic location for trade, commerce, leisure and development in London. It is estimated that at today’s prices, raising the productivity of the to the same level as the Greater South East would contribute around £13bn to UK GDP.1 In other words, success here has a national impact.

1.2 Currently, there is no recognised major transport hub in East London. Stratford, which already has the capacity and the connectivity, and is at the centre of London’s major development plans for the next twenty five years, is ideally placed to become the UK’s newest transport hub serving the Britain of 2025.

1.3 Transport infrastructure is absolutely critical to realising the unparalleled opportunities for growth in this part of the UK. If we fail to develop the necessary conditions for the capital’s growth in the next decade, companies will choose to invest in other cities around the world which are more conducive to development. It would be a debilitating mistake to let this happen.

1.4 High speed rail is part of the transport package that East London needs to support its economic development; which also includes ensuring that is delivered in full, along with the Thames Gateway bridge and the extension of the (DLR). Delivery of these three major transport projects together will determine the extent to which the regeneration potential of the Royal Docks – a key Opportunity Area in the and part of the Green Enterprise District vital to supporting a low carbon economy – is realised. Given the cancellation of the Thames Gateway Bridge, it is particularly vital to the regeneration and economic development of the area that the Crossrail South East branch, currently subject to reappraisal, is delivered.

1.5 More information is available on these issues should it be of interest the Committee. However, this submission focuses specifically on the contribution that high speed rail would make as a key driver of the local and national economy, if Stratford were utilised as a high speed rail “hub”.

1.6 Over £210m worth of public money has already been invested making the station fit for its purpose as an international station, yet no international services currently stop at Stratford. It is an international station in name only. One of its roles was intended to be the London stop for international

1 Return on Capital: a prospectus for the future of the London Thames Gateway, Thames Gateway London Partnership http://www.thames‐gateway.org.uk/

services originating in the UK regions ‐ the Committee will recall that over £350m was expended on purchasing Regional train sets which have never been used for these services. Together with the cost of a link between the West Coast Mainline and the Rail Link, well over £600m has been invested to enable the regions to benefit from links to the European high speed rail network, none of which have been realised.

1.7 However, Stratford has a large catchment of potential users even without supporting regional international services. We believe that there is a commercial case for operators on the current High Speed One line to stop at Stratford and have independent evidence which supports this. In their report (attached as an appendix), Colin Buchanan Associates found that stopping at Stratford is financially viable, would see 2 million passengers opt to use the station annually and deliver £600m in user benefits in the evaluation period (based on the ’s own methodology for valuing journey time savings).

1.8 We are keen to ensure that the UK maximises its investment in new transport infrastructure, specifically in the new high speed rail line (High Speed Two). The new network should generate longer term growth, development and investment in the country.

1.9 The debate around high speed rail has for too long been based on the assumption that the UK’s transport needs tomorrow will be the same as our needs today. Yet the new line will not open until the mid‐2020s. Planning for how our transport infrastructure, and economic growth, will develop in the next two decades will be critical in ensuring that we maximise the potential of high speed rail for the whole of the UK and gain a return on our investment. Stratford is a key strategic location in the future UK economy, and has a major role to play within this agenda. Yet we are concerned that current plans are not exploiting economic trends or major areas of future growth, such as East London.

1.10 We miss a huge opportunity if the objective of our new high speed rail network is solely to cut journey times within and between UK regions. This is a chance to open up the , Northern England and to European trade and investment and create a real driver for our economic recovery through easier access to European trade and industry.

1.11 Yet current plans remain focused on a line which does not connect High Speed One and High Speed Two. This is despite the fact that both the current Secretary of State for Transport and his predecessor have said they see the strategic argument for linkage; especially in the context of building a railway line for over 100 years of use. There is a distinct risk that a series of discrete high speed lines will be built that fail to join up, rather than a network. Stratford is the location which can facilitate a more joined up approach.

1.12 With the new network, we are presented with a unique opportunity; to join the three major transport projects of our generation together, creating the foundations for future economic growth. Connecting the Crossrail link to Heathrow with High Speed One and High Speed Two ‐ in one strategic location ‐ would transform business in the UK, and act as a catalyst for future investment.

1.13 We would welcome the Committee to Newham for a site visit around Stratford and the station, to see the potential and scale of the development opportunity here, and present in person our case for Stratford as a transport hub, and its relevance as a strategic location for the UK economy.

Main submission

East London Moving East

2.1 East London is expected to become the economic powerhouse for the capital over the next two decades. Take some simple statistics: ƒ East London is expected to accommodate up to 249,000 new jobs by 2016 ‐ nearly 40 percent of London’s total employment growth. It will be the location of a third of all London’s new homes. 2 ƒ Over twenty years, the GLA predicts a population increase of 260,000 people in the 5 Olympic host boroughs alone, the equivalent of a whole new borough the size of Newham. These boroughs are already home to one sixth of London’s population.3 ƒ The Mayor of London’s replacement London Plan cited East London as the single most important regeneration priority in the capital for the next 25 years.4

2.2 Stratford holds a unique strategic position in the economic development of London and the UK as a whole. Within the next decade, it will have become London’s major metropolitan centre outside the City and West End, with the development of a high quality commercial, residential and retail offering, including Westfield Stratford City and the Olympic parklands. Stratford will be a prime visitor attraction; a vibrant area to work and do business; and a fantastic place to live. • Stratford City will be a new major metropolitan centre within the next decade. • Stratford is home to the Olympic Park, the biggest new urban park in the country. 10,000 new homes are anticipated on and around the Olympic site alone. • It already has 5 million square feet of consented office space.

2 5 Host Boroughs Strategic Regeneration Framework (2009) 3 5 Host Boroughs Strategic Regeneration Framework (2009) 4 Draft Replacement London Plan, Mayor of London, p.33 (2009)

• Westfield is opening the biggest urban retail development in Europe at Stratford. Westfield's £1.5 billion scheme includes 340 shops opening in September 2011. • It is the growth hub along with the Royals for the Mayor of London's Green Enterprise District. • Stratford already enjoys enviable transport connections into west London, the City and . It currently takes around 12 minutes to travel to Canary Wharf, 20 minutes to Circus, and 25 minutes to Westminster (all direct services). This connectivity will be further supported by the opening of Crossrail in 2017, which will link Stratford to Heathrow in the West. • , the O2 arena, the International Convention Centre and the ExCeL centre, are all a short journey from Stratford. The O2 and Greenwich Peninsula is less than 10 minutes away, and has planning permission for 10,000 new homes and 3.5m square feet of office space.

2.3 The critical point in our argument is that we look at the future economic landscape of London. Stratford is often referred to as being ruled out because it is ‘too far out’ or in ‘Outer London’. This fails to grasp the development trends of the capital over the next decade. It also ignores the current connectivity of Stratford, and the ability for Stratford to be the London stop if the two high speed networks are connected. This would connect us into the European rail network, and eventually open up the regions and Scotland to European trade and business without the need for aviation.

2.4 The advantages for Stratford as a high speed stop are set out in bullet point form below: • Growth at Stratford and appetite to invest is unparalleled across the rest of London (potentially the UK), but requires transport infrastructure and would be hugely supported by high speed rail. • This growth also makes Stratford a destination in its own right over the next decade. There is no major transport hub in East London despite its rapid projected development over the next decade. • Stratford has the connectivity to central London, and a large catchment area which would generate more passenger numbers. • Stratford International has the capacity to accommodate high speed rail and has already received £210m of investment to make it an international station. With the addition of a feature called the eastern egress walkway, the capacity of the station for traveller numbers has been doubled. It is vital we “sweat the use” of such a transport asset. • Using Stratford is not mutually exclusive from using Euston as a terminus but it can relieve the pressure by dispersing excessive traveller numbers from there, providing a more sustainable solution. • It can facilitate the joining of High Speed One and High Speed Two which would connect us into the European rail network and make us ‘open for business’ with Europe without the need for extra aviation.

• It supports the economic regeneration in East London, consolidating investment in the Olympic and Paralympic Games, and other urban regeneration in the borough.

2.5 The report by HS2 Ltd on the new network nevertheless indicated Euston as the London terminus, but gave no commitment to direct connection between the High Speed One and High Speed Two lines and no role for Stratford.

2.6 Population growth around Euston has already peaked while it is set for a huge rise in East London. The expansion needed for Euston to be a terminus station is very considerable. Our suggestion is that Stratford takes some of the extra pressure from Euston as a consequence of the two high speed lines being joined together. Passengers using Stratford would include those from the Midlands, the North West and beyond to Europe, with the London stop at Stratford, as well as travellers whose end destination is the rapidly regenerating East London. Our proposal is not mutually exclusive to Euston also being a terminus, but the argument for utilising Stratford as an existing asset in the system is absolutely compelling. It would create a more sustainable solution for the future needs of the capital and promote investment in the East; a powerful symbol that we are “open for business”. It would also, critically, facilitate the linking of the two networks.

2.7 Stratford covers one of the widest catchment areas in Greater London and is easier to get to by car, taxi and than St Pancras for everyone, except people coming from West London. It is also more convenient than Ebbsfleet for many people living in the densely populated surrounding area. It has much better links to East Anglia than Kings Cross. And as the planned economic development continues in the East, more passenger numbers will be generated.

2.8 However, the right infrastructure is absolutely vital to capitalising on this potential for growth and regeneration. If we do not provide the right conditions for the private sector to invest over the next decade, it may not happen.

Regeneration and Convergence

3.1 Stratford International has received over £210m of public money to ensure that it is fit for purpose to have international services stopping there. The route was selected with regard to the regeneration benefits to the Thames Gateway and East of London.

3.2 It is estimated that at today’s prices, raising the productivity of the Thames Gateway to the same level as the Greater South East would contribute around £13bn to UK GDP.5

3.3 The regeneration benefits seen at existing Eurostar stations have driven at least £6 billion of gross development value.6 A report for London and Continental Railways on the total regeneration benefits of High Speed 1 estimated these as £17bn. In response to the Committee’s specific question as to whether the current methods for assessing proposed transport schemes are satisfactory, we remain concerned that regeneration benefits are not fully taken into account in the appraisal of major transport schemes. In many transport schemes (the Thames Gateway Bridge is another local example) regeneration benefits were not fully included in the Benefit to Cost and investment appraisals.

3.4 High speed rail could have a crucial part to play in transforming the local economy and making East London a place where people in the future want to live, work and stay. According to the recent Government command paper authored by , the new London‐ line could bring at least six of the major cities of the Midlands and the North to within 80 minutes of London; supporting housing growth and business development around the new route.7 This will support East London’s bid for Convergence with the rest of the capital: closing the gap between East and the rest of London in terms of quality of life and economic value to the UK over the next 20 years. It will also support us becoming a net contributor to the UK economy, rather than a borough which is more reliant on the redistributive finance system.

Business backing

4.1 We have considerable backing for Stratford as a high speed rail centre, from major companies which are already investing in East London and which want to continue to do so. We attach a list of endorsements for our case.

4.2 These businesses, and others, see the benefit of creating a high speed rail centre in Stratford, and stand ready to invest further in East London. It is for politicians, rail operators and other decision‐makers to wholeheartedly back Stratford as a high speed rail hub, supporting private sector investment and economic development, and making the most of the investment in a new network by sweating existing assets and understanding economic trends.

August 2010

5 Return on Capital: a prospectus for the future of the London Thames Gateway, Thames Gateway London Partnership http://www.thames‐gateway.org.uk/ 6 Development press releases, Kings Cross Central Limited Partnership, Stratford City development limited. 7 High Speed Rail Command Paper, p.13 (Mar 2010), p.61

Memorandum by the Royal Aeronautical Society (TE 02)

Executive Summary

There have been fundamental changes in the context of UK air transport since the publication of the Eddington Report. These include large increases in the cost of aviation fuel, the introduction of EU environmental policies, and the growth of powerful new international competitors. However, the provision of an adequate UK air transport infrastructure remains essential to national and regional prosperity. However, future development of the UK air transport system must be environmentally sustainable and better integrated into the UK transport system.

Improving the efficiency of existing transport systems can provide a quick-win in the war on greenhouse gas emissions without the need for major public sector investment and without compromising safety. The key is to exploit the technology of satellite navigation and satellite communications. Although the major impact would be on Britain’s roads, the principle also applies to air and sea transport

Introduction

1. The Royal Aeronautical Society (RAeS) is the world’s only professional body dedicated to the entire aerospace community. Established in 1866, the Society has 17,000 members in over 100 countries (including 3,500 classified as young members), and is a leader and provider of foresight within the aerospace community. The work of the Society is supported by a number of specialist groups including an Air Transport Group and a Space Group.

2. The Society’s submission considers the continuing importance of air transport as an element in UK transport policy and the potential of space-based systems to resolve several major transport-related problems.

3. In December 2006, Sir Rod Eddington produced a paper analysing the existing socio- economic and impacts of various transportation modes on the UK’s economy1. Much has changed in the air transport sector since the Eddington report:

• The extension of the EU “Cap and Trade” emissions policy to air transport • A world-wide recession of epic proportions with significant profit impact to the airline industry that is still in the recovery phase • Oil price increases from $63 a barrel to $79 a barrel – an increase on the order of 25%, and with the prospect of higher average prices in the future 2 • London Heathrow’s planned runway expansion and other plans for airports in the SE of England have been rejected or put on hold by the new UK Government. • Economic forecasters predict that the Mid-East carriers and their respective airport hubs may supplant Europe’s in the coming 5 years due to friendly economic, investment and policy environments3

4. These seismic changes were not contemplated when Sir Eddington drafted his initial report in 2006. With regard to the impact on the UK’s prominence and future in the area of air transport the above will likely have significant impacts on economics of the industry in the UK and for the UK consumer of air transport.

1 The Eddington Transport Study, HM Treasury and Department for Transport, TSO, December 2006 2 UK AA Fuel Report, December 2006 and June 2010 as seen on the web site shown below: http://www.theaa.com/motoring_advice/fuel/fuel-price-archive.html 3 Business Intelligence - Middle East, December 2009

5. Additionally, the UK’s new government has made it clear that in an era of waning fiscal receipts and ever-growing financial requirements, reductions to spending must occur and that all sectors of the economy are at risk for cuts – in particular transportation. The government wishes to define those areas most likely to have the least impact to the overall health of the recovery should cuts be ordered.

The economics of UK air transport

6. Since the publication of the Eddington Report, the economic importance of UK air transport has been revealed by a number of studies, including the Oxera Study of November 2009 prepared for the Airport Operators Association4.

7. The most salient features of this report were that the direct benefits of Air Transport to the UK economy were:

Wealth and Employment

• In 2007, measured by Gross Value Added (GVA), the aviation sector (activities constituting airports, airlines and aircraft service providers in the UK) generated £8.8 billion of direct economic output or 0.7% of total GVA of the UK economy for that year. • Including the aviation sector’s supply chain activity increases the impact by 115% to £18.4 billion, or almost 1.5% of the total UK economic output. • The number of air passengers has increased 81% and freight tones by 33% from 1995. Therefore, the overall economic value of the aviation sector of the UK economy has increased at a significantly faster rate than just the value of the sector’s direct impact. • Aviation provides direct employment to 141,000 UK residents or 0.5% of the total employment. This rises to 0.85% or 234,000 jobs when indirect supplier employment is added. • Aviation employees generate £62,000 per employee of GVA versus the average of other UK employees at £46,000 GVA per employee. Therefore, aviation employees are over 35% more productive.

Tax Revenues

• Aviation contributed approximately £4.8 billion in annual tax revenue to the Exchequer or 0.9% of total UK tax revenue in 2007-2008. A further £3.1 billion is contributed by the taxes paid by the supply chain activities. • The sector pays about 32.5% of the wealth generated in tax. This compares favourably to the UK economy as a whole at an average of 32.1%. • When Air Passenger Duty (APD) is included, that figure rises to 54.5%. The tax revenue contribution by the aviation sector is therefore the highest in the EU. • The study showed that the sector’s tax contribution is approximately £6 billion more than its environmental costs (this is before the impact of the EU emissions trading scheme is factored in).

8. The report concludes that the direct economic impact of the aviation sector has increased 8.3% in real terms since the Eddington report of 2006 - an average of 4% per year , and one of the best results of any industrial sector in the UK economy.

4 What is the Contribution of Aviation to the UK Economy, Oxera Consulting Ltd, November 2009 9. There are also several subjective affects:

• Connectivity – reduced travel times and wide selection of destinations lead to greater access to the UK market for foreigners and to foreign markets for UK products/citizens. • Trade improvement – lower transport costs and factors such as the ability of air freight to allow smaller inventory holdings and rapid shipment of “just-in-time” inventory/perishables leads to greater specialization in trade flows between the UK and its trading partners. • Investment – aviation permits UK businesses to make and better manage foreign investments, facilities and projects that create inward investment generating additional jobs and tax revenues.

10 Access to a world-class air transport hub is especially significant to the :

o Globalisation of finance is a major driver of the need for London-based financial firm employees to travel to other world capitals/financial centres. Over 3 million trips were taken in 2008 on behalf of London-based employees – an amount which is 30% greater than in 2000. Business passenger aviation service is a driver in the continuation of London’s future as a financial and business centre in the face of growing competition from emerging market cities such as Beijing, Dubai, Bahrain, Mumbai and Kuala Lumpur. All of these centres have seen massive public and private investment in airports.

o The importance of the aviation offering in SE UK is not the total number of flights but the frequency of service to the other global financial centres that is of most importance to the business traveller. Business travel is likely to increase rather than reduce in the coming decade, although there is a trend away from high premium business traffic, in some cases increasing use of loss cost carriers.

o The modernization and expansion of Gatwick and Stansted offer alternatives to the expansion of Heathrow but with substantially lower environmental and practical impacts. But the lack of coherence and linkage across London’s airport network could have a detrimental impact on services. In the long term, a strategy which does not include some expansion of runway capacity at Heathrow is likely to be detrimental over the longer term to the City’s role as a key global financial and business centre. 5

o The continued prominence of London as a top-tier financial and business centre is therefore in part contingent on the ability of SE-UK airports to provide for the increased passenger traffic expected from the London business community. This expansion of demand will require either a relaxation of the current curfew at Heathrow or additional runway occupancy through new runways or increased use of Performance Based Navigation approaches that improve acceptance rates.

11. The importance of London notwithstanding, the role of provincial airports and the needs of regional travellers should not be neglected. While the London airports are still the dominant hubs for much of the UK, there has been steady growth in traffic from UK provincial airports to other international hubs in Europe, the Middle East and North America.

5 Aviation Services and the City, York Aviation, July 2008, Introduction and Executive Summary In some respects, this may lead to a loss of direct revenue to UK-based carriers and erode the attractions of Heathrow as a global hub to UK originating passengers. On the other hand, the connectivity values of accessing a world transport system are as valid for the British regions as they are for the London area. This underlines the new economic geography of air transport, where competition between carriers and airports has become global. Policy should be mindful of this reality.

Air Transport and the wider UK transport system

12. There is a clear case for improving ground access to major airports and integrating air transport into a UK national transport system. There are several UK provincial airports with good rail connectivity, including Manchester, Birmingham, and Southampton. However, Heathrow and Gatwick are most notable for surface transport access delays and that policy initiatives to solve those issues remain a continuing challenge. Travellers from the West Midlands and the Northwest also face difficult public transport transfers to Heathrow from the centre of London. It should also be noted that some rail connections to Heathrow are more costly than most comparable airports elsewhere. As a minimum requirement, investment in the Cross Rail extension to Heathrow is essential and the wider importance of linking Heathrow more directly to the national long distance rail system, especially any dedicated high-speed network must be underlined for economic and environmental grounds.

Priorities for UK Air Transport

13. As a result of the continuing economic turmoil in the global economy and its negative revenue impact on the Exchequer, the new Conservative Government has clearly signaled its intent to reduce budget outlays – particularly in the transportation sector of the economy. As a result, the DfT has requested advice on which sectors of air transport should be prioritized under a new programme and why.

14. The Society takes the position that the principal areas of air transport spending that are supported by the current DfT budget programme need to be re-aligned. This re-alignment needs to occur within the following overall philosophies:

• The polarized positions of some in government and the public that either the Government must focus on meeting increasing air travel demand without limitation or reduce environmental impact of air transportation at the expense of expansion are mutually exclusive philosophies. A creative, realistic and attainable strategic plan to meet both of these legitimate issues concerning the SE UK airports must be developed. This will require leadership and moderation by both extremes or the UK economy will suffer.

• Due to increasing demand, both Heathrow and Gatwick runway capacity requires improvement. The consequent environmental impact can be mitigated by new methods of managing runway occupancy and noise without the need to reduce the existing curfew or further restrict the operational limitations of the airports or their user community.

• should be expanded to add an additional runway on the expiration of the Planning Agreement moratorium in 2019. The environmental and practical impacts are significantly less for the additional runway at Gatwick than at Heathrow. To facilitate this expansion, additional surface transport options into the City of London need to be explored.

• The UK Government should seek therefore to minimize any costly expansion of Heathrow via additional runways in the short term but at the same time improve the current facilities and capacity via implementation of existing technologies and improved Air Traffic management.

• Additionally, budgetary allocations should be made to reduce the delays associated with both the surface transport to all SE UK airports via improved rail links and other mass transit modes.

• The Government should investigate the prioritisation of budget money to include the addition of a parallel runway at both Gatwick and Stansted whilst ensuring maximum mitigation of the environmental impacts of those improvements.

• Care should be taken to ensure than actions taken to improve the links and capacity of the London airports should not negatively impact on Britain’s provincial airports.

Space-based systems and UK transport policy

15. Space systems are already central to the efficiency and safety of maritime transport, are becoming so for aviation, and are emerging as a game-changing technology for road transport. UK industry is playing a central role in the development of these space systems, thus enabling the relevant UK transport policies to be based on a sound understanding of technical trends.

16. Maritime transport relies on satellite communications as the basis for the Automated Identification System (AIS) on a global basis. Mariners world-wide rely on the space- based Global Maritime Distress & Safety Service (GMDSS). The UK’s Inmarsat is the world leader in providing the relevant communication services.

17. The operator of Europe’s EGNOS satellite navigation service has recently been awarded a certificate of Air Navigation Service Provider pursuant to the Single European Sky Regulation 2096/2005. Europe can now join the USA in applying satellite navigation to the improvement of flight efficiency and safety across Europe. EGNOS ensures that defects in GPS satellites are detected and immediately reported. The UK’s Logica designed and supplied the essential intelligence at the heart of EGNOS that verifies the integrity of its information and thus underpins the certification of the service.

18. Europe’s Galileo will be similar to GPS but will be independent of it. Users will obtain position and timing information from both systems and thus get a more robust, accurate and reliable service. Surrey Satellite, Astrium and Logica are among the UK companies providing major elements of the Galileo satellites and the associated ground infrastructure.

19. The use of satellite navigation to provide in-car navigation information is proliferating. The potential to deliver public benefits using this same technology can now begin. Road tolling on a regional, national and international basis is now feasible and can help reduce congestion and thus deliver economic and environmental benefits. The investment in EGNOS and Galileo has been an essential enabler for road charging and any other safety-related transport applications of satellite navigation, as without this GPS alone does not have the integrity or accuracy needed for these applications. The UK’s Avanti is leading a group of British companies defining how to deliver suitable services affordably and fairly (e.g.: no urban-rural divide).

Five Specific Issues

20. Space-based systems will play a key role in achieving reductions in the carbon footprint of transport through the optimal use of all modes without compromising safety. Satellite services are one of the key technologies for improving the efficiency of road transport – and without the need for expensive and slow-to-deploy gantry-based sensors. Furthermore, once in orbit, satellites run on sunlight and are thus inherently eco-friendly.

21. Priority should be given to investments that both improve transport efficiency and reduce its carbon footprint. Furthermore, preference should be given to solutions that minimise public sector spending. Road tolling based on in-car satellite navigation devices is an example that meets these three criteria: (i) reduced road congestion, (ii) consequential reduced carbon footprint, (iii) sensor systems financed by users rather than by the public sector. One important step for central government to take is to negotiate national standards for in-car systems and thus avoid the need for users to purchase multiple in-car devices.

22. Satellite navigation technology enables a charge to be levied for road use when and where it is in short supply, i.e.: congested. This is an important and logical extension of the use of fuel tax to charge road users for the nation’s road infrastructure. The user of roads in congested areas and/or at peak times pays a premium, as is already the approach with travel on trains, ships and planes.

23. Under the previous Government, the DfT stated that its strategy took full account of transport’s wider impact on climate change, health, quality of life and the natural environment6. However, decisions on funding relevant space programmes have not always reflected this. The DfT initially declined to fully fund the early phases of the EGNOS navigation system, which has recently been certified for aviation use, relying on BIS to provide the bulk of the funds. The same is true of the Galileo satellite navigation programme. Both will be critical for road and other safety-related applications.

24. Satellite-based services are most economical when defined as continental or at least national systems. Furthermore, a system that delivers benefits to ships, aircraft, lorries, and cars may not easily match individual compartmentalized sectoral DfT units. Better cross-sectoral coordination is essential to maximise the opportunities afforded by space-based systems.

25. Britain’s transport users and Britain’s economy will enjoy the benefits of satellite technology if suitable standards are laid down at national level, thus avoiding the need for users, operators and manufacturers to provide a plethora of in-car devices for each region or local area. The benefits will be improved further if the standards are harmonised at international level, thereby extending the economies of scale.

September 2010

6 Delivering a Sustainable Transport System, DfT, Nov. 2008 Memorandum from Richard Starling (TE 03)

If we are to learn from last winter (business experts predicting the Arctic temperatures could cost Britain's economy up to £690m a day), Government now has a major opportunity to invest to prevent £billions worth of loss to the national-economy, by taking a fresh look at winter-roads' management. Existing methodology must now be reviewed and updated to challenge and ease the heavy reliance upon reactive & 'blanket' salt-spreading which is currently the main defence against icy roads and gridlock. The success of this reactive is weakened by an interdependent sequence of procedures which link Met Office weather- prediction to the logistic of getting gritting lorries out & back from centralised-depots. From an enironmental-viewpoint, each winter's salt consumption cannot be recovered. Neither can the investment.

Of particular influence upon traffic-flows are the judgement-calls about whether to salt- spread at all. Is priority given to a control of the cost of spreading, rather than to safer and open roads? These judgements are made locally, but may inadvertently worsen traffic management in other parts of the roads' network. There are no independent- audits of the winter-service performance of Local Authorities.

I fully understand and appreciate the financial prudency which models Council highways' winter-service. However, that approach may cul-de- sac the introduction of more modern methods, and seemed to contribute to the difficulties seen on last winter's roads. What I saw, last winter, was a disharmony between highways' authorities, police and media. Warnings to motorists must be given in a stronger, simpler, consistent, and more timely manner. The same message from media sources. Once again, it seemed ok to react to the snow and ice, rather than to harmonise, prepare and control.

Local Authorities would stand and applaud if the DfT now took the initiative in this matter. The alternative is for Central Government to continue with the same old policy- stance, and add a self-imposed, seasonal pressure to the other challenges which the economy-faces.

September 2010

Memorandum from Derek Halden (TE 04)

Have the UK’s economic conditions materially changed since the Eddington Transport Study and, if so, does this affect the relationship between transport spending and UK economic growth?

The theory in the Eddington transport study has not changed, but the emphasis and approach to making changes should be revisited. Perhaps the most important point is that Eddington’s conclusions were couched in quite academic terms and did not connect with many transport practitioners. A refresh of the policies is needed to re‐focus public spending specifically as follows:

• The transport economy and the impacts of transport on the wider economy are different things. For example, shrinking the transport economy does not necessarily damage the wider economy (e.g. if more people walk rather than drive to the shops and as a result spend more). With future growth likely to come from digital, knowledge and experience sectors, the traditional elements of growth in the transport economy like fuel and car sales, fares, and freight tonnes moved, will be progressively replaced with new drivers of transport growth from improved accessibility, information, digital connections, and lifestyle tariffs for transport (e.g. car club membership like mobile phone payments). • Related to this is the concept that connectivity is not just about infrastructure and capacity but about the costs, security, and flexibility with which travel can be achieved. ‘Making the Connections’ through accessibility planning is still viewed more from the social inclusion perspective by many transport bodies than from its economic growth potential. Public funding should focus on demonstrable accessibility improvements from better connections rather than simply fuelling demand within a narrow transport economy. • Transport investment should be in networks rather than specific modes. This means that separate administration of road, rail and bus budgets could be replaced with investment funding for access to work, access for shopping and leisure, access for international tourism, etc.

What type of transport spending should be prioritised, in the context of an overall spending reduction, in order best to support regional and national economic growth?

Public investment should maximise capabilities and reductions should consider carefully the consequences:

• Capabilities ‐ If it is not easy to identify how businesses will make direct financial gains from public investment then the expenditure may not be making a big impact on growth. Also identifying winners and losers from transport investment helps to identify funding partners able to contribute to the costs of delivery. Social and distributional appraisal is therefore central to deciding on priorities. • Consequences ‐ Most transport investment is designed to reduce spending in other sectors of the economy. Reducing transport spending (e.g. on bus services) simply to add costs to other sectors (e.g. NHS spending on health transport) would be counterproductive and wasteful transferring budgets to sectors less able to secure value for money transport delivery. How should the balance between revenue and capital expenditure be altered?

There are potential benefits from aiming towards zero revenue expenditure from government, provided clarity is provided on the rules governing revenue and capital. Investing in people is part of the knowledge capital of the economy and “jobs for life” (revenue) in transport should be replaced with a “life of jobs” (capital) as far as possible. Funding for rail franchises could work towards being increasingly capital “railway development projects”, and non profit making services like road maintenance and dial‐a‐ride could be managed within new social markets removing them from the publicly funded revenue balance sheet (e.g. as recommended by the Social Market Foundation). Making these changes will take some time, but the direction of travel for public revenue spending should be down.

Are the current methods for assessing proposed transport schemes satisfactory?

Transport appraisal fails even in its own terms since it has only weak influence over decision making. A fairly fundamental change is required so that future appraisal measures the extent to which transport meets the needs of businesses and citizens. Central to this will be to discontinue the use of value of time appraisals which measure narrowly the economic value of transport to ‘the transport industry’ and often mask the true effects of transport on the economy and society. Attempting to ‘retrofit’ within NATA the value of travel time analysis with additional appraisals of wider economic impacts, social and distributional impacts and agglomeration benefits, has made appraisal impractical for most purposes. It would be much preferable to start with much simpler economic benefit calculations that represented a wider range of benefits of transport investment for the economy than can be captured within the value of travel time concept.

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

Most transport investment requires partnerships for delivery. Partnerships between local authorities should become the norm rather than the exception. Provided partnerships have a clear project delivery focus they are efficient. Partnerships to plan investment will recognise that city regions often overlap and different partners are needed for different planning goals.

September 2010

Memorandum from liftshare (TE 05)

1. The following submission is on behalf of liftshare, a social enterprise helping people travel more sustainably by sharing their journeys.

2. In the previous investigation carried out by Sir Rod Eddington in 2006, the report stressed many key priorities that we would agree with. It was particularly encouraging to see the recognition of the large economic and social costs that congestion causes. The further inclusion of the environmental costs from the transport sector was a welcomed important addition.

3. Since publishing the last report, the has experienced recession, and become aware of the economic cost of climate change. The Eddington Report had originally heightened awareness of the relationship between the transport sector and the economy. Following this the Stern Review brought to light the economic cost that future climate change could have. Collectively these reports have given rise to a situation where all decisions need to be made with the sustainability of the economy in mind. Both for the short term return to growth of the economy but also the long term health and prosperity in uncertain operating conditions.

4. It is consequently suggested that in this most recent inquiry the following suggestions are consulted to best support regional and national economic growth:

5. Prioritise funding on actions that combat congestion because of the large economic costs it incurs.

6. Transport spending should see investments diverted from projects with low benefit cost ratios (BCR) to those with more favourable ones.

7. Capital and revenue funding should only be awarded based on clear evidence that the investment will provide the best BCRs.

8. Ensure that each Local Authority identifies measures within their LTP3 to support more efficient use of cars.

9. Continue the use of cost-benefit analysis when assessing proposals but weight more heavily to protect schemes that offer high BCRs as these meet the needs for a return to economic growth.

10. Congestion was a priority for investment from the last report and this should still be the case today. In 2006, Eddington reported that the economic cost of inaction against congestion could waste an extra £22 billion’s worth of time in England alone by 2025. Clearly this is too costly a problem not to continue to act upon. Improving the national average car occupancy will reduce the daily car load. In 2008, 60% of cars on the road had only one occupant (Transport Trends, DfT 2009), which equates to millions of spare seats every day, exacerbating problems with congestion.

11. The comprehensive spending review has meant it is crucial that any investment in transport projects is undertaken wisely to ensure the most appropriate use of the limited funding. As a result of this, it is suggested that investments are provided by diverting funding toward those projects that demonstrate high BCRs essential for a return to economic growth.

12. The previous study stated ‘targeted new infrastructure is strong and offers very high returns – the best schemes offer returns in the region of £5-10 for each pound invested.’ However in the revision of this report I would claim that targeted new infrastructure is no longer offering the most attractive returns. ‘Smarter choice’ travel behaviour change initiatives are cheaper and often more effective than more traditional larger engineering or network enhancement schemes.

13. A promising smarter choice that presents a high BCR essential for a return to economic growth is car-sharing. Two recent independent research projects have proven car-sharing to offer returns greater than £50 for each pound invested. Five times greater than that proposed by other smarter choice alternatives and in the region of ten times greater than targeted new infrastructure. There are high returns because of the low start-up costs of car-share schemes, because the technology is already available and in use.

14. The proven benefits from more efficient use of the car should be promoted to Local Authorities (LAs). LAs should be encouraged to identify measures within their LTP3 to support the more efficient use of cars by car-sharing. Consultations are currently ongoing for LTP3s and this can act as the ideal opportunity for car-sharing to still be included. LTP3s require LAs to plan strategically for transport in their areas, including the impacts this will have on their local economy. The smarter choice of car-sharing will enable a sustainable transport program that allows the economy to recover and grow. LA involvement in making the more efficient use of the car more widespread can enable congestion to begin to be addressed at a regional level, and collectively this can assist improvements at a national level. In order to deliver growth, both nationally and regionally measures such as this need to be implemented.

15. Methods for assessing proposed transport schemes need to encompass numerous perspectives and potential problems. With regard to this inquiry, it appears the most suitable method for appraisal would be one that weights schemes that give the greatest and sustained economic benefits most highly. Of course other factors will need to be accounted for; however with the economy proving to be an important focus in light of the approaching comprehensive spending review, it seems only logical to support such schemes.

16. Benefit-cost ratios can form part of the basis of appraisals. It provides a simple concept that has the ability to include more complex factors and assigns monetary values to items that otherwise may have been excluded. It is important all areas are represented for judgements to be accurate and provide the desired economic growth.

17. To summarise: the main views that have been discussed here are ideas that offer value for money. These can be achieved through encouraging funding to be channelled into schemes that are proven to be the most advantageous and diverting it from projects that are not contributing. An improvement in the efficiency of car use through car-sharing is a project that has demonstrated the benefits it provides at a low cost. It can operate nationally and on a regional scale so the rewards are not concentrated in one area. Implementation and promotion of car-sharing is currently possible with the large potential to influence local authorities’ LTP3. Moreover the technology is already developed and the impact could in fact be very rapid.

18. Car-sharing provides an attractive cost effective measure toward a less congested road transport system and can consequently help drive the UK economy to recovery and beyond.

September 2010 Memorandum from the Federation of Small Businesses (FSB) (TE 06)

The Federation of Small Businesses (FSB) welcomes the opportunity to respond to the above named consultation.

The FSB is the UK’s leading business organisation. It exists to protect and promote the interests of the self‐employed and all those who run their own business. The FSB is non‐ party political, and with 213,000 members, it is also the largest organisation representing small and medium sized businesses in the UK.

Small businesses make up 99.3 per cent of all businesses in the UK, and make a huge contribution to the UK economy. They contribute 51 per cent of the GDP and employ 58 per cent of the private sector workforce.

Many small businesses rely on the road networks to visit customers, distribute finished products or obtain raw materials. An efficient road network with minimal congestion is therefore essential.

We trust that you will find our comments helpful and that they will be taken into consideration.

1. Small businesses are highly dependent on transport. When asked, in a recent survey, what the preferred mode of transport was for journeys over 200 miles, 54 per cent of respondents said car, 33 per cent said air and 31 per cent said rail.1

2. This suggests that when small businesses need to travel they travel by car. The road network is crucial to the survival and more importantly the growth of small businesses. Many small businesses rely on the road networks to visit customers, distribute finished products or obtain raw materials. An efficient road network with minimal congestion is therefore essential. This fact has not changed since the publication of the Eddington Study in 2006 and is unlikely to change in the near future.

3. Funding of road networks is therefore of great importance to small businesses. The FSB has traditionally been opposed to any form of road pricing. In an FSB transport survey carried out in September 2009, 58 per cent said that it is completely unacceptable to introduce a road‐pricing scheme. FSB members feel they are putting enough funds towards the transport system through road tax and petrol duty.

4. Typically small businesses trade within their local vicinity and therefore travel to customers and clients by car. 60 per cent of small businesses have said that it is not relevant for their business needs to travel by air, because they never travel that far.2

5. Another reason why small businesses prefer to travel by road is that it is considerably cheaper than rail; especially if more than one person is travelling. Small businesses have to pay their own rail fares and as flexibility is not always possible, by booking in advance, small

1 FSB Airport Survey, December 2009 2 FSB Airport Survey, December 2009 businesses often lose out on potential savings. The cost of rail travel has to be improved if usage is to be increased.

6. Looking at how toll charges affect small businesses only 4 per cent of respondents in an FSB survey said they were affected every day. Just over a quarter of respondents, or 26 per cent, said they were affected every month. More than half, or 60 per cent of respondents, said that they were not affected at all by toll charges in their regular business travels.3

7. When asked whether respondents would change route to avoid toll bridges/roads/tunnels, 48 per cent said they would change their route and.4

FSB Regions and the devolved countries

8. On a regional level matters get more complicated and down to detail due to the considerable regional variation of transport density and congestion. The FSB has not yet collected extensive data from every region but by way of example FSB members in the East of England have said that they are strongly in favour of the campaign to upgrade the A11 by dualling a section of the road.

9. In the South West, FSB members have said that a significant part of the productivity gap stems from the time distance separation from major population centres. Each 100 minutes of travel time reduced productivity by 6 percentage points.

10. The major strategic need for the South West is a second primary route. The M4/5 corridor is increasingly liable to closure as a result of accidents. On such occasions, the absence of alternative routes means the South West is effectively shut off from the rest of the UK. This is not acceptable from a business perspective.

11. Although transport is a devolved issue, English transport policies and projects are of great significance to small businesses in Scotland, Wales and Northern .

12. Transport systems are vital as trade routes, and it is important that ports, airports and road networks in particular are as efficient as possible to ensure ease of movement of goods and freight throughout United Kingdom and beyond.

13. Similarly the Rail network – mainly development of High Speed Rail as well as issues around fuel duty is of importance to the devolved countries.

September 2010

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3 FSB Transport Survey, September 2009 4 FSB Transport Survey, September 2009 TE 08

Memorandum from the Parliamentary Advisory Council for Transport Safety (PACTS)

The Parliamentary Advisory Council for Transport Safety (PACTS) is a registered charity and an associate Parliamentary Group. Its charitable objective is "To protect human life through the promotion of transport safety for the public benefit". Its aim is to advise and inform members of the House of Commons and of the House of Lords on air, rail and road safety issues.

Summary: Economic conditions in the UK have altered significantly since Sir Rod Eddington published the Eddington Transport Study in December 2006. However, Sir Rod’s focus was based on the changing dynamic of the British economy as a result of increasing specialisation in services and high‐value manufacturing, and his advice to government therefore continues to hold relevance. Central to recommendations made in the study is that in order to achieve the greatest value in transport spending, focus should not be placed on adding to the system but rather on maximising the efficacy of the assets already available. It is therefore vital that government makes decisions to enhance the productivity of the most inefficient elements of the network. An important obstacle to economic growth, when considering the British transport system, is congestion which costs the economy in the region of £22 billion per year, at least a quarter of which is associated with road accidents. Ensuring that congestion is relieved should be a central priority to government; the argument to improve road safety is therefore not simply ethically, socially and emotionally driven but also an economically sound policy area that will deliver real cost savings.

Economic Uncertainty

Sir Rod Eddington’s advice to Government, The Eddington Transport Study1, was published in December 2006. The UK’s economic conditions have therefore seen considerable change and fluctuation since Sir Rod’s advice was published as outlined in the chart below showing quarterly changes in real GDP.

2

1http://collections.europarchive.org/tna/20100408160254/http:/www.dft.gov.uk/about/strategy/transpo rtstrategy/eddingtonstudy/ 2 Source: http://www.statistics.gov.uk/cci/nugget.asp?id=192

As a result of considerable changes to the material status of the UK’s economic conditions, the relationship between transport spending and economic growth has become more relevant and Sir Rod’s advice more significant.

The Eddington Transport Study does not present a specific economic snapshot of the British economy but rather outlines the expected changes to British economic focus based on the shifting role of Britain within the global economy. The recommendations made by Sir Rod are therefore important to bear in mind when considering major public expenditure cutbacks, and continue to be appropriate guidelines to adhere to when attempting to achieve the most effective cost‐benefit outcome on every pound spent.

Eddington’s Recommendations

In his study, Sir Rod differentiates between the impact which transport has on the economic growth of an emerging and of a mature economy. For a mature economy such as in Britain, he points out that transport is a facilitator and that inefficiencies within the transport system act as obstacles to sustainable economic growth.

As such, the suggestion is that government should “sweat the assets” already available rather than prioritising cost‐inefficient grands‐projets.

Eddington focuses on the restrictive impact which congestion has on the network and therefore on economic growth and identifies two areas of particular concern: (1) growing and congested urban areas and their catchments and (2) the key inter‐urban corridors. 3

The Cost of Congestion

Congestion poses a significant cost to the nation each year though no official estimate is evident:

• NERA estimated congestion costs in 1996 at 1996 values as £7 billion per year (£10.2 billion at today’s prices); • The UNITE project (2001) put the costs of congestion at £15 billion at 1998 prices (£20.5 billion at today’s prices); • The Department for Transport (DfT) study of road pricing gave the value of congestion and unreliability as £12 billion in 2010 at 2004 prices; • Eddington (2006) concluded that the increase of congestion between 2003 and 2025 would cost £24 billion a year; and • The British Chambers of Commerce estimated congestion to be costing businesses £23.8 billion in 2008.

A conservative estimate of around £20 billion per annum is used by the RAC Foundation in the introduction to their report ‘Delays Due to Serious Road Accidents’.4,5. According to the report, a

3http://collections.europarchive.org/tna/20100408160254/http:/www.dft.gov.uk/about/strategy/transpo rtstrategy/eddingtonstudy/

quarter of congestion in Britain is associated with road accidents, though the overall cost of road accidents is larger than the cost implied when related to congestion.

PACTS recommends that the Select Committee encourages government to generate a sound and agreed‐upon model for valuing the cost of congestion (similar to models used in road safety which value the prevention of collisions) to ensure that all stakeholders are able to work from the same numbers.

The Cost of Road Death and Injury

Even after more than two decades of steady progress in road casualty reduction, with the numbers reported Killed or Seriously Injured (KSI) reduced by two‐thirds since the early 1980s, a total of 26,906 people were reported KSI in 2009, a year which saw 222,100 road casualties in collisions reported to the police in Great Britain including 2,222 deaths.

It has long been accepted that a considerable proportion of non‐fatal casualties are not known to the police, as hospital, survey and compensation claims data all indicate a higher number of casualties than are reported to and by the police. The best estimate produced in 20086, is that the total number of road casualties in Great Britain each year, including those not reported to police, is within the range 680 thousand to 920 thousand with a central estimate of 800 thousand.

The total value of prevention of collisions and road casualties is therefore likely to be well over the 2008 DfT estimate of £17.9 billion (around 1.25 per cent of GDP).

As part of a wider approach to ensure that transport spending is as effective as possible in terms of its impact on the transport system and, as a result, on the economy, government must focus on getting the most out of the system we already have. Reducing congestion is vital on certain strategic parts of the network. Investing in safety will contribute not only to reductions in congestion but also to wider cost and life savings. Safety schemes can be very good value in cost/benefit ratio‐terms and have an important role to play.

PACTS has looked more closely at the business case for road safety delivery at the local level and at the high cost‐benefit potential in a recent policy briefing.7 The briefing shows how and why Road death and injury is wasteful, destroys lives beyond those of the actual victims, limits future productivity and drains money from our economies, arguing that it is eminently preventable and the industry has an enviable record in reducing road casualties over the last decade and more at a fraction of the costs to society of the problem itself.

Value for Money on Transport Spending – A Conclusion Using Good Practice Examples

4 Irving Yass (2010) ‘Delays Due to Serious Road Accidents’ RAC Foundation, London http://www.racfoundation.org/assets/rac_foundation/content/downloadables/road%20accident%20dela ys%20‐%20yass%20‐%20april%20‐%20report.pdf 5 Advice from private contact with the RAC Foundation 6 DfT (2009) Reported Road Casualties Great Britain 2008, The Stationary Office, London http://www.dft.gov.uk/pgr/statistics/datatablespublications/accidents/casualtiesgbar/rrcgb2008 7 http://pacts.org.uk/docs/pdf‐bank/MAKING%20IT%20COUNT%20‐%20Final1.pdf

In light of current economic conditions, it is particularly important that transport spending is as cost effective as possible. PACTS analysis agrees with conclusions made by Sir Rod Eddington in the Eddington Transport Study which outline the importance of maximising the effectiveness of the network which already exists rather than seeking to enlarge it.

Maximising efficiency will require the management of the system from three strategic directions: Knowledge Management (what is the network and what requires treatment) Value Management (what will have the greatest impact in cost‐benefit terms) and Asset Management (the tracking of post‐intervention performance which is fed‐back into the knowledge system).

Below are examples of the three management areas:

• Knowledge Management, example: M42 Hard Shoulder Running

In response to increasing congestion on the M42, the DfT commissioned work to look at innovative and active traffic management approaches. The Active Traffic Management (ATM) project between junctions 3A and 7 on the M42 near Birmingham is one of the main pilot schemes for the Highways Agency. ATM utilises a set of advanced intelligent transport systems (ITS) applications to improve motorway operation and reduce congestion. A key feature of ATM is the use of the hard shoulder together with variable mandatory speed limits during periods of peak demand.

→ ATM increased the observed capacity of the motorway by between 7‐10 per cent. → ATM reduces the average journey time during recurrent congestion by 26 per cent. → ATM has reduced the variability of journey time by 30 per cent. → ATM made unexpected improvements to safety.

• Value Management, example: UK MoRSE

Molasses (Monitoring Local Authority Safety Schemes) was set‐up to provide information on the effectiveness of road safety interventions. Molasses database was later replaced by an alternative which has been developed by GreenSafe. UK‐MoRSE provides performance data for road safety interventions so users can accurately forecast how much benefit projects will bring, using up‐to‐date performance data from around the UK.8

UK MoRSE uses statistical data from project evaluations to project on the average and typical casualty reductions of using certain interventions on certain route types in certain ways. Users can apply the data provided to make evidence led‐decisions around which treatments would work best. UK MoRSE is a tool which aids rather than replaces knowledge and experience.

• Asset Management

In response to high levels of death and injury on European roads, EURORAP was set‐up to produce risk maps and track safety performance on the strategic road network. Risk mapping is a way of measuring and mapping the number of accidents on individual road sections. Risk is

8 http://www.uk‐morse.com/index.html

divided into five coloured bands from high‐risk (black) to low risk (green). EuroRAP maps give various insights into risk and can be used to support messages aimed at the differing needs and levels of expertise of the target audiences, ranging from the public through to highway engineers and policy‐makers. Performance Tracking is a way of tracking the number of accidents occurring on individual road sections over time ‐ which are getting safer, which are getting worse, and which are staying the same. EURORAP is an important evaluation tool which can be used to monitor the impact of a range of interventions.9

Results from performance tracking have shown that the application of simple engineering measures continues to pay the highest dividends in reducing death and serious injury. However, EuroRAP research also suggests that while some authorities are active in evaluating the benefits of their safety schemes, others do not seem to be aware that the often minor measures they have implemented have saved a large number of lives.10

September 2010

9 http://www.eurorap.org/faqs 10 http://www.eurorap.org/perf Memorandum from the Transport Research Laboratory (TRL) (TE 09)

Have the UK’s economic conditions materially changed since the Eddington Transport Study and, if so, does this affect the relationship between transport spending and UK economic growth?

1. While the economic climate has changed, there is no evidence to suggest that the underlying relationships are any different. Transport investment needs to continue to support economic development, and it can be argued that for the required economic growth and development to be sustained to the necessary level transport investment needs to keep pace. There is a strong case for no diminution of investment, although there should be some reassessment of investment priorities; the current priorities may be correct, but that position should be tested.

What type of transport spending should be prioritised, in the context of an overall spending reduction, in order best to support regional and national economic growth?

2. For roads, the biggest transport issue, related directly to the performance of the network and its ability to support economic growth, is the lack of predictability of travel times and the reliability of the road network. Intelligent Transport can substantially improve the efficiency of all parts of our transport system, while at the same time saving money, improving safety and contributing to carbon reductions. Intelligent Transport Systems (ITS) are already delivering significant benefits but they become even more attractive in times of budget restriction, offering “more for less” when compared with conventional transport solutions. Information and communication technologies can be applied to various modes of transport, in order to make them more efficient while minimising the negative effects on health, nature, the economy and quality of life. There are a number of technologies that are proven to address one or more transport challenges without the need for expensive new-built infrastructure. By employing information and telecommunication technologies, congestion can be eased, road safety improved and the environmental impact of transport can be reduced in times of financial constraint.

3. ITS is therefore a priority for investment: at a time when money is limited, technology can deliver consistent journey times, information services and informed demand management. Key application areas include urban traffic management and control, real- time travel information, managed motorways, adaptive traffic signal control, traffic management at roadworks, fleet management, travel planning, speed adaptation, in- vehicle safety devices, average speed cameras and congestion charging

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

4. One of the key barriers to the effective delivery of transport schemes is the mismatched availability of capital and revenue funding at all levels of government, but particularly at the local authority level. Increases in capital funding have outstripped increases in revenue funding, which raises issues over how the operation, servicing and maintenance of new capital assets will be funded.

5. This issue has been widely discussed and documented. The availability of capital can be sufficient to fund transport projects, but there can be issues over how the operation, servicing and maintenance of these capital assets will be funded. Poor availability of revenue support can diminish the benefits associated with capital schemes, it can result in available funds being stretched thereby decreasing the quality of the scheme and increasing future revenue implications and ultimately revenue intensive schemes may be delayed or cancelled and/or easily funded capital schemes may replace more suitable revenue-based schemes. The viability of schemes such as Prudential Borrowing may be compromised by a lack of revenue to repay the debt and effective forward planning can be jeopardised by varying year-on-year revenue allocations from central government. Moreover, revenue payments from developer contributions for example tend to be of a short term nature, and the future of such schemes can be jeopardised when the funding stops. Sustainable transport schemes are particularly at risk because of their heavy reliance on revenue funding. Smaller or ‘soft’ schemes often require a high level of revenue funding, and are therefore notoriously difficult to finance (with both capital and revenue funding).

6. Recent reviews of transport and finance have focused upon addressing this problem by proposing ways in which local government can be strengthened to give local authorities more control over the way in which revenue and capital are spent. In the short term, as mentioned in DfT’s Second Local Transport Plan guidance, authorities should consider how revenue based transport spending which supports capital investment could be funded, with district auditor support, from the capital programme – one example might be to classify resources that are typically considered to be revenue resources, such as staff time, as capital through referring to staff time as an intellectual resource. In the longer term Local Government needs to make it easier for capital and revenue expenditure to be integrated, and to consider funding revenue-requiring activities from non-ring-fenced revenue support, or from funds raised locally. CfIT has proposed that the importance of transport revenue spending could perhaps be detailed in relation to the delivery of government objectives.

7. Innovative forms of funding transport projects have evolved as a way in which the gap between capital and revenue expenditure can be bridged. There is also the potential to increase levels of private investment, for example through planning gain and the formation of partnerships. Revenue raising approaches will be particularly effective if they take the form of hypothecated revenue – this is likely to increase the acceptability of the tax by directly linking it to the benefits of improved transport infrastructure.

8. The revenue problem can be viewed constructively through the development of local solutions, such as creating partnerships with revenue-rich, capital poor partners (e.g. bus operators), and strengthening the case internally for transport, for example by stressing its contribution to wider corporate and community objectives. The poor availability of revenue funding for highway maintenance is an issue which has gained particular prominence since the Comprehensive Spending Review 2007. Local authorities are tackling this problem in a number of ways, such as by investing in high quality materials to reduce revenue implications, undertaking joint procurement of services, and linking improvements to other agendas, such as the role that well maintained roads have in enhancing the local economy or improving quality of life or the efficiency of public services. Government needs to facilitate these kinds of initiatives to ensure a better balance between capital and revenue funding.

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

9. A key issue that will need to be addressed is achieving integration between land use planning and transport planning. Transport and land use are closely inter-related. Although their planning, implementation and impact tend to operate at different temporal scales, it is crucially important that the transport impacts on land-use, as well as the land-use impacts on transport, are taken into account in the planning processes in order to ensure that the investments are sustainable in the longer term. This integration cannot be achieved at purely a local level since many of the influences will arise from outside local authority boundaries, and similar local initiatives may well have impact outside their boundaries.

10. Regional planning provides an important axis for co-ordinating and integrating transport and land use planning in a horizontal direction (between planning departments and organisations at a local level) and in a vertical direction (between planning guidance and policy at the national, regional and local levels). The removal of the regional ‘tier’ of governance will not significantly impact the vertical coordination, provide central government is able to deal satisfactorily directly with local government, but a mechanism must be found to replace the horizontal coordination function. Local authorities must therefore find ways to work together, and develop planning structures, that provide a context for investment in both land use and transport that are mutually supportive, and do not place one LA’s policies in unnecessary conflict with another. These arrangements could take the form of the proposed Local Enterprise Partnerships (LEPs) in the field of enterprise and economic development. There is a danger that these more ‘voluntary’ arrangements could put more rural communities, especially those in the hinterland of large conurbations, at a disadvantage and thus it will probably be necessary for Government to provide some guidance and recommended strategy for LA partnerships. This guidance should include the provision that transport and land use planning should take wider (sub)regional issues into account.

September 2010

Memorandum from Transport for London (TE 10)

1 Introduction

1.1 Transport for London (TfL) welcomes the opportunity to contribute to the Committee’s inquiry into Transport and the Economy.

1.2 Investment in the capital’s transport makes a vital contribution to the achievement of the Government’s economic growth strategies and reflects the discipline of the Government’s new fiscal regime.

1.3 London and the South East together provide more than 40 per cent of all tax revenues in the UK. Continuing planned investment in London’s transport network will ensure the UK maintains or improves its global competitiveness and will support the economic recovery.

1.4 The Tube upgrades and Crossrail provide the backbone of TfL’s Investment Programme. They are both key elements of national infrastructure and are highly dependent on each other to deliver maximum benefits. Without these projects, London will not be able to cope with population growth by 2031 equivalent to the current population of South Yorkshire. In addition, the Government’s commitment to High Speed Rail means that many thousands more passengers will need to be carried by the capital’s transport system.

1.5 It is also important to remember the sheer scale of existing public transport use in London with more than 11 million journeys made on an average day. Almost half of all bus journeys in England take place in the city and 60 per cent of all rail journeys in Great Britain start or finish in London.

1.6 There is a very strong long-term economic case for investment in London’s transport infrastructure, which is supported by politicians, businesses and other stakeholders in the capital including voluntary and community, and environmental groups. Together, it is estimated that the Tube upgrades and Crossrail will add at least £78bn to the UK’s wealth, so the schemes more than pay for themselves in terms of long-term economic growth and tax revenues.

Our response to the questions in the terms of reference for this inquiry is as follows.

2 Have the UK’s economic conditions materially changed since the Eddington Transport Study and, if so, does this affect the relationship between transport spending and UK economic growth?

Transport for London (TE 10) Page 1

2.1 While the UK and wider global economy experienced a severe financial crisis beginning in 2007, which was followed by a particularly deep recession, there is no evidence to suggest that the long-term economic prospects of London or the UK have changed. There remains a need to invest in transport infrastructure to support economic growth in the future.

2.2 In his review, Eddington pointed out that the most effective transport investment should target growing areas to ensure that benefits are delivered immediately upon completion. He also noted that the interventions delivering best value for money are likely those that provide relief to congestion. These arguments remain equally valid today.

2.3 Eddington highlighted the relationship between the increase in travel demand over the last twenty years and economic growth. The draft replacement London Plan, published October 2009, and the Mayor’s Transport Strategy (MTS), published May 2010, set out the long- term growth that is forecast for London, with population expected to rise by 1.3 million by 2031, and employment by 750,000 over the same period. Growth in travel demand in London can be expected to continue, therefore, as set out by the MTS, by about 15 per cent overall and about 30 per cent for public transport.

2.4 There is evidence of growth in transport demand since the Eddington report was published. Although there has been a pause in growth, the chart below shows that demand growth was so high in 2007-09 that even though there has since been a downturn, demand appears to be close to the level forecast by the Department for Transport (DfT) in Developing a Sustainable Railway. Whilst it may still be too early to draw conclusions on the strength of this recovery, it would nevertheless suggest that the economic downturn has not removed the need for Underground or rail capacity expansion to support economic growth in the medium-term.

2.5 London continues to suffer from congestion on its transport network, despite the recession. The region is still in need of more public transport capacity to allow its economy – which did not suffer as much as the national economy from the recession – to grow.

2.6 Transport schemes take much time to plan and implement. Prior experience with recessions suggests that the planned capacity improvements in London are still needed as long-term employment and population trends remain unchanged.

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Rail and LUMAA journeys journeys 2007-2010 115

110 LU =100

105 Rail 2006/07

Index DfT forecast 100

95

Year 2009 2008 2010 0713 0803 0806 0809 0812 0902 0905 0908 0911 1001 1004 1007 1010 1013 1103 Sources: ATOC ticketing data and TfL Traffic Report

3 What type of transport spending should be prioritised, in the context of an overall spending reduction, in order best to support regional and national economic growth?

3.1 There are advantages from investing in infrastructure that is more likely to be used immediately upon completion and deliver returns from an early stage. In the current environment, public spending can best support national economic growth by targeting infrastructure investment in regions with growing economies, particularly in London, and infrastructure that promotes international business activity so that the benefits of trade can be captured.

3.2 This view is supported by business. A recent survey of companies in the capital found that 98 per cent consider the Tube and Crossrail investment programmes to be important to London’s economic competitiveness in the future. If those schemes were not to proceed, 92 per cent of those surveyed thought the long-term effects will be severely damaging for London’s business community.

3.3 This is an important consideration as many of the Tube’s assets have reached the end of their planned life and need replacement. Some signalling equipment, for example, dates from the 1920s and 1930s. The continued operation of elderly trains and signalling will reduce capacity on the Underground by 30 per cent.1 As ageing assets further deteriorate, the risk of failure increases and there might have to be

1 20 per cent of the 30 per cent reduction derives from a reduction in train fleet availability. This 20 per cent is comprised of: routine minor damage over life of fleet (5 per cent); older trains suffer more equipment failures with harder to replace components (10 per cent); and a combination of occasional serious problems across fleets and the effect of deteriorating signalling equipment (5 per cent). The remaining 10 per cent of the overall capacity reduction comes from a reduction in train speed, largely due to the longer dwell times at stations caused by fewer trains being in service.

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lengthy closures. Key interchange stations including Victoria, Bank, Paddington and Tottenham Court Road would close altogether in peak periods due to overcrowding. Increasingly delayed and unreliable journeys will reduce the capital’s attractiveness as a location in which to do business.

3.4 Investment in London’s infrastructure has also created employment and wealth for other UK regions, such as the orders placed for new and Overground trains with Bombardier in . This has helped to support the rail sector in that city which in 2007 contributed £2.6bn to the local economy and directly and indirectly employed 8,500 people.2

3.5 London is the most productive region in the UK, with its workforce being about one-third more productive than the national average, and it plays an important role in the global economy. London has historically generated a very significant surplus of tax revenues that is to the benefit of the UK. Together, London and the South East provide 43 per cent of all tax revenues in the UK, while in 2007/08 it is estimated that the capital contributed between £14bn and £19bn via a tax export. Investing in London is sure to provide an immediate return to the Exchequer as many of the transport schemes here seek to alleviate congestion/overcrowding on a transport network that is very frequently stretched to the limits. Research by from London First, the business organisation which represents the city’s leading employers, found that the capital’s infrastructure schemes generate four times as many wider benefits for a given level of transport investment as schemes elsewhere in the country. 3 The following diagram shows that while transport schemes in London have similar traditional benefit: cost ratios to those in other UK cities (shown on the vertical axis), the wider economic benefits are four times higher (shown on the horizontal axis).

3.6 Investment in London’s transport system will maintain and improve London’s international competitiveness, which is important for tax revenues: companies not locating in London will more likely choose other world cities rather than elsewhere in the UK.

3.7 International connectivity is vital to sustaining the capital’s status as world city. Against a backdrop of long term growth in demand, ensuring easy access to a wide range of destinations via air and high speed rail is needed for business and leisure travellers alike. The South East Airports taskforce is due to report its findings in 2011; however there is broad agreement on the need to improve surface access to airports and their passenger handling facilities. Increasing load factors and plane sizes may make more efficient use of runway capacity; however

2 Planes, Trains and Automobiles Research, commissioned by Derby City Council, East Midlands Development Agency and Derbyshire & Nottinghamshire Chamber of Commerce from URS Corporation Ltd, December 2009 3 Greater Returns: Transport Priorities for Economic Growth, London First, June 2010 Transport for London (TE 10) Page 4

there remains a debate about making use of alternatives to Heathrow to accommodate future demand.

3.8 In London, the greatest economic benefits will be derived from spending that improves accessibility to Central London by increasing peak capacity. This includes the upgrades to London Underground, Crossrail, and other High Level Output Specification rail capacity schemes. The Tube upgrades will bring economic benefits of £36bn and the benefit-cost ratio of each line upgrade ranges from 6:1 to 10:1. Crossrail will increase rail capacity in London by 10 per cent and deliver economic benefits of at least £42bn. schemes like Thameslink are also very important to Central London’s future growth as they extend the reach of London’s labour market, providing benefits to London businesses but also expanding the opportunities of residents across South East England.

Source: Greater Returns: Transport Priorities for Economic Growth, London First

3.9 Within growing regions, like London, investment intended to regenerate areas is also needed. It is important for transport infrastructure to be put in place to facilitate growth by improving accessibility to existing brown field land and other development sites. This helps alleviate pressure in housing markets and allows the benefits of economic growth to spread across the region. In East London there are barriers to movement, particularly where the River Thames causes severance, that reduce the attractiveness of much brown field land to businesses and households and holds back growth in the region. Investment in improved and new crossings is vital to overcome existing severe congestion and severance problems in the area.

3.10 The bus network will also continue to play a major role in the capital’s economic success. The number of people relying on the bus is at its highest level since 1962 and continues to grow. The bus network plays a vital role in outer London, where three- quarters of all bus journeys

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are made. It provides connectivity and employment opportunities to outer town centres and key interchange stations.

3.11 Investment in National Rail services is also vital to the capital’s success in view of the particular importance of London. The city’s greater dependence on rail than other parts of the country is confirmed by analysis of data from the Office of Rail Regulation and the DfT: • The average London resident makes five times as many rail trips as the average resident in the rest of England; • Sixty per cent of rail journeys start or end in London – this is around 650 million journeys per annum of a total of 1,100 million journeys in Great Britain; • Public expenditure per rail trip in London is only one quarter of that elsewhere in England; • London passengers contribute more to the cost of rail travel. Average rail fares are higher in London and the South East than in the regions. The average fare per passenger km is £1.28 compared with 94p for regional passengers; and • Overall, if you consider transport revenue spending in London as a proportion of the value it adds to the economy, the Capital gets no more than some other parts of the UK (see table below), while capital spending more than pays for itself over time.

Gross Value Added (headline Identifiable government IGET as a workplace GVA) expenditure on transport proportion of 2008 (IGET)* GVA 2008-09 £ per Index Capital Current Area £bn head UK=100 £bn £bn Per cent London 265.1 34,786 170 3.8 2.5 0.9 Greater 558.4 25,697 125 6.2 3.6 0.6 South East

England 1,081.4 21,020 102 10.1 7.5 0.7

North East 40.9 15,887 77 0.3 0.3 0.7 North West 120.7 17,555 86 1.0 1.1 0.9 Yorkshire 89.1 17,096 83 0.6 0.6 0.7 and Humber

East 80 18,041 88 0.5 0.5 0.6 Midlands West 94.5 17,463 85 0.7 0.7 0.7 Midlands East 111.6 19,473 95 0.9 0.4 0.4 South East 181.8 21,688 106 1.5 0.7 0.4 South West 97.8 18,782 92 0.7 0.5 0.5 Wales 45.6 15,237 74 0.5 0.5 1.0 Scotland 103.8 20,086 97 1.3 1.5 1.4 Northern 28.7 16,188 79 0.3 0.3 1.0 Ireland UK 1,259.6 20,520 100 12 9.7 0.8

Sources: HM Treasury Public Expenditure Statistical Analysis 2009; National Statistics NUTS 3.12 London adds 70 per cent more value to the economy each year than the UK average, far more than any other English region or any other

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part of the UK. For the most recent year available, the table above shows the Identifiable Government Expenditure on Transport allocated to the regions, using the Treasury’s Public Expenditure Statistical Analysis methodology, and the value each region adds to the economy, using National Statistics data.

3.13 The column on the right shows current-account government spending on transport in each region as a percentage of the value that region adds to the economy. This measure shows, as a proportion of the value the region adds to the economy, non-capital support for transport in each English region is broadly the same with London and the North West receiving an identical proportion of their Gross Value Added in transport spending. This demonstrates that London gets no more revenue spend than other parts of the UK, in relation to the value added to the economy, and as described above, the capital spending more than pays for itself over time.

3.14 The figure for London includes TfL’s grant from the DfT as well as other DfT spending on rail and motorways, while the figures for the Greater South East combine London with the South East and East regions. The above table shows total transport expenditure across all modes. The situation for rail, as mentioned earlier, is that public expenditure per rail trip in London is only one quarter of that elsewhere in England (see below).

Public expenditure per rail trip (£)

Sources: ORR National Rail Trends yearbook 2009/10 table 7.1; DfT annual report and resource accounts 2009/10

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

4.1 In the current economic climate, spending by Government on transport should focus on investment rather than revenue spending to ensure that much-needed improvements to infrastructure are completed and will be in place when demand returns as the economy begins to grow again.

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4.2 Planned upgrades to London’s Underground and Crossrail are necessary to alleviate chronic overcrowding on London’s transport network and to provide room for future growth. They will provide benefits to London and the UK as a whole, as described in Section 3. Already passenger numbers on the Underground and on National Rail are picking up again as the region moves on from recession.

4.3 Consistent revenue expenditure is, however, also needed to deliver transport services to support economic objectives. This includes revenue maintenance of highway assets, enforcement and policing, and local transport improvements for walking and cycling. These areas are all vital to the smooth efficient operation of the transport system – for both passengers and freight – that is so important to businesses and the wider economy.

4.4 London also suffers from having two overly-distinct transport networks: the TfL network and the National Rail network. Each has different levels of service quality and fares tariffs, yet the customers are largely the same with identical needs. This acts as a disincentive to use of public transport, especially by less frequent travellers. Evidence shows that passengers and other stakeholders value TfL’s service quality standards including turn up and go train frequencies; earlier first and later last train services; and better passenger information. The provision of the higher TfL service quality standards has a strong business case, but requires higher revenue expenditure.

4.5 In London, revenue spending is also used to support bus services, which are vital to London’s continued economic success. Buses are the most widely-used form of public , with over 6 million trips made every weekday – over 2.2bn passengers per year (around half of all bus journeys in England) and up 59 per cent over the past ten years. They are also critical for employment and widen access to jobs. Sixty-two per cent of bus passengers are in employment (49 per cent full-time and 13 per cent part-time).

4.6 The bus network is the only public transport service present throughout Greater London, serving the entire population of the city. Services provide local and longer-distance links and also act as feeders to the rail network. They are the primary public transport for many inter- suburban trips and the principal link with the central area for many parts of inner London. Buses are important for local economies and are keeping town centres alive. Bus passengers contribute the largest proportion of monthly visitor spend in 15 of London’s town centres at 38 per cent, outweighing those who walk (32 per cent) and car users (14 per cent). Around one in eight of all bus trips is part of a longer journey also involving a rail service.

4.7 The bus network is flexible and regularly reviewed. It thus supports delivery of new homes, hospitals, retail and office development, and other centres of employment or public services. A comprehensive,

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reliable network reduces car-dependency and provides access to a wider range of employment opportunities for residents. Increased use of buses is the main component of the increase in public transport’s mode share of travel in London between 2000 and 2008 (28 to 33 per cent). This level of change is a major achievement for a city such as London, not matched by any comparable city in recent times.

4.8 London’s roads run at or near capacity for much of the day. Any reduction in bus services is likely to increase the number of car journeys as people use other means of transport. This will add greatly to the cost of congestion, which grows enormously once demand exceeds road capacity and to the costs from car pollution.

4.9 Transport providers also have a duty, especially during periods of tight public spending constraints, to demonstrate value for money at every opportunity. TfL has found efficiency savings of over £5bn up to 2017/18 while protecting frontline services. Work on schemes for which no funding was available has been stopped; senior salaries have been frozen for the past two years and, unlike in other areas of the public and quasi-public sector, performance awards have been waived by senior staff; back-office expenditure is being reduced by 25 per cent; staff numbers are being reduced by eight per cent including operational and management roles in London Underground. Many hundreds of further reductions are happening across TfL: a total of £220m has been saved by reducing the use of consultants and temporary workers; around £160m has been saved by moving to cheaper offices; and over £200m has been eliminated from the Marketing and Communications budget.

5 Are the current methods for assessing proposed transport schemes satisfactory?

5.1 Transport appraisal guidance has been improved recently through the New Approach to Appraisal (NATA) Refresh process. The inclusion of Wider Economic Benefits has ensured that appraisal takes account of the significant benefits transport capacity can bring to the economy. The Department for Energy and Climate Change methodology that greatly increases value of Carbon emission savings, with further increases likely following regular future reviews, is also welcome.

5.2 Further improvements to the appraisal system can be made, but another major upheaval would be disruptive and, in our view, is not warranted. Some commentators believe there could be a much better appraisal framework which would radically re-prioritise transport programmes. However, it would be better for the existing framework to continue evolving, and for more effort to be put instead into devising procedures for improved decision making.

5.3 Appraisal guidance could usefully be revised to capture more accurately the role transport provision can play in directing growth to

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less developed areas. For example, in London there are many areas with significant brown field land ready for development that are poorly served by the transport network, which is likely to inhibit economic growth.

5.4 Time savings are extremely important in transport appraisals. Schemes such as Crossrail produce substantial time savings as well as providing wider economic benefits. However, because brown field sites available for development have few existing trips very little time savings arise from schemes that connect these locations. As a result, the current methodology does not build a strong business case for such schemes. This creates an impossible situation; the land is difficult to develop without transport infrastructure yet the appraisal guidance does not result in a solid business case to be made to justify new schemes. As a result, projects needed to support the redevelopment of East London, including river crossings, are not fully valued.

5.5 Other countries seem to make the transition from brown field site to opportunity area more easily. Appraisals need to be able to assess potential long term journey benefits together with associated economic growth and various quality of life improvements, as well as benefits for existing journeys. The methodology is currently weak in this area.

5.6 It is vital, particularly as public funding of potentially growth-promoting transport schemes is likely to be severely constrained in the coming years, that when companies and households gain more from transport improvements than simply faster journeys, these impacts are accurately identified in appraisals. Investigations into the nature of such gains have tended to get bogged down in an academic debate about supposed double-counting of monetised benefits, when the real unresolved issue is who actually gains financially and by how much.

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

6.1 The London Plan and London’s other regional strategies provide an important guide to both public and private investment and development in London. London’s regional plans are not affected by this policy decision.

6.2 London has benefited greatly from having a single regional transport authority, TfL. This has allowed for most of the transport services across the region to be integrated and for regional transport priorities to be achieved. The Mayor of London’s Transport Strategy has been developed (by TfL) alongside the Mayor’s Spatial Strategy (developed by the Greater London Authority) and his Economic Development Strategy (developed by the London Development Agency) to provide an overall integrated plan for London’s development. However, better integration of transport modes and coordination of planning could be

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achieved if the Mayor was given responsibility for National Rail services in the capital. These suburban services, particularly in South London, are an important part of London’s transport network. But because they are part of the National Rail franchising system the service they offer is not fully integrated with other transport modes in London. One need only look at the challenge of implementing a uniform fare structure across the Underground and National Rail networks to see why this is undesirable.

6.3 A consistent approach to minimum service standards across London and improved planning and sponsorship of schemes by a locally accountable sponsor such as the Mayor or TfL could help to deliver more for less.

7 Conclusion

7.1 The Government is facing a huge challenge in tackling the country’s budget deficit, while protecting frontline services, and supporting economic recovery. Sustained investment in London’s transport infrastructure is essential, however, if the capital is to accommodate forecast population and employment growth at the same time as maintaining its position as a leading world city and as a generator of wealth for the rest of the UK.

September 2010

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Memorandum from Transport-Watch (TE 11) The ten year plan 1. The last Government’s Ten Year plan envisaged that congestion could be greatly reduced by increasing rail use by 50% and bus use by 10%. Consequently vast sums have been spent on public transport. 2. However, the policy was, at its inception, deeply flawed. Firstly, it was always obvious that, since rail accounted for only 2% of motorised journeys and since rail and bus each carried only 6% of passenger-miles, large increases in those percentages could have only a trivial effect on car journeys. For example, increasing rail use from 6% to 9% (a 50% increase) and bus travel by from 6% to 6.6% (a 10% increase) would increase public transport’s share by less than four percentage points. Fig 1 illustrates the potential effect. It assumes half of the increase in public transport use would come from the car and that car use would otherwise rise by 10% over the 10 year period. Clearly the effect of the policy would be difficult to discern. 900 3. Further, the car has enabled a dispersed land Fig 1 effect of policy by car 800 use that is difficult or impossible to serve by Bn passenger-km By bus By tr ain 700 bus let alone the train. If it were otherwise 600 that land use distribution would have arisen in 500 704 693 the past and it did not. 400 640

4. As for road and rail, the train is used by people 300 reaching the hearts of our largest cities 200 52 because there is, for those people, no other 100 47 47 36 36 54 practical way of reaching the destinations. 0 Base Year No policy With policy Half of those journeys are more than 20 miles long and 10% are more than 80 miles long. 14000 Fig 2. Annual passenger-km per head Similarly, the bus may get a passenger to a 12000 town centre but seldom anywhere else except Cars / Vans 10000 at great inconvenience. In contrast the car Buses serves out of town locations; half of all such 8000 Rail 10868 11062 journeys are less than 5 miles long and 90 % 6000 are less than 17 miles long. 4000 5. Supposing that left any doubt as to the 1155

2000 1833 798 815 foolishness of the policy, consider figure 2. 657 649 798 The idea that the car trips that have arisen 0 1952 2000 2008 since 1950 could ever be swept into buses and trains is clearly absurd. What have they done? 6. Despite the above, vast sums were spent promoting public transport. For example, for the decade Government expenditure on rail will amount to circa £50 billion, equivalent to £2,000 for every household in the land. That at a time when nearly half of us use a train less than once a year and when those from the top quintile of household income travel four times as far by rail as do those from either of the bottom two quintiles. 7. Simultaneously, road capacity has been reduced by a series of minor adjustments at junctions. E.g. a) Setting stop lines back from the opposing curb line by several car lengths. b) Lengthening the all-red times at traffic lights. c) Channelisation schemes that ensure the busiest turning movement may be congested whilst the lanes reserved for other movements are empty. d) Banned turns and one way systems that force long diversions on the motorist. 8. These measures were driven partly by the desire to reduce road accidents, partly to assist pedestrians at all costs and partly, on the mistaken idea that if motorists are delayed they may well go by bus. However, the costs have been very large. Here are the numbers based on the DfT’s values for time. a) A one minute delay to one thousand vehicles/day costs £83,700 per year. Two minutes added to all vehicle trips would cost £12 billion annually. b) Adding 1 km to 1,000 journeys per day (e.g. by banning turns), where the speed is 40 kph (25 mph), costs £189,000 per year. Adding 1 km at 40 kph to all vehicle trips would cost £13.5 bn annually. c) Reducing the speed of 1,000 cars per day from 25 to 20 mph over 5 miles would cost £234,000 per year. The same for all cars and vans on urban roads would be £12.6 bn. A 5 mph speed reduction on cars and vans on all roads would cost £17.1 bn annually.

Detailed calculations are available at http://www.transport-watch.co.uk/transport- pdfs/topic9.pdf.

9. The cost of reducing speed is of particular interest since speed has been blamed as the cause of road accidents. Consequently motorists have been subjected to ever lower speed limits and the punitive speed camera regime. For example, the current advice, DfT Circular 01/2006, is that speed limits should be set at the average speed rather than, as previously, at the speed below which 85% of motorists travel (the 85th percentile). That implies (a) a universal speed reduction in the range 5 mph to 10 mph and (bn) that 50%, rather than 15%, of us will be travelling more slowly than we would otherwise choose. 10. How many accidents might such a speed reduction save and what would be their cash value? TRL notes 421 and 511 suggest a range of savings that are often summarized as a 5 % reduction in casualties per 1 mph reduction in average speed. If that is applied to the 230,000 casualties in 2008, along with the average casualty cost of £53,000 then the saving following a 5 mph speed reduction would amount to £3 billion, far below the £17 billion delay costs implied by the speed reduction. 11. Since the values of time and casualty are supposed to reflect the way humans react when faced with risk these numbers suggest that, rather than slowing traffic down, the policy should be to speed it up. 12. At any rate, in view of the above the combined delay cost to the economy of the policies that have been in place these last 15 years is likely to be in excess of £25 billion per year. Economic cost of the speed cameras 13. The ever popular speed cameras are credited with saving lives1. However, we find that instead of the long established downward trend of 7.1% per year accelerating under the impact of the cameras, in 1995, it flattened off to 2.5% as illustrated in fig 3. That happened despite the speed cameras being supported by tens if not hundreds of thousands of speed humps and the endless traffic management schemes that impose such cost upon the nation. 14. Had the previous trend continued there would have been 10,000 fewer deaths than actually occurred. Indeed, compared with the pre-1995 trend, there were 370 extra deaths for every doubling of fines. The correlation, see fig 4, is remarkable. Of course there is no obvious causal link but, had the matter been the reverse of the facts, doubtless the cameras would have been given the credit.. Consequently perhaps they should take the blame.

Figure 3 Figure 4

15. The June 2007 value for a fatality is £1.64 million. If that is increased by 10%, to allow for lesser casualties, the 10,000 extra deaths imply a casualty costs, laid at the door of present policies, of £18 billion for the period. Additionally, in excess of 13 million motorists were fined, most of whom were driving as well as could reasonably be expected. If those fines averaged £70 the amount taken was nearly £1 billion. Evaluation 16. Here are the some of the questionable assumptions and weaknesses within the economic analysis and business cases made for large scale projects, referenced particularly to the HS2: a) The passenger forecasts, upon which the economic analysis depends, are often improbably high. For HS2 four and a half times as many passengers are forecast as would currently transfer from the existing line if it were now built. That implies a train carrying 500 passengers every 5 minutes in each direction all day throughout the year. b) The analyses assume that passengers’ time is entirely wasted when it is not. If that reality were recognised a large proportion of the supposed savings associated with shorter journey times would vanish. c) The value of time is inflated at circa 1.8% per year for ever and ever. The effect of this largely hidden assumption is to double the supposed benefits compared with those that would arise with no such inflation. d) For most projects, circa 40% of the calculated benefits come from the last 30 years of a 60 year evaluation period. In the case of HS2 that ends in 2086, so generating uncertainty. After all, most of us will be dead before the 30 years has started. 17. There are two other important issues. One is that 98% of the UK population will use HS2 less than once a year2. The other is a fatal flow in the economic analyses. Here is the detail: 18. When evaluating public transport proposals the New Approach to Transport Appraisal (The NATA) requires ‘Incremental Fares’ to be subtracted from costs, thereby providing the net cost to the Government. In the case of HS2 the Incremental Fares are the full fares minus the revenue lost by the existing railway. It is that net cost that is compared with the supposed time and other savings attributed to the scheme. However, that leads to an absurdity, namely that the economic performance of the proposal can be changed by arbitrarily altering its economic boundary. 19. For example, if the boundary were widened to embrace the losses to the airlines and the filling stations due to the transfer of passengers to HS2 then the incremental fares would be correspondingly reduced. 20. More generally, it is not the cost to the Government that is of interest. Instead it is the cost to the nation as a whole. For that reason the economic boundary should be widened to embrace the economy as a whole. Incremental fares then fall to zero, and the economic case for schemes such as HS2 and Crossrail collapse. 21. In response to that argument Department for Transport wrote: ‘Your letter of 08 June suggested that rail services were in principle no different from any other goods and services. If this were the case, we would leave the provision of such services and the networks on which they operated entirely to the private sector’ 22. We comment, by claiming rail is a special case, when it is not, and by ignoring the point being made, the DfT has effectively thrown in the sponge on this issue. The implication is that Incremental Fares should indeed be struck out, in which case projects such as Crossrail and HS2 do indeed fail the cost benefit test by wide margins. 23. Against that background it is clear that evaluations for such projects are wildly optimistic. To avoid that: a) Passenger forecasts should be reduced by the application of “optimism bias factors” in the same way that costs are presently increased. b) The value of time should recognize that time spent on a train is not entirely lost. c) The notion that the value of time should be inflated exponentially for ever should be reconsidered. d) The evaluation period should be shortened to at most 30 years. e) Incremental fares should be struck out. Additionally, if, as with HS2, the proportion of the population that will benefit is both small and from the better off then the rationale for taxpayer’s support, amounting to tens of billions of pounds, will be weaker than if the proportion were large and evenly spread. Presentation 24. Cost and benefits are presented in terms of “present values”. Those values create the impression that costs are less than will actually arise. In the case of HS2 the present value of the capital cost is £17.8 billion at the 2009 price and discount base. That is the sum which, if invested at the Treasury Discount Rate of 3.5%, would yield the cash required for construction. The mid-construction year is 2022. £17.8 billion invested at 3.5% for the 13 years 2009 to 2022 provides £27.8 billion. That is to say, the money that will actually be needed is not the £17.8 billion but circa £27.8 billion (at 2009 prices). 25. Further, supposing we can believe the passenger forecasts, the net loss to the Government by 2085 would be 11.9 billion at the 2009 price and discount base. That corresponds to £21 bn in the opening year 2026 and to £145 bn in the year 20863, at 2009 prices, illustrating that the values perceived depend critically on the discount base selected. Cancellation 26. It has been said that the HS2 project “cannot be cancelled” because that would waste the £9 million spent on studies. However, the £9 million is less than one two-thousandths of the capital required. It is as though someone believes that, because they had spent one pound researching a £2,000 holiday they should pay for it regardless of its horrors. In the case of HS2 the horror is that the loss will be in the tens of billions of pounds. Eddington 27. The HS2 reports refer to Eddington as though his report provides support for high speed rail when it does not. Instead it says “The principal task of the UK transport system is not, in comparison to the needs of France or Spain, to put in place very high speed networks to bring distant cities and regions closer together...... Instead, because the UK’s economic activity is in fact densely located in and around urban areas, ... the greater task is to deal with the resulting density of transport demand”. 28. Instead of single, extraordinarily expensive, projects such as HS2, the Government should, if it has any spare cash, undo the damage of the traffic management schemes of these last 15 years. That may generate circa £25 billion per year in time savings, thereby benefiting the nation as a whole rather than offering very expensive subsidised transport to those few among the better off who need to travel long distances at high speed. France and the railways 29. The UK envies France its high speed rail and the supposed efficiency of the SNCF. However, the aptly named Professor Prud’homme, of Paris 12, pointed out in a paper dated 17.11.2000, entitled Tales from the SNCF, that at a time when the SNCF claimed it was running into profit it was actually being subsidised to the tune of nearly 1% of GDP (later reduced to 0.6%). Furthermore, he concluded that the French motorways or national routes are between two and six times as productive, in terms of capital and labour employed, as is the SNCF.4 30. That accords with our analyses which show that, contrary to the railway myth, given rail’s rights of way, express coaches and lorries would discharge the national rail function at a fraction the cost of the train5 whilst reducing the casualty rate6, and using less fuel7. Indeed even in central London and in the peak hour the surface rail network is, in highway terms, used to only between one seventh and one fifth of its capacity if paved. This remarkable fact is easy to prove: some 250,000 crushed surface rail passengers enter central London in the peak hour8. There are 25 pairs of tracks. Hence we have 10,000 passengers per inbound track. The 10,000 could all find seats in 150 75-seat coaches or in 200 50-seat vehicles. That compares with the capacity of one lane of a motor road, the same width as required by a train, of 1,000 coaches per hour, five to 7 times the 200 or 150 coaches required. 31. If paved, this great network would not only provide previous surface rail commuters with seats at one quarter the cost of the crushed conditions that they now endure, but countless lorries and other vehicles would divert from the unsuitable city streets that they now clog. 32. Those who disbelieve should Fig 5. (Picture courtesy of National News & Pictures) contemplate the strategic road network paved with railway lines. The place would be at a near standstill, as is the railway in highway terms. Figure 5 illustrates - a nearly empty swamp of rails within a stone’s throw of Westminster where the roads are clogged with traffic. 33. Safety is the vector where the gap between the myth and reality is at its largest. The railway lobby likes to say that more people die on the roads than passengers in a year on the railways. That ignores (a) usage, and there are 17 times as many passenger-miles by road as there are by rail and (b) staff, and trespassers. When the latter are added then, excluding suicides the deaths per passenger-mile by rail is higher than that on the motorway and system9. 34. The following compare the performance of the strategic road network with national rail’s. We encourage Committee members to study those illustrations since they tell a devastating story that should not be ignored.

100% 93.7% 80% 100% Fig 6a. Passenger-km 88.6% 90% 66.8% 90% 70% Fig 6b. Tonne-Km Fig 6c, Tonne-km 80% 80% 65.3% 70% 60% 70% 56.2% 60% 50% 60% 50% 50% 40% 40% 28.4% 40% 32.4% 30% 30% 20.5% 30% 20% 6.3% 20% 20% 11.4% 10% 8.6% 10% 4.1% 10% 0% 0% Rail Strategic Other All roads 0% Rail Str ate gic Othe r All roads Roads roads Pipe line Rail Water All roads Roads roads

35. The data used to produce the three diagrams relates to 2008. They illustrate the trivial contribution rail makes to the nation (6.3% of passenger-miles, 8.6% of freight if water and pipe are included or 11.4% if road and rail only).10 Despite that rail enjoys subsidy and capital grants running at £5 billion annually, equivalent to £200 per year in taxes for every household in the land, or to £250,000 per mile of track, or to 16 pence per passenger mile or, if passengers and tonnes are added, to 11 pence per mile travelled. 36. In contrast the strategic road network makes a profit for the exchequer of £13 billion per year, equivalent to £400,000 per lane-mile or to 6 pence per passenger mile or to tax of £520 from every household in the land. Worse still the density of use by rail is about one third that achieved by the strategic road network. 37. The following two diagrams (where distances are in km, not miles) illustrate the point.11 These underplay the poor financial performance of rail compared with road in that rail track is probably 6 to 7 times as expensive to build12. Consequently, in terms of capital employed, the productivity of the strategic road network may outperform rail by a factor, not of three, but of 20 (and that is before taking account of the relatively low value of rail freight, for the most part bulk minerals etc). [In Fig 8 “M and T” denotes motorway and trunk roads]

30 20 Fig 7. Profits Fig 8. Average daily flow 17.47 24.7 18 25 and losses Profits from roads (Freight in tonnes) 16 20 14 12.01 15 12 10 10 8 6.50 5.1 5.6 3.9 4.79 5.46 5 6 4 0 1.71 2 -5 -2.0 Flow per tack or lane (000)s 0 -7.0 Rail M and Rail M and Rail Road -10 £ hundreds £ ten K per Pence per Pence per -9.9 T T per House track or lane pass-km unit-km -15 hold km -14.9 Passengers, P Freight, F P plus F -20 Losses from rail

Conclusion 38. Most of the junction improvements and traffic management measures of these last 15 years should be replaced by ones designed to reduce congestion and air pollution. Similarly speed limits should often be raised rather than lowered. The consequential time saving may benefit the nation to the tune of £25 billion per year and would be enjoyed by all strata of society. 39. The punitive approach to the motorist, particularly via speed cameras and speed humps, should be abandoned in favour of sensible policing, education and persuasion. That may re-establish the downward trend in road deaths that existed prior to present policies. 40. There are fatal flaws in the assumptions to do with the value of time and in the fundamental theory that underlie the economic analyses used to support transport proposals. For example, the Department of Transport has been unable to answer our argument that incremental fares should be struck out. Without those fares proposals such as Crossrail and HS2 fail the cost benefit test by wide margins. Similarly, if the values of time reflected the ability to work effectively while travelling, or to otherwise usefully employ the time spent, then the economic cases would collapse. 41. Further, the belief that rail is efficient and safe compared with road transport is contrary to the facts. Hence, before committing more resources to the railways, the Government should find if any of the assertions in this note, and the associated references, can be overturned. If none can be (and, at the Public Inquiry into the Modernisation Programme, ’s immensely expensive inquiry team found none)13 then policy should be aligned to accord with those assertions. Lightly used railways may then be converted to motor roads managed to avoid congestion. These would employ capital up to 20 times as productively as does rail and would be used by all strata of society to a greater extent than are trains, which area used mainly by the better off. 42. At its most general, Government should base its policy on evidence with the intention of making the best use of land already committed to transport in the interest of the community as a whole. 43. In any event it is a fraud upon the future generations of taxpayers to fund projects, which are known to make losses in the tens of billions of pounds, by loans guaranteed by the Government. That is particularly so when the presentations (a) do not stand scrutiny (b) following (a), cannot attract finance from the commercial sector and (c) ignore far more effective options.

1 The national safety camera programme Four-year evaluation report December 2005, PA Consulting group 2 National travel survey data shows that 55% of us use a train more than once a year and that 5% of rail journeys are more than 100 miles long. Hence, if half of the latter would transfer to HS2, a very generous assumption, the proportion of the population that is likely to use it at least once a year is (56% x 5% x 50%) = 1.4%, or one in 70. Conversely 98.4% of us may use HS2 less than once a year here rounded to 98% to allow for increase usage 3 The discount rate is 3.5% for the period ending 30 years after opening, i.e. ending in 2056, and 3% for the remainder. Hence the loss at the 2086 base is the 2009 value multiplied by (a) 1.035 raised to the power 47 and (b) by 1.03 raised to the power 30, providing a multiplier of 12.22. 4 French and English versions of the papers are available at http://www.transport-watch.co.uk/french- railways.htm 5 http://www.transport-watch.co.uk/road-rail-comparisons.htm

6 Transport Watch analysis of death rates by road and rail, source data from national statistics http://www.transport-watch.co.uk/transport-fact-sheet-2.htm 7 Transport Watch analysis of fuel economy and emissions based on RSSB and other national data see http://www.transport-watch.co.uk/transport-fact-sheet-5.htm 8 Transport Statistics Great Britain provides some 500,000 surface rail commuters entering the capital in the three hours 7 am to 10 am. Hence the number in the peak hour is not likely to exceed 250,000. 9 Transport Watch facts sheet 2 available here http://www.transport-watch.co.uk/transport-fact-sheet- 2.htm 10 Source data for these is Transport Statistics Great Britain 11 See transport-watch analysis at http://www.transport-watch.co.uk/transport-fact-sheet-1.htm 12 See Transport-watch analysis at http://www.transport-watch.co.uk/transport-fact-sheet-7.htm 13 See the closing statements here http://www.transport-watch.co.uk/transport-pdfs/west-coast-main- line.pdf and here http://www.transport-watch.co.uk/transport-pdfs/railtrack-closing-statement.pdf

September 2010 Memorandum from Stagecoach Group plc (TE 12)

1.0 Introduction

1.1 Stagecoach Group plc welcomes this opportunity to contribute to the inquiry into Transport and the Economy and to present evidence to the Transport Committee.

1.2 The Eddington Report identified the reduction of urban and inter-urban congestion as two of three priorities for investment if economic growth was to be maximised.

1.3 The Committee’s Terms of Reference for this Inquiry are particularly relevant, when economic growth is a stated Government priority in a future of severely constrained public expenditure. Our views on both urban and inter-urban transport congestion issues are given in response to the questions the Committee has posed.

2.0 Stagecoach Group

2.1 Stagecoach Group has extensive operations in the UK, United States and Canada. The Group employs around 30,000 people and operates bus, coach, rail, and services.

2.2 In the UK, our fleet of around 7,000 buses connects communities in more than 100 towns and cities across the country. We were independently judged Bus Operator of the Year at the 2005, 2006, 2009 and 2010 UK Bus Awards.

2.3 Two million passengers travel on Stagecoach bus services every day, using a network stretching from south-west England to the Highlands of Scotland. We serve major cities, including Manchester, , Newcastle, , Hull, Oxford, and , as well as key shire towns and rural areas.

2.4 We operate a range of local scheduled services, express coach networks and school bus operations. Most of our services are operated on a commercial basis in a deregulated environment. We also operate contracts on behalf of local authorities and other organisations.

2.5 Stagecoach has invested more than £250 million in new state-of-the-art buses over the past four years. This is part of a long-term commitment to improve our environmental performance and ensure all our vehicles are fully accessible to the elderly, disabled and families with young children. As part of our strong commitment to the safety and security of our passengers and our people, all our new vehicles are fitted with digital CCTV systems.

2.6 We also operate express coach services linking major towns within our regional operating company areas. The Group runs the market-leading budget inter-city coach service, .com, which carries over two million passengers a year on a network covering more than 50 locations. , our joint venture with ComfortDelGro, is the leading provider of inter-city express coach travel in Scotland.

2.7 Putting customers first is our priority. We continue to focus closely on the recruitment and training of our people, and we have one of the best records of any major operator for social and vocational training among our frontline drivers and engineers. Our UK Bus division is also a major employer, providing jobs for around 18,000 people at over 100 locations in our 18 regional companies.

2.8 Stagecoach Group is a major rail operator and has an involvement in running almost a quarter of the UK passenger rail network. The Group operates the East Midlands and South Western rail franchises, the latter incorporating the and networks. South West Trains, the UK’s biggest commuter franchise, runs nearly 1,700 trains a day in south-west England out of London Waterloo railway station.

2.9 We also operate Supertram, a 28km light rail network incorporating three routes in the city of Sheffield, and have a 10-year contract to operate and maintain the tram network. In addition, Stagecoach Group has a 49% shareholding in Virgin Rail Group, which operates the West Coast inter-city rail franchise.

2.10 We are committed to investing over £200m in our rail franchises to improve the quality and range of our services. This has included station and car park enhancements, making ticket purchase simpler using smartmedia and ticket vending machines, depot extensions and rolling stock refurbishment.

3.0 Have the UK’s economic conditions materially changed since the Eddington Transport Study and, if so, does this affect the relationship between transport spending and UK economic growth?

3.1 Since the publication of the Eddington Report in 2006 economic growth has faltered and the Government has now determined that it must urgently address the structural deficit in public finances. It has called for Ministers to produce plans in all domestic spending areas, excluding health, which would reduce expenditure by both 25% and 40%. Decisions will be announced on 20th October 2010.

3.2 As the economy recovers, the demand for movement of goods and people will increase and congestion will rise, unless demand management is introduced, and/or investment in additional road and rail capacity is provided. Inaction will create a brake on growth.

3.3 The costs of congestion are already substantial. In 2009 excess traffic delays, poor air quality and greenhouse gas emissions were estimated to cost the English urban economy between £16 billion and £25 billion per annum1. Over-crowding on some trains has reached unacceptable levels and parts of the rail network cannot cope with any additional services at peak times.

3.4 The Government and the EU are also now giving greater priority to the reduction of greenhouse gases and pollutant emissions, through increasing regulation. Such measures increase the capital and operating costs of commercial transport vehicles and significantly add to the overall fiscal pressures2. However, there are opportunities for public transport to play a larger part by encouraging modal shift away from car.

4.0 What type of transport spending should be prioritised, in the context of an overall spending reduction, in order best to support regional and national economic growth?

4.1 Transport spending should be prioritised where it offers the greatest return and the least recurring administrative cost. 4.2 The provision of bus services is labour intensive and fiscal measures which are designed to maintain services are therefore good for retaining employment in the industry. In particular, Bus Service Operators’ Grant (BSOG) has proved a cost effective means of limiting bus fares and keeping bus services affordable for those without alternative means of transport. We therefore strongly support the maintenance of BSOG at existing levels. Failure to do this will result in job losses in the industry.

4.3 Stagecoach was disappointed that the new Government called a halt to Kickstart schemes approved by its predecessors. Kickstart has proved to be a low cost, targeted use of short term funding to create jobs, increase social inclusion, attract modal shift, reduce congestion and improve the environment. It is to be hoped that once the funding review is complete, this programme will be re-introduced.

4.3 Employment opportunities, particularly for young people, are likely to be limited for the foreseeable future and we believe that Government can help to address this by funding significantly expanded apprenticeship schemes in the bus industry. This would then provide a future pool of skilled engineering labour available to the entire road transport industry, to the long term benefit of the whole economy.

4.4 Aside from employment issues, congestion and pollution reduction should remain the twin policy priorities and the use of public transport for all but the shortest journeys, should be prioritised given its smaller carbon footprint3.

Urban Congestion

4.5 In urban areas, bus operating speeds continue to fall as operators struggle to maintain service reliability on mixed use carriageways4. This is an inefficient use of resources, makes services less attractive to passengers, and at the same time increases fuel consumption, carbon dioxide and pollutant emissions5.

4.6 Given the inflationary cost pressures of lower bus operating speeds, cleaner exhaust emissions and increasing fuel prices; it is crucial that expenditure which enables buses to move freely on the highway is prioritised if bus services are to be both affordable and attractive to customers. While some Authorities recognise this imperative, others do not6.

4.7 The results of the first Passenger Focus national bus passenger survey7 show consistently high levels of overall satisfaction throughout England, (outside London). However, the lowest ratings were for value for money, which demonstrates the importance of maintaining BSOG payments to operators, if future fares levels are to be constrained.

4.8 BSOG aside, Stagecoach does not believe that in the current economic climate, revenue support for bus services should be increased; rather, efforts should be directed towards making bus services relatively more attractive to motorists, thereby increasing patronage and revenues and reducing their need for subsidy. Where Stagecoach and others have been able to forge strong Partnerships with Authorities this has been achieved.

4.9 In this regard, Eddington recommended enabling legislation to permit bus service franchising as a delivery mechanism for urban services without explaining why8. We have always questioned the economic effectiveness of such a regime. Bus franchising would address none of the issues identified above and in a time of constrained public expenditure, we would now suggest that any proposals of this type are simply unaffordable9.

4.10 On rail, we are experiencing significant congestion and over-crowding on our London suburban services. DfT have already committed to funding infrastructure changes for longer trains but there is no commitment to provide the necessary additional carriages. Our low cost, alternative solution (to new build) that uses existing trains has yet to be accepted.

Interurban Congestion

4.11 The picture is less clear for inter-urban journeys where road journey time reliability measures show little change over the last 5 years10. In contrast, journey reliability by rail has improved from some 84% (in 2005) to a current national average of 93% PPM11.

4.12 We believe that road congestion on strategic routes can be reduced through a variety of operational and capital schemes. We believe that road pricing is a necessary tool in controlling and managing interurban demand. We applaud the use of active capacity management now being extended across more of the motorway network. Further improvements could be achieved by simple and cheap operational measures such as restricting HGVs to the inside lane from 0700 to 1900hrs as in Germany.

4.13 On the rail network, the current regulatory settlement for includes some 50 major capacity enhancement projects costing some £1.6bn, in addition to its maintenance and renewal activity. We believe that greater integration of train operating and infrastructure companies will bring about significant efficiencies in the infrastructure costs of the UK rail industry. Research referenced by OECD12 has demonstrated that vertical separation can cost up to 40% more that an integrated railway.

4.14 Extra interurban rail capacity can often be provided relatively cheaply through lengthening trains, particularly on electrified railways. For example Stagecoach has developed proposals to add an electric power car to its fleet which would reduce carbon emissions and increase capacity. New trains and extra vehicles have been ordered to lengthen Virgin’s Pendolino trains to alleviate over-crowding being experienced on their West Coast Main Line services between London, Birmingham, Manchester, Liverpool and Glasgow where passenger growth is exceeding 10% pa. These will increase seating capacity by 28%. They will lie idle until 2012 under current DfT proposals.

4.15 We would highlight two areas where congestion management opportunities for rail are being missed. Firstly, an easement in fares regulation of saver and long distance season tickets (which are exceptionally cheap due to an accident of history) would enable long distance interurban train operators to manage their demand better through increased use of advance purchase revenue managed fares. Secondly, since the move away from the original OPRAF style franchise contracts to the National Rail Franchise Terms (NRFT) currently used by DfT, costs have risen and opportunities for improvements are being missed. This is due to the highly prescriptive nature of the NRFT and the high degree of control exercised by DfT over almost all aspects of our rail operations.

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

5.1 Insofar as local public transport schemes are concerned, the focus should be placed on relatively small capital schemes which deliver large passenger benefits. These will predominantly be urban measures which improve bus operating speeds and service reliability. Measures which encourage mode shift to public transport, like Park & Ride schemes accompanied by central area parking restraint, are also likely to deliver large benefits for the capital expenditure incurred. For well designed schemes, the bus services can operate without recourse to subsidy.

5.2 As indicated above, revenue expenditure should be limited to providing socially essential bus services in the most economic way possible.

6.0 Are the current methods for assessing proposed transport schemes satisfactory?

6.1 In November 2009 Stagecoach co-funded a study published by the Green Alliance13 which recommended that government should: test transport scheme value for money using a revised cost benefit analysis, consider the alternatives in each appraisal to ensure best value for money was being obtained, create an independent body to evaluate transport solutions which considered wider government objectives, such as reducing emissions and improving health, and reform the transport appraisal model further to take better account of scheme impact on national carbon targets.

6.2 Further to the points made above we consider that any cost benefit analysis which values the bus passenger’s time significantly lower than that of the car passenger or car driver, fails to take proper account of the harmful environmental and congestive effects of the motor car referred to in 3.3 above.

6.3 We would add that if the primary objective is to achieve economic growth in a period of constrained public finances, we would suggest that the assessment process for relatively small schemes with high benefits should be both simple and speedy to enable those benefits to be realised as quickly as possible.

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

7.1 Stagecoach does not believe that the absence of regional bodies should be an impediment to the formulation of schemes. We note that Government is encouraging the formation of Local Enterprise Partnerships (LEPs) and inviting them to set their own priorities for expenditure which deliver local economic growth and other Government objectives.

7.2 It is not yet known whether LEPs will be able to bid for funding and we understand that the Government intends to make this clear in its forthcoming Decentralisation and Localism Bill.

7.2 Whether schemes are to be developed by LEPs or by Local Authorities, acting alone or together, there will be an issue of nationwide scheme ranking in a prolonged period of limited funding constraint. In this regard it would seem likely that measured objectives and outcomes will be necessary to identify which schemes should qualify for Government financial support.

7.3 For the reasons we have argued above (4.5 – 4.7), we consider it is essential that one key measure of scheme appraisal should be the impact of the proposed investment on both the absolute and the variability of bus operating speeds.

REFERENCES

1 “The wider costs of transport in English urban areas in 2009” – source Cabinet Office Strategy Paper

2 If the UK bus fleet were to be replaced in its entirety, the premium for adopting hybrid vehicles would be circa £3.5 billion (at current prices) – source Stagecoach

3Journeys by bus emit 1/10 of the carbon dioxide emitted by cars per urban passenger km – source Greener Journeys

4 bus operating speeds reduced by 14.5% in the 10 years to 2009 – source Stagecoach

5 Bus emissions double when operating speeds reduce from 20kph to 12 kph – source TRL

6 Not one of the 36 Metropolitan Highway Authorities has adopted bus operating speed as an improvement target – source “An Analysis of Urban Transport” Cabinet Office Strategy Unit November 2009

7 Source - http://www.passengerfocus.org.uk/news-and-publications/document- search/default.asp?go=1&add_topic=1612&topic=&type=&year=2010

8 Source – Eddington Report Paragraph 1.150

9 For the Metropolitan ITAs this has been estimated to be an annual running cost of £450m p.a. and substantial, but unknown, transition costs – source “An Analysis of Urban Transport” Cabinet Office Strategy Unit November 2009

10 Source - DfT Congestion Statistics July 2010

11 Source - Network Rail Overall Performance for Period 3 2010/11

12 Source - OECD “Structural Reform in the Rail Industry” quoting Ivaldi and McCullough (2004)

13 The right route: improving transport decision making. http://www.green-alliance.org.uk/uploadedFiles/Our_Work/RightRouteFinal.pdf

September 2010

Joint memorandum from Prof. Peter Mackie and Dr. Greg Marsden (TE13)

Summary of Key Points

1. While the impact of transport spending on the economy is one dimension of policy. It is not desirable to partition the transport budget into components which aim at the different objectives; a holistic approach should be taken.

2. Transport spending is only a part of the strategic picture; pricing and regulatory policy are others.

3. The Eddington analytical framework remains broadly valid but some of the conclusions have changed. The lower track of GDP moderates the need for transport investment to expand capacity. The public finance situation implies a required cut‐off rate of return or benefit:cost ratio significantly higher than assumed previously. The case for capacity related investment is weakened relative to pre‐crisis.

4. Relative to Eddington, our prescription would be: a) Greater emphasis on maintaining what we have to a good standard; b) Further investment in resilience to climate change; c) More priority to ‘making better use’ and improving network reliability; and d) Greater priority to investment in transport quality for our cities.

5. It is inevitable in the short‐term that capital will be cut by proportionately more than revenue expenditure. We attach priority to keeping the existing asset base intact and providing revenue support for core public transport. There is great uncertainty as to how different ‘cuts’ scenarios will play out due to the number of actors involved.

6. We believe that most of the assumptions underpinning NATA are defensible although we accept that there are difficult questions regarding uncertainty and change where the evidence base lags behind the needs of decision‐makers. This would seem to be true irrespective of the framework in play.

7. A key problem is that there is a lack of clarity over prioritisation at a strategic level. Many of the criticisms levelled at NATA are because it is being stretched to perform comparisons to which it is not well suited.

8. The Department must move to change its processes for approving major schemes. We suggest a significant increase in the minimum value of scheme over which it needs approval rights to match the rhetoric of devolution and smaller government. However, it must retain and potentially grow its relationship with local partners, the Highways Agency and Network Rail for the many schemes that will be both local and national in nature and which neither party has the heart or funds to support alone. Critical Contextual Observations

As a backdrop to our response to the questions, a few contextual observations are in order:

• While the impact of transport spending on the economy is one dimension of policy, so the other DfT goals relating to safety, environment and distribution/accessibility remain relevant. Choices need to be made against their impact in relation to all the objectives. It is not desirable to partition the transport budget into components which aim at the different objectives; a holistic approach should be taken.

• Transport spending is only a part of the strategic picture; pricing and regulatory policy are others. Conceptually at least the balance and trade‐offs need to be kept under review. The economic consequences of changes in rail fares policy are likely to be a case in point in the coming weeks.

• Transport is very largely a means to an end with the end being the responsibility of other Departments of State. There is a very wide range of delivery agents. Furthermore the transport budget is significantly funded by Communities and Local Government. So we take a broad system‐wide approach not a ‘Departmental’ focus in our response.

• We are staring down the barrel of the spending cuts in an unprotected sector and a large cut in the size of the DfT at a time of significant administrative upheaval. The new national Planning arrangements have not yet worked through, the Regional Spatial Strategies and associated transport prioritisation infrastructure has been swept away and Local Economic Partnerships are the flavour of the day in local government. The fiscal cuts will work at a much faster pace than changes in the planning environment which the Committee rightly identifies as a risk.

• It is very important to recognise the political, legal and other constraints under which the Government is operating. In some cases, such as road user charging, politics has dictated a slow tempo, raising the question of whether there is now a need for Plan B. In other cases (e.g. concessionary fares in 2006 and 2008), policy formulation moved fast in one direction and would require primary legislation to move in the other. Some extremely large schemes are in a category which transcends normal economic judgement; there is not, in that sense, a fixed transport budget pot.

Q1 (a) Have the UK’s economic conditions materially changed since the Eddington Transport Study?

Yes, in the following respects:

• On reasonable assumption, forward GDP will track 10‐15% lower than Eddington assumed.

• Partly because of exchange rate effects, fuel prices are at the upper end of expectations and seem unlikely to fall back in real terms.

• The cost and timing of reductions in carbon emissions in the non‐transport parts of the economy appear to be problematic, so the transport sector may need to contribute more to the Government’s target (though lower than forecast growth will help contribute to this naturally).

• Transport is in the non‐protected sector of public expenditure so public funding is going to be acutely scarce; this in turn influences the balance between public funding and funding through farebox or toll revenue streams. Q1 (b) Does this affect the relationship between transport spending and UK economic growth? The lower track of GDP moderates the need for transport investment to expand capacity because both road and rail traffic growth will be lower than forecast and values of travel time savings will be lower. Also the public finance situation implies a required cut‐off rate of return or benefit : cost ratio significantly higher than assumed previously. Though the relationship might be unaffected, the trajectory of the economy means that the case for capacity related investment is weakened relative to pre‐crisis. The Eddington analytical framework remains broadly valid but some of the conclusions have changed.

Q2 What types of transport spending should be prioritised in the context of an overall spending reduction in order best to support regional and national economic growth?

We do not think it is right to think of transport spending as directed towards a single policy goal so our answer is in relation to all the goals of policy which we think are well set out in the previous administration’s Delivering a Sustainable Transport System document.1 Relative to Eddington, our prescription would be:

• Greater emphasis on maintaining what we have to a good standard. A natural response to funding cuts will be to “sweat the assets” yet this works against the general notion of liability/debt reduction as it simply defers larger costs to future years although it might hide them.

• Investing in resilience in the face of higher incidence of storms and winds needs higher priority. The bridge collapse at Workington should be a wake‐up call.

• More priority to ‘making better use’ and in particular to improving network reliability, whether through software solutions enhancing information or hardware investments to provide a margin for handling incidents and accidents.

• Greater priority needs to be given to investment in transport quality for our cities. 78% of trips are under 10 miles in length and 93% under 25 miles (representing 64% of all car travel by distance). City regions are the engine of the post‐industrial economy but are suffering the diseconomies of congestion. We are also slipping behind our European competitor cities. Whilst only a part of the picture, the quality of transport infrastructure is a feature in attracting and keeping inward investment. Work by the Commission for Integrated Transport has found that our typically per capita spend on transport in the UK is broadly £90‐£125 per annum. Throughout the 1990s we spent only 50% as much in capital as the Germans, French and Italians, countries which also provide more revenue support for public transport. The UK Government’s deficit reduction strategy is abrupt, relative to other nations, and so, despite a narrowing over the last decade, this gap can once again be expected to grow. This in spite of the often excellent value for money demonstrated by smaller urban investments.

• It follows from the above that we would give relatively lower priority to investment in national and international network infrastructure. Investment cases need to be considered against ‘best feasible management/pricing’ alternatives, not simply against ‘do‐minimum’. For example, open access on rail with lengthy concession periods may not be the best way to allocate precious rail capacity, still less be used to justify expensive public investments. However, capacity decisions need to be balanced against forecast demand and congestion and we are not in the camp which

1 It is noted that DaSTS has now been removed from the DfT website and placed on the national archives; however the goals themselves remain relevant. argues that the inter‐urban road network is complete, merely that a more selective approach is inevitable.

Q3. How should the balance between revenue and capital expenditure be altered?

As a preamble, the question implies that there is a set of control mechanisms which enable it to ‘be altered’. But in reality the changing balance will be the outcome of decisions of hundreds of actors in the system. We doubt that, given any one set of reductions in capital and revenue allocations to DfT and DCLG, anyone in central government would be able to confidently explain how this would play out – particularly if there is a desire to see real integration across public services at a local level. We reflect that the failed Manchester TIF referendum suggests that even with very large sums of supporting funding the Department for Transport has limited influence in forcing demand management. With far reduced levels of support this influence will be further diminished.

It is probably inevitable in the short‐term that capital will be cut by more than revenue expenditure. Ultimately it is more important to protect maintenance budget lines and revenue support for core public transport and hence the priority we attach to keeping the existing asset base intact.

Another question which the Committee might consider is the balance between very major projects such as Crossrail and HS2 and large but not super projects such as the recently abandoned A14 scheme. This perhaps turns on whether the public funding for the super projects is seen as internal to the ordinary transport budget or as part of an external national ‘Grand Projets’ Fund.

Q4 Are the current methods for assessing proposed transport schemes satisfactory?

This appears to us to be a question expecting the answer No and we anticipate that the Committee will receive evidence on various alleged weakness of the New Approach To Appraisal (NATA) as an assessment tool and of particular components within it such as the value of travel time savings. We think it is important to see the wood before the trees.

First of all, we think assessment of proposed transport schemes should be viewed as the entire political and social process by which schemes and policies are created, developed, consulted upon and appraised. Viewed in that way, there are criticisms such as the gestation period of schemes, the quasi‐ judicial nature of planning inquiries, the overlapping responsibilities of local authorities, PTEs, delivery agencies and government departments, the adequacy or otherwise of Hybrid Bill procedures and so on. Clearly the British planning system does not operate at the speed of the Chinese land development system. Nor are we willing to fund the generous compensation schemes which lubricate the French system. Perhaps we have the planning system we deserve.

Within that overall structure, we see three levels. The first is the development of strategies for areas such as city regions or corridors such as London‐Birmingham. The second is the appraisal of schemes within the strategy such as say the A1(M) scheme from Ferrybridge to Red House near Doncaster. The third is the assessment of a multiplicity of scheme options in terms of design, layout, alignment, capacity etc. using for example the Design Manual for Roads and Bridges. In general, we would defend the use of a three tier approach to scheme assessment—a scheme should make good sense within a spatial strategy, it should perform well in cost‐benefit analysis terms and the chosen design should be a good solution relative to the alternatives.

Of these, we think the weakest element is the first. Although we had the very high level statement in DaSTS, we have not yet populated the upper tier with the hard grind and experience of actually doing strategic studies. The Multi‐Modal Studies of a decade ago were broadly a failure in that regard and it will be interesting to see whether the DaSTS studies prove more successful. We fear that both the timing and content of those studies may have been misplaced in the current budget circumstances.

By contrast there is a lot of experience at the middle tier and the issues with NATA are not the feasibility of doing it but whether it is structured correctly (see below). We see little challenge to the NATA framework as a way of assembling the relevant evidence in a controlled and consistent manner. We believe that the middle tier (the NATA) though absent in some other policy areas such as Education and Regeneration/Housing is nevertheless essential to assessment in the transport sector which cannot be reduced to single indicators of cost‐effectiveness.

If the concept of NATA (which is really a rebranded version of the Framework developed in the late 1970s) is satisfactory, what about the details? Any appraisal system is going to be most comfortable comparing like with like, so the Roads Review of 1998 (Nellthorp and Mackie, Transport Policy, 2000) was well within the comfort zone of the NATA. Comparisons between very large and very small or across modes and policies will be less comfortable whatever the appraisal tool. So we would stress the need for a better pre‐filter at the strategy level to ensure that the right mix is coming forward for assessment at the second level.

Within the NATA itself we think a number of the criticisms which we have seen are misplaced. In particular we would defend the Department’s guidance on the treatment of taxation including fuel duty and of the value of travel time savings. We may wish to expand on that in the light of other evidence. While the impact of transport schemes on land use patterns within cities is important, we think that changing the focus of appraisal of schemes funded from national funds to one centred on the value of land development or employment capture would be misguided. We think that the real issues are not so much about NATA itself as the policy challenges which appraisal is intended to inform. There is currently a greater level of uncertainty to deal with in assessment than for a generation. Resilience against weather conditions and security concerns, unreliability in road and rail networks are very important but difficult appraisal topics. The evidence base lags far behind the policy need in various respects (e.g. in climate impacts). The low discount rate and sixty year appraisal period involve model and appraisal conjectures about the future which verge on the fictitious. It is important that decision‐makers retain the perspective that NATA is for decision‐support not decision‐making.

Q5. How will schemes be planned in the absence of regional bodies and following the revocation and abolition of regional spatial strategies?

The assembly of a coherent set of regional spatial strategies, regional transport strategies and the associated use of a semi‐devolved Regional Funding Allocation (RFA) process took more than five years to put in place. This is perhaps too long but is a feature of the pace at which the planning process has to move and reflective of the number of stakeholders that were in play. It is our opinion that the RFA process had just begun to overcome the initial tendency of any new funding constellation where each body simply lobbies for its own preferred scheme. The programme for regional major scheme approval had begun to become a more strategic and managed process.

LEPs provide an opportunity to reformulate these constellations (with the associated delays in re‐ establishing working protocols, priorities and trade‐offs). However, there will be many more of them than regions. So the Department has to choice to re‐centralise or devolve the prioritisation processes for major decisions. Arguments for centralisation might surround a more consistent set of policy decisions and an oversight of value for money. This in our view is something of a red herring as the scale, range and objectives of the different schemes being put through the departmental mincer at any one time will be such that comparability is unattainable (see our points above about a better strategic filter). The Secretary of State also seems to have signalled that the Department will not have the staff to take on such a workload.

Arguments for devolution are consistent with allowing local areas to determine their own transport strategies and investment priorities as they know these requirements best. The uncomfortable middle ground here is however, that major schemes require budgets which fall well outside of the yearly capital allocations they receive so simply apportioning capital in a block grant approach and hoping the best schemes will get built will not work. Total devolution too is also a red herring – investments in some non trunk road routes and rail lines are still of a local, regional and national importance and both local and national stakeholders need to be involved. We currently see little clarity over arbitration between the Highways Agency, Network Rail and the emerging LEPs (and their predecessor bodies) on setting investment priorities for an area and the role of appraisal in that process.

We suggest the setting of a more sensible set of criteria for central government involvement in major investment decision‐making. It is our view, for example, that the current £10m definition of a major scheme is far too restrictive – this might be relaxed to £100m. Other criteria such as the volume and degree of through route traffic relative to local traffic might be included. It would also be helpful to continue to outline indicative funding envelopes for investment so that the set of proposals tabled is properly prioritised before it gets there. Matched funding could also be significant (e.g. through workplace parking or equivalent).

Finally, we sound a warning that the LEPs are being established in a time of cuts. Leaner staffing will reduce the limited cross‐sectoral planning experience that exists as agencies focus on core tasks. Adversity may generate a spirit to generate more from less – it may equally lead to entrenchment and short‐sightedness due to the turmoil of the change process. The Department needs to plan for more active engagement with LEPs as the cuts bite if it is to communicate its agenda effectively.

• The evidence is submitted as the views of Professor Peter Mackie and Dr Greg Marsden and is not the view of the Institute for Transport Studies nor the University of

September 2010

Memorandum from Unite (TE 14)

1. Introduction

1.1 This submission is by Unite the Union. Unite is the UK’s largest trade union with over 1.5 million members across the private and public sectors.

1.2 Unite the Union’s current membership in transport, together with our membership in other trade groups, such as supervisory and administrative grades, and some maintenance engineering members, exceeds 250,000. Unite represents workers in all areas of transport including bus, coach, taxi, tram, rail, road haulage, logistics, civil aviation, docks, ferries and waterways.

1.3 Unite has obtained the views of our transport worker members through our lay member committees at national and regional level. Therefore Unite is in a unique position to submit a response to the Transport Committee Inquiry into Transport and the Economy.

2. Executive Summary

2.1 The relationship between transport spending and UK economic growth is even more vital during this tenuous post recession period then it was previously.

2.2 Unite is extremely concerned that the Government’s drastic cuts programme is jeopardising the recovery and may even lead to a ‘double dip’ recession.

2.3 Continued investment in transport infrastructure is crucial to delivering and maintaining economic growth. It will not only help build the UK out of recession by providing jobs and attracting investment, but provides an essential element for long-term, sustainable growth.

2.4 Every transport mode makes a substantial direct and indirect contribution to the UK economy and Unite will protect its members and their terms and conditions vigorously across all these modes of transport.

2.5 If any alteration is needed between transport revenue and capital expenditure during this time of little economic growth then it is greater expenditure in the UK’s transport infrastructure that is required.

2.6 What are the criteria that the decision maker will be using to make their decisions when assessing proposed transport schemes?

2.7 If the Government wants to make some cost neutral improvements to the UK’s transport policy then Unite’s ‘Safer Way Campaign’ would be an appropriate place to start.

o a maximum single piece of driving duty not to exceed 4.5 hours, o a maximum length of driving time of no more than 8 hours in 1 day, o a maximum of 10 hours total working time in any one day.

2.8 Regional transport strategies must be maintained despite the removal of the wider regional spatial strategy.

3. Have the UK’s economic conditions materially changed since the Eddington Transport Study and, if so, does this affect the relationship between transport spending and UK economic growth?

3.1 The Eddington Transport Study 2006 was explicit about the long-term links between transport and the UK’s economic productivity, growth and stability.1 Since Eddington’s Transport Study the UK has undergone a severe recession from which recovery is still fragile and the Committee is right to recognise this in its terms of reference to this inquiry that “a good transport system is a pre-condition of the long-term economic growth required to drive the UK’s economic recovery”.2

3.2 When the Eddington Transport Study was conducted the UK economy was amidst a period of sustained growth that would last 16 years and was finally brought to an end with a 0.6% fall in the 3rd quarter of 2008, after 64 consecutive quarters of growth in the UK.3 Now after 6 negative quarters in a row, the UK has reported growth in the last 3 quarters.4 GDP increased by 1.2% in the second quarter of 2010, compared with an increase of 0.3% in the previous quarter.

3.3 The transport sector’s contribution to the UK economy since the Eddington Transport Study is substantial in terms of the sectors contribution to UK GDP and employment levels.

Transport & Communication Transport & Communication Year Gross Value Added Workforce Jobs 2006 £83,655,000,000 8,837,000 2007 £88,280,000,000 8,845,000 2008 £91,347,000,000 8,905,000 2009 Not available 8,622,000 Source: UK National Accounts - The Blue Book 2010 3.4 However, the transport sector should not just be valued on its considerable direct GDP and employer contribution to the UK economy alone. Transport provides a ‘multiplier- effect’ to all the other sectors of the UK economy which has an indirect economic value, which can be hard to quantify but which is certainly present.

3.5 The British Chambers of Commerce (BCC) has estimated a transport infrastructure ‘multiplier-effect’ worth around three times the cost of a powerful package of road, rail and airport improvements, which will deliver economic benefits worth a projected £86.3bn for an outlay of £30.1bn.5

3.6 Concerns about the damaging consequences of failing to invest in transport infrastructure have also been raised by the CBI who state that: “an apparent saving

1 The Eddington Transport Study, 2006 2www.parliament.uk/business/committees/committees-a-z/commons-select/transport- committee/inquiries/transport-and-economy/ 3 www.statistics.gov.uk/ 4 www.statistics.gov.uk/CCI/nugget.asp?ID=192&Pos=1&ColRank=1&Rank=144 5 www.britishchambers.org.uk/6798219246897588197/transport_priorities.pdf

today means spending more tomorrow, and fails to recognise the direct and indirect 6 benefits that quality infrastructure can bring in the near term.”

3.7 It is Unite’s view that the relationship between transport spending and UK economic growth is even more vital during this tenuous post recession period then it was previously.

4. What type of transport spending should be prioritised, in the context of an overall spending reduction, in order best to support regional and national economic growth?

4.1 Unite believes that this Government must deliver on commitments it has made for the high speed rail network, which can drive economic growth with a yield of £2 in benefits for every £1 spent and deliver 10,000 jobs7, and the Crossrail project, which will be essential to the development of London’s prosperity and competitiveness.

4.2 Unite urges the Government to rethink its opposition to a third runway at Heathrow, which for £9bn investment from the private sector, not government coffers, would generate £30.7bn of economic benefit to the UK.8 The London Hub business cannot be replaced by the utilisation of other neighbouring airports or the construction of a fictional new airport in the Thames. If managed correctly runway additional capacity at the airport would not lead to an increase in green house gas emissions and may provide incentives toward reducing emissions globally. In addition, these transport infrastructure projects will provide numerous opportunities for British construction and manufacturers. These projects must not be compromised by short-term cost-cutting measures.

4.3 However, it isn’t just about preventing the mothballing of large proposed transport infrastructure projects. Maintaining current funding in existing transport infrastructure is just as crucial.

4.4 The Government is pursuing a severe programme of spending cuts in which unprotected departments are to see budgets slashed by some 25%, with reports of as much as 40%. A 25% cut to the Department for Transport’s £13.6bn annual budget would amount to £3.4bn. Cuts have already been announced in respect of local authority grants, Network Rail, railway stock and road improvements.9

4.5 At a time when the Government, local authorities and PTE's should be increasing investment in transport infrastructure. Within the bus industry there is so much that could be done e.g. financial support for tendered bus services, new buses, bus stations, bus stops and shelters and the timetable and service information provided on them. Unite fear that local authority spending cuts will impact heavily in this area and make public transport less attractive and more difficult to use, particularly if timetable and service information is degraded.

6www.cbi.org.uk/ndbs/press.nsf/0363c1f07c6ca12a8025671c00381cc7/f3d498f499d77c6a8025779800442fb d?OpenDocument 7 news.bbc.co.uk/1/hi/8561286.stm 8 www.britishchambers.org.uk/6798219246897588197/transport_priorities.pdf 9 www.bbc.co.uk/news/uk-politics-10924719

4.6 Unite is extremely concerned that the Government’s drastic cuts programme is jeopardising the recovery and may even lead to a ‘double dip’ recession.10 Continued and increased investment in transport infrastructure is crucial to delivering and maintaining economic growth. It will not only help build the UK out of recession by providing jobs and attracting investment, but provides an essential element for long- term, sustainable growth.

4.7 Every transport mode makes a substantial direct and indirect contribution to the UK economy and Unite will protect its members and their terms and conditions vigorously across all these modes of transport.

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

5.1 Certainly it isn’t by the Government reducing or removing the only direct national funding for bus services - the Bus Service Operators Grant (BSOG). BSOG, formerly known as the Fuel Duty Rebate (FDR), is a rebate to bus operators on the fuel duty they pay. Operators who run local registered bus services are reimbursed for the major part of the tax paid on the fuel used in operating these services. These also include many rural, school and socially important services and the grant is also increasingly important to community transport providers. Government provides a fuel duty rebate on approximately 80% of the fuel used by buses. Bus operators pay fuel duty tax on the remaining 20% of their fuel. 5.2 BSOG lowers the cost of providing services, resulting in lower fares, a more comprehensive network of services, less congestion on our roads and a better and healthier living environment in our communities. It also helps support the 170,000 jobs in the bus industry and thousands of others in bus manufacturing and support services.

5.3 BSOG also helps the Government achieve its aims of carbon reduction, lower road congestion, and social inclusion. The Government has publicly recognised the value of BSOG, with the Transport Minister Norman Baker telling the House of Commons on 29th June: “The benefits of that grant are clear: it ensures that the bus network remains as broad as possible, while keeping fares lower and bringing more people on to public transport, with the obvious benefits of reducing congestion, lowering carbon emissions and improving air quality in our towns and cities.”11

5.4 The Department for Transport’s own submission to the review of the local bus market said that BSOG represents high value for money.12 A previous study for the Government by the Commission for Integrated Transport found that every £1 invested in BSOG provided between £3 and £5 of wider benefits.13

5.5 If the Government withdrew BSOG this would have damaging and wide-ranging consequences for local communities, public transport services, low-income groups, the UK economy and the environment.

10 This is a view shared by a number of notable economists. See for example, www.newstatesman.com/economy/2010/07/growth-budget-cuts-recovery 11http://services.parliament.uk/hansard/Commons/bydate/20100629/mainchamberdebates/part005.html 12 www.bettertransport.org.uk/system/files/10.07.09.bsog_briefing.pdf 13 www.bettertransport.org.uk/system/files/10.07.09.bsog_briefing.pdf

5.6 Unite also opposes the planned sale of Dover and the trust ports to raise capital for central government. The Dover Harbour Board claims that the sale would cause the “Removal of constraints to enable growth: access to capital with no statutory or artificial constraints on the Port’s development and growth; optimisation of its capital structure and user charges”. However in reality The Dover Harbour Revision Order 2006 provides the Board with the capacity to borrow funds in whatever way they choose and the ferry companies claim that the route is already 40% over capacity. For UK-registered vehicles, 77% travelled via the Dover Strait in 2009; the corresponding figure for foreign vehicles was 88%. If there is another unforeseen event like the Ash cloud incident or the wrong type of snow which causes the channel tunnel to shut then the Dover port becomes an even more vital UK economic life line than it already is

5.7 Therefore Unite believes that if any alteration is needed between transport revenue and capital expenditure during this time of little economic growth then it is greater expenditure in the UK’s transport infrastructure that is required.

6. Are the current methods for assessing proposed transport schemes satisfactory?

6.1 Unite is concerned with the actual decision makers. What are the criteria that decision makers will be using when assessing proposed transport schemes?

6.2 If the Government wants to make some cost neutral improvements to the UK’s transport policy then Unite’s ‘Safer Way Campaign’ would be an appropriate place to start.

6.3 British bus drivers are presently driving longer periods than their European counterparts. This is wrong on grounds of safety because the deepening congestion on Britain’s roads makes their job increasingly stressful and hazardous. The British Driving Hours Regulations currently provide for bus drivers to work for up to 5.5 hours without any breaks, and up to 16 hours in a whole day. Unite believes it is time for:-

o a maximum single piece of driving duty not to exceed 4.5 hours, o a maximum length of driving time of no more than 8 hours in 1 day, o a maximum of 10 hours total working time in any one day.

6.4 The issue of excessive driving hours and the poor quality of UK regulations ought to be a matter of serious public concern and we urge the Transport Committee to support our campaign calling for steps to be taken to tighten the current drivers hours regulations.

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

7.1 Unite is unsure what the Government plans to take the place of the regional bodies following the revocation and abolition of regional spatial strategies. Of particular concern is the status of the regional transport strategy, which was part of the wider regional spatial strategy.

7.2 The backbone of any local transport network is the bus. 4.8 billion journeys are made every year on buses. For the 25% of UK households that do not have a car, to get to

work, to school, to visit the shops or the hospital, the first and often only travel choice is a bus.14

7.3 Clearly if there is no provison to get the level of bus demand right as part of a regional transport stratgey, then it could be a recipe for disaster for local transport services provision. Regional transport strategies must be maintained despite the removal of the wider regional spatial strategy.

September 2010

14 www.bettertransport.org.uk/campaigns/public_transport/buses/facts

Memorandum from Merseytravel (TE15)

1 Introduction

1.1 Merseytravel welcomes the Transport Select Committee’s inquiry into ‘Transport and the Economy’. The publication of the Eddington Report marked a step change in the way that government viewed transport and its role. Instead of simply perceived as being a means of moving people from A to B, the wider of contribution of transport, especially in terms of economic development, was really for the first time given the attention it deserved.

1.2 The publication of the Eddington report, alongside the Stern report on climate change, meant that there was an opportunity to integrate, in policy terms, local, regional and national transport with economic, social and environmental objectives. More recently, the costs and other disbenefits of congestion have been measured by the Cabinet Office report, ‘An Analysis of Urban Transport’, amongst other studies. Together, these reports demonstrate the central role that transport plays.

1.3 Unfortunately, the opportunity of integrating transport into wider policy development has yet to be fully realised and this means that transport is still not allowed to play its full role.

1.4 Merseytravel is the combined Passenger Transport Executive (PTE) and Integrated Transport Authority (ITA) for Merseyside, and is the public sector body responsible for the coordination of public transport across the Liverpool city region with the exception of Halton. Working with our partners across the Districts and the business community, our objective is to produce a fully integrated transport system which is accessible to all.

2 Issues

2.1 Have the UK’s economic conditions materially changed since the Eddington Transport Study and, if so, does this affect the relationship between transport spending and UK economic growth?

(a) The changing nature of the UK’s economic position, and the downturn, should be viewed as a short term issue in terms of transport provision. The long term trend is for increasing demand for travel and this should not be ignored in the debates regarding the future requirements for all modes of transport.

(b) It is disappointing that the Government has already ruled out certain transport policies, such as road pricing, without an examination of their impacts and how any revenue generated could be used. Without such a cross-modal approach to transport, any facilitation of economic, social and environmental improvements could be hampered.

(c) Clearly, a lack of accessible and efficient transport links present a real barrier to economic growth and investment. This, in turn, can contribute towards worklessness and social exclusion. Research has shown that better coordination and integration in our transport networks can have a sustained impact on their usage and, in turn, on the economic performance of our city regions (see for example Centre for Cities, ‘On the Move’, see www.centreforcities.org/onthemove).

(d) As an economic enabler, effective transport infrastructure connects people to jobs and markets, benefiting businesses and potential employees, and helping to tackle

worklessness and unleash the skills potential of many people on the peripheries of our towns and cities. Effective transport infrastructure creates greater opportunities for businesses by opening up new markets and increasing competition and productivity. In addition, investment in transport infrastructure can also directly support jobs and boost local economies.

(e) New legislation has been passed since the publication of the Eddington report which also needs to be reflected in the provision of transport and in the calculation of its contributions. The recent Equalities Act introduced a new duty to carry out Equality Impact Assessments as well as the need to demonstrate that due consideration of the socio-economic impacts of decisions and spending have been given.

(f) Eddington adopted a blanket approach that all passengers enjoyed the same access to transport and that all passengers had the ability to pay the full, including environmental, cost of that transport. This is clearly not the case and in the current economic setting this inability to access and pay has become even more marked.

(g) So the economic discussion also has to be concerned with barriers to accessing transport and these impact on already disadvantaged groups and communities. This makes consideration of the bus network a key policy area as this remains the most used form of public transport.

(h) In addition, work by the Joseph Rowntree Foundation shows that the high cost of transport imposes barriers, especially on the young, to work, education and training opportunities.

(i) In an era of reduced budgets Merseytravel recognises the need to be more creative in the use of funding whilst maintaining a focus on reducing economic and social inequalities. This means delivering on the smarter choices agenda but also communicating the business benefits of initiatives such as Neighbourhood Travel Teams, Personalised Journey Planning and more targeted support such as WorkWise which encourages the widespread adoption of smarter working practices.

(j) Public transport connects people to jobs, services, friends, family, education and leisure – particularly those on the lowest incomes, more than half of who do not have access to a car. Again, equality of access has to be a key consideration.

(k) Alongside this when new developments are being planned there is often a failure to properly consider transport requirements. Merseytravel considers that the only way for transport and land use planning to be fully integrated, especially now that regional strategies have been abolished, is for PTEs where they exist to be made statutory consultees in the planning process at a local level.

(l) Taken together these issues illustrate some of the steps which need to be taken if economic improvements are to be made and transport is to play its role in securing those improvements.

2.2 What type of transport spending should be prioritised, in the context of an overall spending reduction, in order to best support regional and national economic growth?

(a) There is not a single answer to the question as such decisions should be made locally. In some areas, infrastructure provision will be required, in others the emphasis may need to be on supported services. The spending should be focused on where it

delivers the greatest economic, social and environmental benefits. This is an issue picked up in section 2.4.

(b) However, for such policies to be established requires clarity over decision-making structures, the level of resources available and sources of funds. This means that clarity is provided on issues such as Local Enterprise Partnerships (LEPs) and the Regional Growth Fund (RGF) as a matter of priority.

(c) Unfortunately, we fear that those projects most at risk appear to those in the North of England. However, as spending per head on transport is already lower in the North than it is in London then to reduce spending still further would appear to undermine the rebalancing of the economy for which the Government is striving.

(d) Clarity on issues such as the balance between taxpayers and farepayers on the price of rail tickets will help to establish the level of spending available elsewhere in the transport sector.

(e) The principle of using the RGF to leverage private sector investment is one that Merseytravel supports and it is clear that certain parts of the country are more heavily dependent on public sector spending than others. As the Government will recognise, the RGF cannot be a substitute for a genuinely strategic and properly funded approach to economic development and regeneration policy and so further information is required regarding how the RGF is intended to integrate with other policy instruments and funding streams.

(f) We need to understand the role that public sector funding in transport plays. It is not simply about the provision of infrastructure but it can also be an enabler of private sector investment. Whilst the private sector may not always readily see the returns that can be made from transport projects, partly because of the timescales involved, public sector funding can attract development to an area. The ability of transport to connect people, for instance giving business access to a workforce or communities access to health, education and leisure facilities, means that development becomes viable and attractive to the private sector. It is these connections that help developers to make a return on their investment.

(g) The ability to pump-prime for the private sector investment needs to be reflected in the appraisal of transport projects (see Section 2.4).

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

(a) Again, this is a decision that should be made locally but for such decisions to be really effective this requires greater local control over total funds. For instance, greater flexibility on revenue spending and more say over how funds can be raised and spent.

(b) PTE revenue spend is increasingly dominated by funding the free off-peak bus pass for older and disabled people. There are concerns that, alongside the grant that the Government provides for the pass being cut, the element of direct grant that PTEs receive for the scheme could be removed and pooled together with the general funding received by local authorities. All these proposals directly threaten the sustainability of concessionary fares.

(c) There is a lack of clarity over revenue budgets too. The Bus Service Operators Grant (BSOG) is being reviewed and we hope the decisions taken around the Spending Review on 20th October will set out the current and future plans for BSOG, which plays a valuable role in the delivery of affordable bus services.

(d) The legal requirement for PTEs to fund the national concessionary fares scheme will doubtless remain in place meaning that should there be any further pressure placed on revenue funding then the other services provided by PTEs will be further squeezed. This could mean that groups such as young people and job seekers who require access to transport having to pay more for the service and/or facing cutbacks in services. This would run counter to the requirements of the Equalities Act and would hit economic development in the areas concerned.

2.4 Are the current methods for assessing proposed transport schemes satisfactory?

(a) It is widely recognised that the NATA system of appraisal is in need of work and we welcome the Government’s commitment to its review. We believe that this should be a matter of priority for the DfT.

(b) Some good work has already been undertaken by the likes of the Campaign for Better Transport on the reform of NATA but what is clear is that climate change priorities and carbon reduction have to be more fully reflected in the appraisal methods.

(c) However, more emphasis is also required on the agglomeration benefits of transport projects in their appraisal, including their ability to leverage in private sector finance but also attract wider private sector investment to an area. Transport projects can, in effect, pump-prime an area for private sector investment. The expected delivery outcomes of the project, as assessed, should reflect real economic needs and requirements, for instance the projects’ ability to support sectors in the local economy.

(d) Appraisal methods should also ensure that major investments are supported by ‘soft measures’/smarter choices such smartcard ticketing facilities, rather than simply being stand-alone, largely capital projects.

(e) The proposed Green Infrastructure Bank could assist in the revision of project appraisal methods and one of the immediate tasks for the Bank should be for it to look at basis upon which it supports projects.

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

(a) Merseytravel is currently involved in the preparation of a LEP for the Liverpool City Region and we believe that such a body might provide a mechanism for some sort of wider strategic authority. However, how LEPs relate to one another or ‘compete’ for funding is not yet clear.

(b) In addition, until LEPs are up and running we may be in a position where private sector investment is being postponed or possibly even cancelled. Anecdotal evidence suggests that developers are not willing to make investment for fear of legal challenge now that regional strategies have been abolished. This obviously runs counter to the need to encourage economic growth and job creation.

(c) The speed with which a new system can be agreed and implemented is the key.

We are also concerned that those local authorities (or city regions or LEPs) that are best able to facilitate private sector investment are likely to benefit at the expense of those areas less able to facilitate such involvement.

This would appear to be a regressive approach and so further information on the criteria by which decisions on funding will be made and how some degree of ‘equality’ between areas will be ensured in the absence of any formal structure between the local (or LEP) and national levels. Furthermore, there is also a risk that the RGF could be seen as a centralising process, rather than a localising one, with the final decision resting with ministers on the advice of Approval Panel.

(d) In essence, there is a risk of finance being attracted to areas with an existing robust private sector and or existing transport links, rather than helping to spread growth and rebalance the economy.

(e) The abolition of the regional strategies also means that the ability of a larger geographical area to plan for infrastructure requirements and balance completing needs has been removed. If, as has been speculated, larger LEPs, for instance those following existing county council boundaries, are rejected, then this problem will persist.

3 Overall

3.1 As a Grant Thornton report for pteg concludes ‘the economic logic for investment in local transport and improved inter-regional connectivity remains’ (‘Government Spending Cuts: Scenarios for Future Transport Funding’).

3.2 The task facing us is to allow local control over finance so that travel opportunities can be opened up but policy needs to ensure that travel choices are not just given to those that already have them.

3.3 The system of appraisal also needs to be reviewed so that it actually reflects the economic and environmental benefits of

September 2010

Memorandum from Passenger Focus (TE 17)

Summary

Rail passengers’ top three priorities for improvement in Britain are value for money, punctuality and service frequency. Punctuality is the single biggest driver of overall satisfaction with rail services, while the biggest driver of dissatisfaction is the way that the industry manages delays.

Bus passengers’ top three priorities for improvement in England (outside London) are punctuality, frequency and getting a seat. There is a wide variation in the factors which have the most impact on the satisfaction of bus passengers from one area to another.

We do not believe it is our role to tell elected representatives how much of taxpayers’ money should be spent on public transport, or how to divide the public contribution between rail and bus subsidy. However, we do feel it is appropriate to set out where passengers would like those budgets to be spent and to alert the Committee to the likely consequences of reductions in public support.

Passengers do not exist in a vacuum. They know that tough decisions on public spending are having to be made and that transport will not be immune. However, as the Eddington1 report made clear, transport is essential to the economic well-being of the country. Rail and, in particular, bus travel, also deliver a range of social benefits.

In the rail sector demand has already returned to pre-recession levels and is forecast to double within the next 20 years. Rail plays an essential role in driving sustainable economic growth both in terms of commuting into urban areas and also through providing good connections between regions. Catering for this demand requires continued long-term investment. A significant reduction in spending will clearly have an impact on rail passengers both now and in the future.

A withdrawal or significant reduction of public subsidy for bus services could be bad news for passengers, since it would almost inevitably lead to service cuts and fare rises. If reductions prove necessary, bus operators and local authorities should consult on proposals and explain decisions. Government should place conditions on recipients of public funding to account to passengers and taxpayers for the outcomes achieved on their behalf.

Introduction

Passenger Focus is the independent statutory watchdog for Britain’s rail passengers and, since February 2010 for bus, coach and tram passengers in England (outside London, where passengers are represented by London TravelWatch).

The first part of our evidence summarises passengers’ priorities for improvement on rail and bus, and what drives satisfaction levels. The second part addresses the likely impact of cuts in public subsidy on passengers and the best way to protect passengers’ interests.

Rail passengers’ priorities and drivers of satisfaction

As part of its input into DfT’s High Level Output Specification (HLOS) process Passenger Focus commissioned research into passenger priorities for improvement. Around 4000 passengers were asked to rank 30 different aspects of rail travel2. The work was repeated in 20093.

1 Eddington Study. December 2006 2 Passengers' priorities for improvements in rail services. July 2007

The table below shows the top ten priorities in 2009 compared to 2007. It also shows the relative importance of each attribute ranking relative to punctuality - the higher the score, the greater priority passengers assign to that service aspect.

In the 2009 2009 Rail Service Improvement Preference 2007 2009 'Score' research there Price of train tickets offer excellent value for were money 1 1 1.08 three clear At least 19 out of 20 trains arrive on time 3 2 1 priorities for Sufficient train services at times I use the train 2 3 0.98 Passengers are always able to get a seat on the train 4 4 0.86 Company keeps passengers informed if train delays 5 5 0.79 Information on train times/platforms accurate and available 7 6 0.75 Maximum queue time no more than 2 mins 6 7 0.69 Trains consistently well maintained/ excellent condition 8 8 0.69 Seating area on the train is very comfortable 9 9 0.67 Station staff are available whenever required 17 10 0.67 improvement: value for money, punctuality and service frequency. These, coupled with seats/capacity in fourth place, emphasise the continued importance passengers place on the ‘core product’.

Passenger Focus also conducts the National Passenger Survey (NPS). We consult over 50,000 passengers a year to produce a network-wide picture of passengers’ satisfaction with rail travel.

Multivariate analysis of the overall satisfaction and dissatisfaction scores reveals that punctuality is the single biggest driver of overall satisfaction, while the biggest driver of dissatisfaction is the way that the industry manages delays. This means that the best way to improve overall passenger satisfaction is to get the trains to run on time. This again emphasises the importance of the ‘core product’.

Bus passengers’ priorities and drivers of satisfaction

In March 2010 Passenger Focus published a report on a survey of over 3,800 bus passengers in England outside London4. This provides an indication of bus passengers’ investment priorities.

The table below shows the top ten priorities at the end of 2009. More punctual buses is passengers’ top priority, while more frequent services going to a wider range of destinations and cheaper fares are very important. Getting a seat also matters, although most passengers seem not to be experiencing difficulties at the moment. Interestingly, passengers placed a very high priority on flexible, multi-operator tickets.

3 Passengers' priorities for improvements in rail services. March 2010 4 Bus passenger priorities for improvement. March 2010

Bus Service Improvement Preference 2009 More buses are on time or within five minutes of when they are scheduled to 1 arrive Buses run more frequently at times when you want to use the bus 2 All passengers are able to get a seat on the bus for the duration of the journey 3 Tickets and passes are available that entitle you to travel on all buses in your 4 local area, not just those operated by a specific bus company Buses go to a wider range of destinations in your local area 5 Bus fares, tickets and passes offer better value for money 6 All drivers are helpful and have a positive attitude 7 Accurate timetable and route information is available at all bus stops 8 Tickets and passes are available that entitle you to travel on all types of public 9 transport in your local area, not just buses All bus stops have a well-maintained shelter 10

There is a wide disparity between the views of paying passengers and those travelling on free bus passes. Both groups placed high importance on improving punctuality and getting a seat. Inevitably, those travelling on free passes were relatively unconcerned about fares and tickets, focusing more on features such as waiting facilities and low-floor buses, which may reflect their tendency to be more physically frail, as well as helpful and positive drivers. Unsurprisingly, paying passengers highlighted cheaper tickets as a priority for improvement.

It is also interesting to note some significant regional variations. For example, cheaper tickets are a relatively higher priority in the South West and the South East; personal security is a key issue in the West Midlands and the North West; and helpful drivers are regarded as more important in the North East and the South West. In the South East in particular, passengers want better information at bus stops – route maps, timetables and real-time information about when the next bus will be arriving.

Using the same multivariate analysis of the overall bus passenger satisfaction and dissatisfaction scores as we have adopted on the rail side, reveals significant local differences between areas. For example, the five factors which have the greatest impact on passengers’ overall satisfaction with their bus journey in Brighton and Hove, in order of impact are: length of time the journey took; appropriateness of the speed; length of time spent waiting for the bus; smoothness and freedom from jolting during the journey; and helpfulness and attitude of the driver. By contrast, the factors with the most impact in Cumbria are: electronic information showing the time of the next bus; value for money; length of time the journey took; comfort of the seats; and information provided on the outside of the bus (route number and destination).

Rail – what type of spending to prioritise

Passenger Focus has commissioned some initial work on deciding where rail spending should be best targeted in this difficult economic period. While the initial findings must be treated with caution due to the small sample size they are based on, some broad themes did emerge: • Capital investment projects should be deferred until more funding is available – the current budget should protect current services. • The prospect of fare increases was strongly resisted, especially if these were in addition to the standard annual rises that participants already experience. • Potential changes to the frequency and punctuality of current services was strongly resisted by commuters who had built their lives around train times and frequencies. Participants felt peak services were already under severe strain and changes would not be tolerated. To a degree these represent captive markets. • There was tacit admission that speed of services was of less importance than other core service factors. So, improvements to journey times could potentially be delayed. Other, ‘softer’ aspects of service provision might be altered as a compromise e.g. station cleaning, staffing levels (assuming more fundamental moves towards smart ticketing), and off-peak service frequencies.

It is clear from our research that passengers’ priorities centre on the provision of an affordable, punctual and frequent service. We feel that Government spending on rail should focus on these priorities.

It has been suggested by some in the industry that it is impracticable to go much beyond current levels of punctuality and that investment required to do so could be better spent improving some other aspect of the railway. Passenger Focus welcomes the continued improvement in punctuality across the network – though there are still pockets of poor performance that need to be addressed, but is concerned at the argument that punctuality targets should be ‘frozen’.

The existing measure of punctuality (PPM) classes a train as on time if it arrives within five minutes (for shorter distance services) and 10 minutes (longer-distance) of its scheduled arrival time. However, research by Passenger Focus5 found commuters appear to notice lateness from the first minute, not just after five minutes or 10 minutes allowed by PPM, with levels of satisfaction dropping accordingly. This gap between PPM and passengers’ own experience of delay also reflects the way in which punctuality is calculated. For example, punctuality is only reported at the final destination rather than at intermediate points and so ultimately records the delay to the train rather than the passenger – e.g. a passenger could have been 15 minutes late at the point he/she got off but the train may have made up time later on and arrived ‘on time’ – in such circumstances the passenger was late but the train was on-time.

In a time of spending cuts it is inevitable that rail fares will also come under some scrutiny, with parts of the industry arguing that removing fare regulation and moving to airline style pricing models allows better utilisation of capacity (particularly during the ‘shoulder peak’ period). We believe this misses two fundamental points:

i. Captive consumers. Many commuters have little (or limited) ability to change travel patterns in response to rising fares. Such decisions are often tied into longer-term choices on where to work or live. Some may be able to change modes of travel but others, especially when commuting into London, have little in the way of a viable alternative. Increasing commuting fares can, therefore, lead to either an increase in car use or the passenger having no option but to bear the cost in the short to medium term. Where competition within an industry is insufficient to control price then it is important that the market is regulated to stop captive consumers being exploited.

5 Towards a ‘right time’ East Anglian railway. Passenger Focus March 2010 ii. Railways are not airlines Our fares and ticketing study6 showed that Great Britain benefits from some of the most frequent services in Europe. The benefits of this are lost if you are tied to a specific train. Turn-up-and-go frequencies do not align themselves well to airline style book-ahead restrictions. Not everyone is able, or wants, to plan their precise train journey weeks or days in advance.

Passengers understand that tough decisions on public spending are having to be made and that transport will not be immune. However, it is widely acknowledged that costs within the industry are too high and that it is still not as efficient as it should be. For example: • opportunities for greater synergies between renewals and enhancement work • Generating additional demand by reducing engineering possessions • Increasing demand and promoting long-term benefits by aligning industry incentives

We also believe that some of the rigidities in the existing fares structure, and the complexities surrounding its use, suppress existing demand and revenues. There is a clear sense from passengers that the industry must look to address these before thinking about passing any of the ‘pain’ onto passengers in the form of higher fares or a reduction in services.

Bus – what type of spending to prioritise

All bus passengers rely on punctual, frequent and reasonably priced services. These are at least partly dependent on public subsidy. A withdrawal or significant reduction of public subsidy could be bad news for passengers, since it would almost inevitably lead to service cuts and fare rises. There is a risk of a double whammy for passengers as local authorities are also making tough decisions on spending and tendered services are already being trimmed back.

Buses serving the edges of cities and towns and rural areas will be under most threat. Smaller operators making more modest profits are likely to come under severe pressure and have less room for manoeuvre.

It is in passengers’ long-term interests to have bus companies making healthy profits, but some of those profits must be used to help fund improvements to services. However, all operators must justify why they need to cut or reduce services. In the absence of a clear explanation for changes to services, the arguments for quality contracts and partnerships are likely to become more compelling.

Although naturally we would prefer it if Government were able to maintain current levels of support for the bus industry, we are realistic. We recognise that public finances are constrained and likely to remain so. If all areas of public spending have to contribute to repaying public debt, it would be understandable if Government wished to see a proportionate reduction in real terms public spending on buses.

However, any changes to public subsidy for bus services must be very carefully thought through and consulted on. Bus services are local and should be determined locally. Local authorities and operators should consult users. They should do so while plans are at a formative stage, providing local people with a rationale for their proposals, and alternative options. They should provide feedback once they have analysed the responses, explaining their decisions.

6 Fares and Ticketing Study. Passenger Focus. 2009

Any reductions in BSOG should be phased in to give bus operators, local authorities and passenger transport executives the time they need to do this effectively.

BSOG should be looked at in the context of all public funding for buses and what it is designed to achieve. Taken as a whole, taxpayer support for buses is considerable. Government should place certain conditions on recipients of this money to account to passengers and taxpayers for the outcomes achieved on their behalf.

Patronage figures are a poor measure of success, since they are likely to reflect external factors such as an expansion or contraction in the economy. Unless very carefully designed, an Incentive Per Passenger scheme risks skewing resources away from rural and edge of town services which may be performing well but which are unable to attract passengers in the same numbers as major routes in urban centres.

Instead, the outcomes sought by Government should be closely linked to passenger priorities and to delivering improvements to passenger satisfaction levels.

We acknowledge the risk of Government being overly prescriptive. We are not advocating central target setting. However, it is important that the Government knows what it is getting for its money, and that passengers have the information they need to hold their bus operators and local authorities to account. As a minimum, this should include accurate figures for the punctuality of bus services, disaggregated down to an appropriate level, and figures for overall passenger satisfaction and the satisfaction of fare-paying passengers with the value for money of their bus services. Government spends a lot of money on behalf of taxpayers and passengers supporting bus services; it should demand more in exchange. Now is a perfect time to introduce such a requirement.

As an immediate way forward, we would recommend trialling the independent collection and publication of passenger satisfaction and bus punctuality data on a sample of routes in some of the country’s big cities, prior to a wider national roll-out.

September 2010

Memorandum from The Chartered Institute of Logistics and Transport in the UK (TE 18)

Summary

• UK economic conditions have, of course materially changed since 2006. However, some travel patterns are set on a trend irrespective of GDP. Car trips and distance are decreasing while rail and some bus trips are growing independent of the economy. Other transport, in particular freight related and air travel, is more closely linked to the economy.

• Alternatives to travel will assist in growing GDP but will result in more travel later.

• Economic growth is therefore best supported by prioritising transport investments which are related to GDP. CILT(UK) continues to support the Eddington priorities: congested urban areas, inter urban corridors and gateways.

• CILT(UK) continues to support better pricing for all travel, providing direct signals on the value of each trip on which economic value and therefore priorities can be based.

• In a time of limited public sector finances, schemes which leverage private sector investment should be prioritised.

• The best schemes depend on the particular circumstances. Public transport, cycling, walking and low cost integration schemes can help in urban areas, but the movement of goods and services for the economy is vital. Rail schemes and the removal of road bottlenecks are appropriate to inter urban corridors. The provision of capacity at gateways is fundamental if they are not to inhibit the flow of people and goods.

• The balance between revenue and capital expenditure should not simply be altered because of financial limitations. Carefully targeted revenue expenditure may have a high long term economic benefit, just as much as capital investment.

• Current appraisal techniques are not adequate, but simpler appraisals are appropriate for initial sifting or for schemes with obvious benefits. Wider benefits should be studied but should not be used unless doubts about the value of benefits or the limitations of data are fully understood.

• Devolved administrations have considerable autonomy in transport decision making, but some nationally important schemes are being held up for local reasons. National policy should be afforded significant weight in planning decisions. Localism should not prevent nationally important infrastructure being provided.

The Chartered Institute of Logistics and Transport in the UK (CILT(UK))

1 The Institute of Transport was founded in 1919. The first President was Sir Eric Geddes, who was also the first Minister of Transport. One of the principal objectives of the Institute, then as now, was to promote the knowledge and study of the art and science of transport in all its branches, and to provide facilities for the exchange of information and ideas. As today’s CILT(UK), it has in excess of 18,000 members. This response was formulated by the Institute’s Public Policies Committee, which includes representatives from all parts of the transport profession and from all nations and regions.

Have the UK's economic conditions materially changed since the Eddington Transport Study and, if so, does this affect the relationship between transport spending and UK economic growth?

2 Clearly, the economy has been in recession since 2006 and, although it is now recovering, uncertainties over the pace of recovery and the Government’s programme to control public spending inevitably mean that the extent of the impact on transport expenditure is unclear although it is likely to be negative in most areas. The relationship between GDP and travel is complex, and we should be cautious about the use of transport statistics as some modal data is not compatible. Some elements are declining, notably travel by car – which has been falling for several years both in terms of number of trips and distance travelled. This has not just been because of the recession (although a reduction in commuting has contributed) but appears to be a change to the previous long lasting trend of almost continuous steady growth. On the other hand, many trips by public transport (bus in London and some regional areas and rail) and cycling have increased and continue to do so, albeit more slowly in some cases, despite the recession. Freight traffic has decreased after a period of strong growth on all modes, with heavy goods vehicles declining more than light vans. Air travel seems closely linked to the economy. Intermodal container traffic on rail has grown although other rail freight markets have declined, in particular coal traffic following changes in the energy market. In 2010, international freight transport, in shipping and aviation is recovering, but the picture is mixed for rail and on the roads.

3 Alternatives to travel, particularly for business purposes, may have had some effect on recent trends, and are a very important way of increasing business activity and therefore GDP. However, it is vital that travel is not inhibited by nationally imposed restrictions or excessive taxation, otherwise the benefits of improved business contacts will be lost. Goods can be ordered over the internet, but then need to be delivered. Jobs can be set up by electronic communications, but then people need to get to work. International business, especially in the BRIC and similar emerging economies, needs face-to-face contact. Cultural contact cannot be experienced remotely.

4 The short term trends since 2006 do not necessarily show a change in the relationship between travel and GDP as some are directly in proportion. However, the decline in car travel appears to be a change in the both trips and distance relative to GDP. As car trips are around two thirds of all travel, this is significant. Public transport and cycling are also showing growth relative to GDP which may be a shift in the relationship.

5 Most of what Eddington said still applies since the concepts were not based on any particular rate of growth in the economy. However there is a danger that transport spending will increasingly be devoted to propping up less profitable transport operations rather than investing in connections for the future e.g. increased subsidy for services where patronage declines, rather than investing in connectivity for city regions, reliable journey times on long distance routes to support regional development (including tourism), and investment to support local economies.

6 While the relationship between economic growth and travel is one of cause and effect (in that order), the relationship between economic growth and transport spending is usually the other way around (i.e. transport spending leads to economic growth). Work done in Greater Manchester shows that the connection of areas of unemployment with job opportunities is a vital function for transport investment. However, sometimes the investment fails to deliver the expected gains or even to have perverse results if not properly planned. There is a lead and lag time between spending which may be of the order of five years on average, and it is certainly not the case that spending five or more years ago has led to the current downturn. Indeed, spending five years ago, coupled with a downturn in travel demand, has led to a reduction in congestion on most modes which means that recovery is for the time being not held back. But it would be a very bad mistake to impose a blanket restriction on investment now, as demand will rise in the next five years and congestion will then limit growth.

What type of transport spending should be prioritised, in the context of an overall spending reduction, in order best to support regional and national economic growth?

7 The policies of the Coalition Government clearly suggest the public sector alone must not be expected to shoulder the burden of transport spending either in capital or revenue terms. Public spending should therefore work with and create incentives for private investment. Where public investment in transport does not attract significant other investment, by people, businesses and investors it should generally be seen as a lower transport priority.

8 Economic growth is best supported by ensuring that those elements of travel which are related to GDP do not suffer from congestion and delay. This means that the networks should be provided with sufficient capacity or else managed to attract the most valuable traffic and deter the less important. Eddington’s foci remain the most important: inter-urban corridors, key gateways and congested urban areas where they are impacting journeys to work. However, Eddington paid little attention to regional interests (except to the extent that inter-regional links leading to international gateways were clearly considered priorities). In the current economic circumstances the consequences, inter alia, of Government actions may well create circumstances in which regions with high proportions of public sector jobs and skilled workforces will become more attractive for inward investment which may be facilitated by judicious improvements both to inter and intra-regional transport networks. This can be measured by Gross Value Added from raising the number of job and training opportunities accessible to deprived areas, which schemes can be prioritised.

9 Eddington drew particular attention to the need for correct economic pricing on all modes. He pointed out that, in the absence of correct pricing, a higher level of investment was needed to reduce congestion and overcrowding; and that strategies involving road pricing gave much higher rates of return. At a time when public sector funding is scarce it will be particularly important to make the best use of existing infrastructure and to get the pricing right, whether to give good value for money on publicly funded projects or to make them attractive to funding by the private sector.

10 The solutions should, of course, depend on the circumstances. Congested urban areas can be relieved by a range of options including better public transport, cycling and walking, but the movement of service and light freight vehicles is vital. The urgency of road improvements may be greatest in our regional towns. Inter urban corridors and gateways may be assisted to a limited extent by rail, but really require the road network to provide sufficient capacity, in particular the removal of bottlenecks. Pricing on both road and rail should be designed to spread demand to make efficient use of the available capacity throughout the day. Increased access to rail freight is needed for raw materials and finished goods, both imports and exports, but in a way that allows payment for use, rather than for a particular frequency of capacity. There are also many low, or nil, cost interventions related to information and integration which are often implemented within major schemes but which can be independent if the major scheme does not go ahead.

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

11 The long term aim should be to reduce the need for ongoing revenue support and where possible lock in sustainable economic and social business models for the delivery of transport. Working towards zero revenue funding could help the economy, for example by creating social markets for road maintenance and supported public transport. New transport markets are a potential growth area for the UK as large integrated transport companies will increasingly grow their markets overseas.

12 In the shorter term, if transport capacity remains the obstacle to economic growth (as it is in the case of inter-urban roads, rail and air transport and congested periods in urban areas) then capital expenditure to create new capacity should be considered and may take priority over revenue expenditure on subsidising travel. While revenue expenditure can be related to actual use (for maintenance or subsidy), properly targeted support can release productive capacity either more quickly or more efficiently. It is both more efficient and more effective to achieve mode shift by increasing the cost of the mode to be discouraged than to make the preferred mode cheaper. Studies have shown, for example, that cheaper bus fares attract additional passengers who did not previously travel at all, or made shorter journeys on foot and that a relatively small proportion of the increase comes from former car drivers and passengers. Conversely, when the congestion charge was introduced in central London, many of the people who stopped driving in by car switched to bus assisted by the increased levels of services introduced concurrently. It is instructive that transfer to already congested Underground and, to a lesser extent, suburban train services was proportionately rather less than expected.

13 Overall there is an opportunity, which sadly the urgency of Government inspired cuts may be ignoring, to reassess the conventional wisdom that capital investment is always to be preferred to revenue expenditure. Both will always be required – just as there comes a point where complete replacement of an asset is more efficient than further maintenance, so there are instances where revenue support to bolster services (for example in passenger rail routes parallel to major highways or in congested urban areas) may be more efficient than capital investment.

Are the current methods for assessing proposed transport schemes satisfactory?

14 The case for change in transport economic appraisal was made strongly by SACTRA in 1999 and again by Eddington in 2006. We responded to the NATA Refresh consultation but the current changes being proposed by DfT do not go far enough. Summating small time savings on the part of many individuals over a long period does not give a clear indication of a scheme's value to the economy in terms of usable benefit, or actually facilitating better connection of people to jobs. The dialogue about wider economic benefits (including tourism), agglomeration, and social and distributional impacts has become far too complex, partly due to lack of clarity and or consensus about how social and economic value is or should be incorporated in value of travel time. It is fair to say that virtually nobody is able to defend the current approach with all parties citing important changes as necessary.

15 To ensure a practical short term solution, one of our key responses to the DaSTS initiative was that some schemes are so obviously either good or bad that they do not need a high level of sophisticated calculation to measure them. If a proposal produces excellent financial returns on the investment, whether by private or public sector, and contributes to environmental and social benefits, then professional time should be spent on fund assembly and tackling barriers to delivery rather than the pseudo-science of economic appraisal. Appraisals should always note the limitations of the data, in particular whether it is available in comparable form between modes.

16 For more complex business cases the broad level sifting of investment opportunities will assist in prioritising appraisal resources at resolving the uncertainties being highlighted in the appraisal debate. In this debate, there is a need to a wider perspective to look at national benefits. For example, the wider use of smartcards will have benefits but this cannot be assessed by looking at the effects in one region alone. A back office serving a number of smartcard operations will be considerably more efficient than a number of smaller operations.

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

17 The demise of regional spatial strategies, and with it regional transport strategies, creates a major gap in the development and delivery of non-local transport schemes and this needs to be filled. The alternative is that nothing will get done and economic, environmental and social conditions will get worse because travelling becomes more dispiriting.

18 It is important at a national level that Central Government should continue with the preparation of National Policy Statements as an overview and direction for the delivery of major transport infrastructure (airports, sea ports, national road and rail networks) so that infrastructure of national importance can be provided even in instances where the local communities find it difficult to accept.

19 A particular example of this is the need for a national policy statement on the provision for intermodal freight. There is a clear case for facilities that provide for better and more road/rail interchange points that would enable more long- haul freight to be handled by rail. There have been a number of recent planning applications that have been refused in the South East. Such developments, carefully located, would fit in with a national strategy that calls for better connectivity and this should be recognised through national guidance so that they could be given proper weighting in planning decisions.

20 The devolved administrations and London have considerable freedom to decide their transport priorities but they are dependent to a large extent on funding allocated by the UK Government. The relatively better performance on transport investment in each case is arguably because planning and transport investment decisions and the relationships between them are better understood by smaller administrations and executives responsible for their own regional issues and the correspondingly shorter decision chains. Examples of this in Scotland are the ability to undertake investments to re-open rail lines for passenger use.

21 In England, local government can decide their own priorities for local transport, be they those related to economic growth as identified by Eddington, or through other ways, such as rural transport for social progress. Local authorities, working through local economic partnerships, can collaborate in preparing sub- regional strategies, as is being proposed in a number of areas such as the West Midlands and the Yorkshire City Regions. These local economic partnerships are new and untested and particular local authorities may find it difficult to resolve conflicts between different parts of an area, especially where one has to accept a disadvantage for the benefit of the wider sub-region. The nature of these new partnerships geographically means that some transport issues which extend across administrative boundaries will remain unresolved. From a transport point of view the abolition of spatial strategies covering the whole of a travel-to-work area threatens to remove a way of solving transport problems through land use and transport planning policies operating together. This seems a retrograde step, economically, environmentally and socially. Similarly the abolition of the Government Offices for the English Regions threatens to delay decision making both through increasing the workload centrally and removing local professional knowledge and advice.

22 Localism is likely to be beneficial for local transport issues, but will cause delay, prevarication and sub optimal scheme design for nationally important transport infrastructure. Decisions on national transport infrastructure must remain with national authorities, with local inputs only where the balance of national benefits is outweighed.

September 2010

Memorandum from the Local Government Technical Advisers Group (TAG) (TE 19)

1. Summary

1.1 TAG has given written and oral evidence to a number of House of Commons Transport Committee inquiries and also responses to consultations by Government/The Department for Transport and the Eddington study itself. We have included with this evidence a few of the most pertinent submissions to give further explanation to our submission outlined below.

1.2 The threads running through our evidence are that: • Transport expenditure for the economy, environmental or carbon reduction reasons needs to be directed towards policy objectives in an integrated way. • We have been concerned that for many years that transport expenditure is far too closely assessed on the basis of somewhat spurious cost benefit analysis; we believe it needs to be directed much more towards delivering agreed policy outcomes. • The balance needs to be shifted from capital (infrastructure) towards revenue and from big schemes towards smaller not least to make the best use of our considerable UK infrastructure. • Road and public transport congestion and particularly reliability are important issues, but these are unlikely to be solved by major infrastructure investment and can often be exacerbated by adding road capacity. • The future transport solutions are likely to lie in more electronic communications, smarter choices, public transport improvements and incentives to companies and individuals to change behaviour.

2. Introduction

2.1 In our covering letter we thank the House of Commons Transport Committee for the invitation to submit evidence and we would be very pleased if asked to appear before the Committee to give further evidence and answer any questions. Although we have been before to Committee on several occasions on a wide range of issues, in the covering letter we also describe TAG’s role, membership and expertise. Of particular relevance, we last appeared before this committee on The Major Road inquiry. that appears to lead up to this presently convened inquiry.

2.2 We would also draw attention to submissions we have made to the Eddington Inquiry and the Department for Transport over the past few years on a number of issues that are highly relevant to the present inquiry. For information and further background we believe it may be helpful to the committee, even at this relatively early stage, to have copies of some of the previous submissions made by TAG. These are:

i. TAG submission to the Eddington Inquiry made in January 2006. ii. Our very recent submission to the magazine The Surveyor, in response to their request on how best to meet the fiscal situation for transport expenditure generally. iii. Our submission to the Department for Transport on their NATA Refresh review of scheme appraisal. iv. TAG response to Government Consultation On Delivering A Sustainable Transport System (DaSTS) v. Press notice and letter on strategic planning to Eric Pickles by RTPI and 28 other bodies including TAG.

2.3 We are aware of the government’s response to your latest Major Roads Inquiry and it appears to us that to some extent this government response seeks a view from the House of Commons Transport Committee on how priorities should be changed in view of the latest fiscal situation.

3. General comments relating to this inquiry

3.1 There are some areas which are highly relevant to this latest inquiry but would appear at first sight not to be linked to the issues to be addressed.

3.2 The most important of these is the issue of the effective management of total traffic on the road network. We believe TAG and the House of Commons Transport Committee are at one that this is a fundamental part of the policy before any roads priority or assessments or investment are even considered. Road pricing and congestion charging have been supported by TAG for many years, and our reading of your past reports and indeed Eddington stress this is a fundamental issue or a ‘no- brainer’. We also note that this whole subject area has been addressed by yourselves.

3.3 In some areas road pricing or congestion charging would not necessarily produce the best or most cost effective traffic result for the local economy; effective management of all parking, including removing the tax subsidy to workplace parking, that presently exists and is not available for those using sustainable transport, is another powerful tool.

3.4 Supporting policies on land use, sustainable transport, integrating all modes of transport and delivery of effective public transport are also fundamental to the subject of Transport and the Economy. Relating to these, we await the outcome of the Competition Commission revue of bus services and how government might get more effective public transport for the level of public expenditure that is made in this area. Also, in any cuts or rationalisation of other services (e.g. health and education), it is important that savings in such services do not result in additional burdens on the transport systems or make access to such services more difficult for certain sectors of the population.

3.5 Another area that might not at first appear relevant to this study, but is also fundamental is the sustainability issue dealt with so well by the Stern Inquiry. On Stern it is interesting to note that he recommends that strong action to reduce emissions must be viewed as an ‘investment’. Stern also stressed that the economic costs of inaction on C02 are far greater than the economic costs of continuing as normal. While there is much talk about ‘Peak Oil’, he did appear to imply that there was an abundant supply of fossil fuels and if all were to be used the damage to the planet could be catastrophic. He stressed the importance of consistent policies on carbon change and the dangers of over investment in long lived high carbon infrastructure.

3.6 TAG fully accepts that a good transport system is a precondition of long term economic growth of any country, however within the densely developed areas of Britain there is a real danger that excess or hyper-mobility will or is already damaging the economy and long term future of the U.K. This is both from excess congestion and more C02 and other pollutants than the U.K. and the world can handle. With the advent of IT to assist tele and video conferencing and working from home, electronic modes of communication can take some of the role of physical transport and could indeed lead to a reduction in the need for the present level of infrastructure, and in particular road infrastructure.

3.7 Our understanding of the Eddington report was that the worst congestion problems existed in urban areas - as we all know these can only really be resolved by a reduction in traffic volumes and not by road construction. Public transport, sustainable modes and road pricing (by publicly acceptable means) are key to reducing urban congestion. With lower volumes of traffic required to meet the economic requirements of urban areas there is indeed some pressure removed from the inter-urban road network. A significant part of the traffic on the inter-urban road network is long distance commuting into the urban areas; the removal of some of this traffic could reduce the need for inter-urban road enlargements as well.

3.8 Connections and support of freight movement generally are perhaps key to the economy. However at present road freight transport does not pay its full costs for the damage it causes to the road system; furthermore the present extent of road network available also encourages unnecessary traffic. In our submission to Eddington we pointed out that some low value items such as potatoes grown in were being packed in Somerset, this does not sound like a sensible use of the transport system. While connection to ports and international trade is extremely important, there should be some scope to remove some unnecessary freight traffic; therefore the third area of road congestion problems on routes to ports might be solved by a reduction in car commuting traffic and removal of low value added freight movements.

3.9 TAG does recognise that there is still a need for some road construction particularly to access potential new economic areas, opening up brown field sites for new industry etc. There are also some peripheral areas of Britain that need to be inter-connected to support the local economies; however there is a danger when providing extra road capacity from a weaker area to a stronger area that an improved transport system actually damages the weaker area. The key issue is to de-link economic wellbeing from transport; there is already evidence that this is happening in parts of the country and can go further.

4. Responses to the questions raised by the House of Commons Transport Committee.

1. Have the U.K.’s economic conditions materially changed since the Eddington Transport Study and, if so, does this affect the relationship between transport spending and U.K. economic growth?

4.1.1 The U.K.’s economic conditions have materially changed since 2006-7. We have had the world recession promoted from the banking industry which appears we are coming out of. However it has left a large public debt and we understand the present fiscal priorities (as described in the Department for Transport’s response on the Major Road Inquiry), mean that large scale investment or spending on transport has to be cut substantially. This situation stresses even more the importance of making the best use of our existing assets and therefore increases the importance of measures to limit traffic volumes (including congestion charging/road pricing – so strongly recommended by Eddington), maintenance and anything that moves people and goods more economically and with less infrastructure.

4.1.2 TAG’s submissions to Eddington, on road pricing to the previous House of Commons Transport Committee, on the Government’s consultation on Delivering A Sustainable Transport System (DaSTS) (as attached) and indeed on many other consultations and inquiries including Local Transport Planning Process and funding of schemes are all highly relevant and have gained in importance.

4.1.3 The net result we believe means that we need to maintain and expand expenditure on maintenance, on smarter choices, on public transport and small scale schemes. We also need to reduce wherever possible overheads on providing these essential services by reducing the intense complexity of the bureaucratic systems and one obvious candidate is the assessment of schemes and Local Transport Plans. This is discussed further under point 4 below and in our submission to The NATA Refresh process as attached.

2. What type of transport spending should be prioritised, in the context of overall spending reduction, in order best to support regional and national growth?

4.2.1 As stated above we believe that economic growth can be fostered with less reliance on transport movement and more reliance on IT, local movement in urban areas, particularly by sustainable modes, and by some small scale road construction to open up potential growth areas. However an absolute fundamental is reducing the total amount of traffic on the road network to release space for essential traffic, particularly by reducing long distance car commuters and less necessary freight traffic.

4.2.2 The priorities for transport spending should be probably safety, before anything else, followed by road (and other infrastructure) maintenance, smarter choices, public transport, cycle and other small scale schemes. Such a strategy will provide for essential traffic supporting economic growth without further major construction and best support regional and national economic growth. Our attached submission to The Surveyor magazine gives further explanation on this.

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

4.3.1 TAG has commented frequently that more funding is needed for revenue expenditure including those items just mentioned, e.g. safety, maintenance, smarter choices. While it is possible to classify major maintenance and to some extent planned maintenance as capital, earlier and regular interventions are far more cost effective. As these are normally considered as revenue it supports the argument that spending should be moved significantly towards revenue and away from capital.

4.3.2 Other priorities we have identified such as Smarter Choices and public transport also require predominantly revenue expenditure to make full use of existing capital assets. Furthermore, as mentioned above, Stern considered that spending to reduce CO2 should be considered as an investment (in the future). In principle we should not be investing in more capital unless we can maintain and look after and properly use our present capital assets.

4. Are the current methods for assessing proposed transport schemes satisfactory?

4.4.1 In a word, no!

4.4.2 TAG has been critical for many years over the importance given to the so- called cost / benefit ratio as part of the assessment of any individual scheme and particularly major road schemes. There have been substantial failures in the present methods to deliver schemes that meet agreed objectives of either central or local government. The cost / benefit ratio, which is largely based on time savings for peak hour car traffic, is given a very large weighting in the assessment of schemes; furthermore much of the so called benefits in the calculations appear from periods well in the future when modelling is even less reliable than earlier on.

4.4.3 Our submission to NATA Refresh (as attached) is probably still just as relevant today although we understand that some of the issues are now been tackled, e.g. that there was a benefit from burning more carbon in the calculations! While TAG in principle agrees with the original five points of NATA as a basis for assessment these being:- • Integration – ensuring that all decisions are taken in the context of our integrated transport policy; • Safety – to improve safety for all road users; • Economy – supporting sustainable economic activity in appropriate locations and getting good value for money; • Environmental Impact – protecting the built and natural environment; • Accessibility – improving access to every day facilities for those without a car and reducing community severance” the weight given to the fallacious economic assessment (which should perhaps only be a small part of the third bullet point above) effectively takes over in the assessment of almost all major road and many other schemes.

4.4.4 The complexities and lack of understanding of how the benefits accrue in the calculations is totally opaque to all but specialists. The work involved in the assessment of schemes, many of which are very unlikely to see the light of day, uses up substantial resources that could be better spent delivering small scale traffic schemes, bus priorities, or the revenue expenditure required for smarter choices. Furthermore each revision to the methodology appears to generate even more work and less realism in the resulting figures. It also removes from politicians, local or national, the ability to query what are the real advantages and disadvantages of the schemes.

4.4.5 That said we recognise that the Treasury would like to know it is getting good value for money. Making local people more responsible for their expenditure by handing more of the budget over to local authorities and regional bodies would ensure that this is more likely to be achieved rather than the present system of bidding for Central Government funds by ever more large scale analysis, which is largely meaningless. There is a substantial industry in chasing funding which is an unnecessary overhead.

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

4.4.6 TAG has joined with a number of other bodies in a submission to Secretary of State Eric Pickles on possibilities to replace the regional strategies (as item 5 attached).

4.4.7 One of the problems of transport is peripheral areas. Regional prioritisation will obviously remove the peripheral areas between each local authority, and so give a more consistent transport picture across a larger area. It is also necessary to have joined up networks, which can only really be delivered by organisations at a higher level. At present we are not convinced that Department for Transport head office or for the countries of the U.K. have necessary abilities to co-ordinate the activities of several hundred local areas, however whatever areas and administration systems are set up there will always be peripheral areas that need a co-ordinated approach and indeed some of our members from outlying areas (eg the north east, the west country and the north west) report that the transport investment in such areas does not meet the needs as well as others.

September 2010 Memorandum from Rail Freight Group (TE 20)

1. Rail Freight Group is pleased to submit evidence to the Transport Committee’s Inquiry into Transport and the Economy.

2. RFG is the representative body for rail freight in the UK. Our aim is to grow the volume of rail freight where it is economically and environmentally sound to do so. We represent around 120 member companies operating in all sectors of rail freight, from train operators, ports and shipping lines to customers and suppliers.

3. RFG recognises that control of public finances is the top priority of the Coalition Government. This has implications across all areas of transport as spending is reduced or cut. However, the Government has also indicated that it remains committed to carbon reduction and its policies and actions must also therefore be aligned to that objective as well.

4. The Department for Transport has yet to clarify how it will continue to support rail freight after the impacts of the spending review are known and understood. For example, will its advocacy role continue, will the lorry charging scheme support modal shift and how will any restructure/break up of Network Rail impact on rail freight? Government’s actions in these areas have as much potential impact as the spending cuts themselves, and we hope that the findings of this Inquiry will help DfT to prioritise its actions accordingly. A lack of funds does not need to mean a lack of interest.

Rail Freight and the Economy

5. Rail freight makes an acknowledged contribution to the economy. Data released by Network Rail indicates that rail freight directly contributes some £870m to the economy but actually supports an output of £5.9bn, some six times its direct turnover.

6. Since privatisation, rail freight has been transformed into a competitive and efficient operation. There are now 5 operators in the UK, and customers have a real choice of rail haulier. Private sector terminals are opening, offering additional choice, and the major ports are also improving their rail freight offerings.

7. The sector has also become more efficient, achieving real unit cost savings of some 30%. This has come from managerial changes and reductions, investing in new equipment and technologies, and from ‘sweating the assets’. The ability to run longer, and higher gauge trains on certain routes has also helped increase efficiency.

8. As a consequence of these changes, rail freight has grown some 60% overall since privatisation. In the last two years, through the recession, rail freight volumes overall have fallen. However, a more detailed assessment of the data shows that, whilst the traditional bulk sectors have fared badly – coal in particular has been severely affected – the newer non bulk sectors have continued to grow year on year. In particular the movement of containerised goods from the major ports and between UK cities has increased year on year for the past 7 years, and has grown by 63% (tonne-km) over that period. The volumes of intermodal goods on rail is now comparable to the volume of coal on rail.

9. This suggests that rail freight is now adapting well to the change in the UK economy from production to import, and is equipping itself to address the challenges of this sector. However, ongoing Government support is vital if this success is to continue.

Have Economic Conditions Changed Since Eddington?

10. Clearly, since the Eddington report was published, the UK has suffered a major recession, and, whilst it appears that the economy is recovering to some extent, the impact of spending cuts has yet to have its full impact. The recession has clearly had an impact on all transport sectors; port volumes fell, road haulage volumes fell and overall road congestion dipped somewhat. It is therefore likely that the data behind the Eddington study now appears outdated.

11. However, whilst the absolute levels of traffic may have differed, the trends have remained unchanged. This suggests that the priority areas highlighted by Eddington – urban areas, key interurban corridors and international gateways are still valid. For rail freight, the links between the major ports and UK cities and between those cities themselves have been demonstrated to be the growth areas, and align well with Eddington’s analysis.

12. Eddington highlighted the need to consider small scale, as well as large interventions, and as funding is reduced, this strategy will need to continue to be applied. In the rail sector there are numerous small scale interventions which can generate capacity, such as increasing services overnight and at weekends, small scale enhancements on top of renewals and minor signalling modifications to permit longer freight trains to operate. Such types of measures will help growth to continue throughout a period of austerity.

What type of spending should be prioritised?

13. Government has been clear that, alongside its fiscal priorities, reducing carbon and promoting sustainable transport is also key. We therefore consider that the extent of carbon reduction should be a major consideration in deciding transport priorities.

14. In Philip Hammonds speech to the IBM Start Conference on 10 September, he emphasised his commitment to sustainability. For passenger transport, he indicated that the move to electric cars was the key way that carbon reduction was to be achieved in the UK. However he did not mention freight. The electric HGV has not yet been developed and is likely to be many decades away, if feasible at all. Technologies such as improved aerodynamics have a place but the contribution is modest. It is therefore clear that rail freight must continue to have a place in low carbon freight transport. We would therefore expect to see DfT’s spending priorities recognise this.

15. Whilst we are not opposed to High Speed Rail, we remain sceptical about the benefits that might accrue to rail freight. A much stronger commitment will be necessary on the use of any released capacity for rail freight, and a physical link to HS1 for intercontinental services will also be necessary if the route is to support rail freight.

16. We are also concerned that DfT is seeking to prioritise spending on a major restructuring of Network Rail. Whilst we understand Government’s frustration at the company, any change needs to protect the needs of the national operators, including freight operators. We would expect that the Government would have to provide strong evidence in support of change, since any such alteration to the structure of the railway would certainly cost a lot of money in the short term. Changing Network Rail’s governance and working practices might well be a more fruitful means of cutting costs and could achieve the coalition’s manifesto commitments of making the company more accountable to its stakeholders. It could be done without legislation provided the company and its members agreed.

17. Whatever changes are proposed, it is vital that there is, as a minimum, a national body responsible for timetabling, access, charges, capacity reservation, co-ordination of engineering work, performance regimes and possession planning as well as safety. If restructuring is to proceed we would favour lower cost solutions – such as regional cost centres – which help meet ORR and DfT objectives but protect freight services.

Balance between Revenue and Capital

18. For rail freight, the cost of capital equipment has historically been a major issue in developing new rail freight services. This has been particularly true in, for example, the construction sector, where the high capital costs of discharging equipment for rail have been difficult for the sector to bear. In the past, freight facilities grant was often used to help meet this cost.

19. In the intermodal and domestic sectors, capital costs are still high. However there are some differences. Equipment is more standardised and some, like containers, can be used by different transport modes. Handling equipment can be selected for the size of operation, from small facilities using container lift or reach stacker to large facilities using cranes. Linking intermodal facilities with other services such as warehousing also reduces overall transport costs. Many developers have investment funds available for such facilities subject to a supportive planning regime (see below). So, in the growth sectors, the need for Government investment in capital equipment is likely to be less than previously if the conditions are right for private sector investment. This means that presently the intermodal sector needs revenue support ahead of capital support at present.

20. That said, there remains a need to ensure that the rail network supports an efficient rail freight sector. The current programme of work anticipated to support the Strategic Freight Network in CP4 is of course at threat from spending cuts and we have yet to see which schemes remain. However we would consider capital schemes which increase efficiency, such as gauge clearance and train lengthening should remain priorities.

21. Aside from investment, we consider that Government must act in support of rail freight efficiencies, for example, by supporting the development of innovate wagon types, and ensuring that efficient freight operations are possible in any restructured rail network. Measures such as longer lorries, which undermine the economics of rail freight should also be resisted.

22. Capital investment, and support for efficiency measures are key because as rail freight efficiencies grow, and cost comparability with alternative modes improves, the need for rail freight revenue support will reduce. Over the last 7 years, intermodal rail freight has grown by some 63% but the revenue support budget has remained largely unchanged at around £20m per annum. This clearly indicates how the revenue support, whilst still vital, is reducing in real terms. Government should be supporting the industry in reducing further its need for revenue grant, through investing, or helping others to invest.

Assessment Methods

23. At the highest level, we consider that the assessment measures used for Government investment and transport schemes in particular must ensure that priority is given to schemes which deliver Government priorities. The new Ministers at DfT have indicated on several occasions that their key priorities are deficit reduction, and carbon reduction. We would therefore expect the assessment techniques to align with this.

24. Presently, the assessment techniques do not give a particularly high weight to carbon. For example, schemes which have a negative overall carbon impact can still have high priority if they deliver (for example) significant journey time savings. We would suggest that a much higher weight should be given to carbon reduction targets.

25. In mode shift benefit rates used by DfT in assessing rail freight schemes, removing a lorry from 1 mile of congested motorway is assumed to be worth £1 in congestion relief, but only 3p in carbon reduction. 34p is also removed from the benefits for the taxation loss from reduced road fuel. It is therefore clear that DfT value the taxation loss 10x more than the carbon reduction.

26. We are concerned to ensure that DfT does not focus solely on the carbon benefits of electric cars to deliver its share of carbon reduction targets. The movement of freight makes up some 30% of all transport emissions and cannot be neglected in policy and in appraisal.

Planning

27. The proposed reform of the planning system is causing concern in the rail freight sector as it appears likely that gaining planning permission for rail freight interchanges is likely to become considerably more challenging even than previously. To grow, rail freight will need more, modern terminals and an increase in rail linked warehousing. The analogy is that High Speed 2 will not be a success if no stations are to be built.

28. Major interchanges over 60Ha presently come under the Infrastructure Planning Commission. The proposed changes to the Commission are unlikely to be particularly problematic, although there are concerns over the criteria that Ministers will apply to decision making once an inspector has concluded.

29. However we have yet to see even a draft version of the National Policy Statement for National Networks, which will be a key document in determining how rail freight interchanges will be assessed. The document will need to be clear in setting out the national and sub national need for such facilities, and the criteria which should apply. The document should seek to balance local needs with the national need and not be dominated by the localism agenda. We would also be very concerned if there were any attempt to increase the threshold for consideration of interchanges.

30. As well as the larger facilities, there are also many developments which fall below the threshold of the IPC. The abolition of regional strategies is unhelpful for such sites, as they had previously helped to balance the local issues and regional benefits and need. We consider that Local Enterprise Partnerships must be empowered to support the development of such facilities.

31. Overall therefore, rail freight needs the planning system to include;

a. A strong National Policy Statement with clear guidance on the national and regional need for rail freight terminals;

b. A clear role for National Policy Statements in the planning process for schemes below the threshold level;

c. The ‘duty to co-operate’ requirement on local authorities extended to clarify the areas which must be covered by such co-operation and the outputs which are expected;

d. Clarity on the legal status of documents produced by Local Enterprise Partnerships in consideration of planning applications;

e. Incentives given to Local Authorities to plan for ‘unpopular’ developments such as rail freight terminals in their areas, akin to the recent announcement of incentives for house building.

September 2010

Memorandum from Roger Vickerman (TE 21)

Problems in identifying the wider benefits of transport

1. Introduction – the issues 1.1 Transport as a determinant of land use and economic development has been the subject of much controversy. What have become known as wider economic benefits (WEBs) or, to reflect the fact that there may also be negative net effects, wider economic impacts (WEIs), continue to provide difficulties on both theoretical and empirical grounds and hence there is no clear guidance for their use in appraisal. 1.2 Formal appraisal techniques tend either to exclude the possibility of wider economic impacts, largely because of the fear of double counting, or simply include an arbitrary add on. The fear of double counting is a major issue in the appraisal literature. But frequently there is pressure from promoters facing an inconclusive benefit‐cost analysis to recognise that some of the indirect effects of a project could have been omitted. 1.3 Recent research has improved our understanding of the way in which accessibility affects the performance of firms, the public sector and labour markets. In imperfect markets reduced transport costs can have differential impacts on different sectors and different regions. These could also impact on the public sector’s ability to maintain or develop services in those regions as there may be an impact on the tax base. Transport improvements may affect the labour market, leading to widening catchment areas and allowing workers to move to higher productivity jobs, leading to agglomeration impacts which go beyond the simple sum of the benefits to individual firms. 1.4 The conceptual and theoretical arguments have advanced, but the empirical evidence remains problematic. Both the SACTRA Report in 1999 and the Eddington Report in 2006 found it difficult to give precise guidance on this at both national and regional/local level. This is in part because there is no a priori relationship between transport improvements and their consequences for the economy. It is difficult to determine whether the link between better accessibility and economic performance runs from accessibility to performance or vice versa. There are conflicts between estimates based on different methodologies. The interrelationships and spillovers between different areas could have major impacts – transport improvements in one area can either enhance or detract from economic performance in other areas. 1.5 This has important policy implications. Underinvestment in transport infrastructure as a result of the failure to include any WEIs could lead to lower growth and congestion in affected areas. On the other hand overinvestment as a result of including assumed WEIs which do not exists could lead to problems for public budgets and negative externalities associated with over expansion. The former may occur if one jurisdiction tries to leave it to others to invest so it can benefit from spillovers, the latter where regions are competing with each other to attract mobile investment by enhancing local accessibility. Hence there are implications for the most appropriate level at which to implement transport policy.

2. Implications for appraisal 2.1 The first stage is to improve the application of Cost‐Benefit Analysis (CBA) recognising the existence of externalities (such as environmental impacts) and imperfect competition (in the absence of perfect competition it cannot be assumed that changes in transport costs will be directly reflected in prices). 2.2 To take into account all the impacts on the wider economy appears to require a much larger modelling exercise such as the use of computable general equilibrium (CGE) models. These have been used in a variety of studies, but are very dependent on assumptions made about the parameters used; small changes can lead to significant swings in the overall conclusion. 2.3 There are issues about the appropriate geographical scale of analysis. How large an area is affected by a scheme? Are there spillovers? Are the gains to one region at the expense of another or is there a real net gain? 2.4 Most appraisal is carried out on single schemes, but these are usually links in a wider network; the creation of a new link will affect, and be affected by, conditions on other links on the network and decisions about the programming of investments will affect the valuation of any one investment in that programme. 2.5 Too much emphasis may have been placed on the appraisal of new infrastructure investments to the exclusion of upgrade investments or service level improvements; are there similar levels of gains to be found? 2.6 There may be effective ways of making progress without large scale modelling. A development of the Economic Impact Report to focus on identifying where the issues identified above may arise could pose the questions: • Are there increasing returns or imperfect competition in the region under study? • Do these differ by industry? • What is the relative importance of transport costs in inputs or outputs for that industry? • Will the change in transport costs affect this relationship – i.e. will it increase competition from regions with established advantages or enable economically more peripheral regions to compete more effectively?

3. Implications for policy 3.1 The overriding implication is that simple rules can be dangerous, especially simple rules derived from complex models. • Investment in transport can seriously damage the health of an economy by changing competitive structures in a region and exposing it to more competitive regions elsewhere. • But a failure to invest in transport can be just as damaging by not allowing a region’s enterprises to compete effectively with other regions. • There is no simple a priori rule for knowing into which category a region will fall, and indeed that category may differ for different investments. • Transport policy has to be able to explore carefully the transport needs of a region’s economy rather than making the assumption that all increases in speed and reductions in transport costs are bound to have positive effects. 3.2 Traditional methods of appraisal, depending on complex transport planning models and what may seem to be obscure evaluations of the benefits of time savings and accident reduction, may be insufficiently transparent to be clearly understood by all stakeholders. This makes their conclusions difficult to challenge in any constructive manner. 3.3 This reflects problems with the levels of decision making. Spillovers between areas make it difficult for a single jurisdiction to coincide with the area receiving most benefits, the area incurring most costs and the area providing most of the finance. Where policy is established by higher level jurisdictions but implemented at lower levels there is scope for policy refraction. 3.4 Competition between different policy‐making authorities can lead to bias in investments where excessive competition leads to over‐investment in non‐viable competing facilities such as under‐ used regional airports, or the fear of competition to reluctance to fund investments where the benefits may accrue to neighbouring regions leads to under‐investment and a sort of ‘race to the bottom’ effect.

4. Concluding remarks 4.1 The discussion has come full circle on the existence and importance of the wider benefits of transport projects, from “transport is critical to economic growth”, to “beware double counting, the user benefits will capture (almost) all impacts”, to “wider benefits are the key to understanding the real effects of transport investments”. We still have no universal response to the question “are there wider benefits of transport investments which are not captured in a simple CBA counting direct user benefits?”. The best we can say is “it depends”. However, recent research has taken us much closer to knowing what it depends on. We know that the impacts can be negative as well as positive. We know that they will vary from region to region and project to project and we know what to look for as indicators of possible sign and magnitude. 4.2 There remains much on the research agenda: • We need more empirical evidence on the effect of imperfect competition and the productivity gains from transport. • More needs to be done on assembling micro‐behavioural evidence; on link versus network effects and on spillovers and jurisdictional competition. • We need evidence from more ex post studies, have transport investments really made the difference claimed?

Roger Vickerman is from the Centre for European, Regional and Transport Economics, University of Kent

September 2010

Memorandum from the UK Major Ports Group (TE 22)

1. Summary The UK Major Ports Group welcomes the Transport Committee’s decision to set up a new inquiry into transport and the economy. It is our strong view that good transport infrastructure plays a vital role in the development of the UK’s economy. While ports themselves are financed through private investment and do not seek any financial help from the taxpayer, road and rail links to and from ports are rightfully part of the publicly financed national transport infrastructure system. The importance of these international gateways was recognised in the Eddington report and schemes to enhance capacity and remove bottlenecks should continue to receive priority within what will inevitably be a constrained Department for Transport spending programme. Our strong view is that continued investment in connections to ports will promote economic recovery, not hinder it.

2. Analysis UKMPG is one of two associations representing ports in the UK. Our 9 member groups handle over 70 percent of the UK’s international trade by volume, and therefore play a significant role in supporting the UK economy and promoting exports. UK ports are privately financed and do not seek any financial help from the taxpayer. Annual investment in upgrading and developing port facilities has been running at £200-300m per year and this will increase as several large development projects (which have already received planning approval) are taken forward.

3. The ports sector gave a strong welcome to the Transport Study by Sir Rod Eddington published in December 2006. We were particularly pleased to see the report’s recognition that, given the international nature of the UK’s economy, good links to international gateways such as ports were crucially important, offered a high rate of return and should be a priority area for future DfT investment. We were also pleased that the previous Government acted quickly to implement Eddington’s findings through: − setting up a new streamlined planning system for major infrastructure projects through the provisions of the Planning Act 2008; − putting major ports at the centre of the strategic transport corridors set out in the white paper “Delivering a Sustainable Transport System”, published in November 2008; − bringing forward several major road and rail projects improving links to ports under the Transport Innovation Fund, Strategic Freight Network and accelerated Highways Agency programmes.

4. In 2008 the independent consultants Oxford Economics carried out an assessment of the economic importance of ports as part of a wider review of the UK maritime sector. Their main conclusions based on 2007 data were that - Ports directly employ over 130k people and support a further 230k jobs - Ports directly contribute around £8bn to UK GDP and indirectly generate a further £10bn - There are further unquantifiable benefits for instance enabling other sectors such as fishing, marine aggregate dredging and offshore oil and gas to operate as well as supporting a number of industries based on or near port estates.

5. UKMPG considers that despite the recent economic downturn, the economic realities addressed in the Eddington and Oxford Economics reports have not changed. The UK continues to be an economy which is more dependent than most on international trade and ports remain central nodal points in that process. Indeed, any rebalancing of the economy away from finance and services to the export of manufactured goods would increase the role played by ports. Secondly, in an increasingly carbon conscious world, ports are key players in facilitating the use of the most carbon-efficient transport modes, i.e. water and rail (over 50% of UK rail freight now starts or finishes at a port). Ports are also important in the development of renewable energy, particularly offshore wind and biomass.

6. It is our strong hope that the new coalition Government will continue to pursue Eddington principles in reaching difficult decisions on the future allocation of public expenditure. The private sector has shown confidence in the future of the UK ports sector, with a major expansion of the UK’s largest container port, Felixstowe, now well advanced and initial development of a large new port on the Thames at London Gateway now underway. The Government should demonstrate similar confidence. Port-related road and rail schemes tend to score highly in economic appraisal terms even though the methodology used in DfT’s NATA (New Approach to Transport Appraisal) methodology does not yet take sufficient account of the additional value generated by international traffic movements. We trust that NATA will continue to be the basis for scheme appraisal and that economically important freight projects will not lose out to more politically attractive though economically less worthwhile schemes.

7. UKMPG notes that as part of the Government’s localism agenda, regional spatial strategies are being abolished and Regional Development Agencies are to be replaced by local enterprise partnerships. We look to the Government to ensure that economic priorities are secured through the successor arrangements and that improving local road network links to ports will continue to be an investment priority (including a commitment that transport infrastructure improvements will be a priority area for the new Regional Growth Fund). For their part, ports will continue to work closely with local authorities and other key stakeholders so that there is a good overall understanding of ports’ future development plans, bearing in mind the need to react quickly to changing market circumstances. Port masterplans can have a role to play here, though in line with Government guidance it will be up to individual port authorities to determine whether in the light of local circumstances masterplanning represents a good use of time and resources.

8. At national strategic planning level, UKMPG ports will continue to work closely with Network Rail and the Highways Agency in preparing schemes designed to improve access to ports. National road and rail links to ports are rightly the responsibility of the state to finance (as is the practice in all other EU countries). Expecting ports to pick up part of the cost (other than for sections directly into ports which are for the exclusive use of port customers) simply adds to the cost of port development projects and reduces their comparative viability, making them less attractive to mobile international capital.

9. We also hope that the Government will take a positive approach to encouraging the development of coastal shipping, which has the potential to become as important a mode for commercial freight in the UK as the inland waterways network is for the transport of freight in continental Europe (with around a quarter of the port of Rotterdam’s traffic now being transhipped onto barges). Coastal shipping does of course have the benefit of requiring relatively low infrastructure investment compared with other transport modes and makes a positive contribution to reducing carbon consumption (because shipping is the most energy efficient way of moving goods) as well as reducing congestion on the hard pressed national road network.

10. Conclusion We hope that these considerations will be of use to the Committee in its investigation, and look forward to updating them as necessary when the results of the Government’s comprehensive spending review are published.

September 2010

Memorandum from TravelWatch NorthWest (TE 23)

1. Introduction

1.1 TravelWatch NorthWest (TWNW) is an independent Community Interest Company representing users of all forms of public transport in North West England. We are grateful for the opportunity to be able to comment on this consultation by the House of Commons Transport Committee. It is understood that there will be a further opportunity to comment on specific DfT financial responses to the Government’s Comprehensive Spending Review after this is published on 27/10/2010 and therefore the following is a general comment plus answers to the five questions posed by the Committee.

2. General Comment

2.1 We seriously question a transport projects policy which prioritises solely on a criteria of economic growth. It is essential to consider social and environmental factors1 in parallel.

2.2 When the seminal Eddington Report was published2 the perceived wisdom that good transport provision was a prerequisite of economic growth was rarely questioned. Earlier research however3 had already revealed the fragility of this presumption by demonstrating how some new transport infrastructures had the potential to actually disadvantage the economy of some of the locations they were intended to benefit. A sometimes unintended consequence has been that industry and labour can find it easier to migrate to more prosperous locations. Paradoxically, industry can also find it easier to supply from these more economically prosperous areas the regions originally intended to gain from the initial investment!

3. Specific Questions

(i) Has the UK economy changed since Eddington? If so does this effect the relationship between economic growth and transport spending?

3.1 The Eddington Report was written in December 2006 and thus pre-dated the global economic crisis of 2008.

3.2 The relationship between economic growth and transport spending is less clear in a recession, although, noticeably there has been a slight decline in car usage, both the number of trips and overall mileage. To provide an example of changing relationships, a pre Eddington investment on outputs such as new roads or supported public transport links between areas of relatively high unemployment and areas with labour shortages might have several benign, and often unintended, outcomes such as reducing -

• DWP’s unemployment benefit payments

1 “A New Deal for Transport” ODPM 1998 2 “Transport’s role in sustaining the UK’s productivity and competitiveness” Eddington Sir R. TSO December 2006 3 “Trunk Roads Assessment” Standing Advisory Committee on Trunk Road Assessment (SACTRA) Reports 1980 (HMSO) and 1999 (TSO) • NHS costs of treating illness and depression associated with unemployment and isolation • Crime rates.

3.3 As a further example, supporting a rural bus service can reduce the social and health costs of domiciliary or hospital care for elderly dependants by removing their isolation and facilitating their continued, and generally preferable, independent living4.

3.4 Recessions make it easier to show cross sector benefits. It is astonishing that such benefits (which are patently obvious) are generally not captured when prioritising initial proposals for transport investment. It is high time there was a universally recognised and mandatory mechanism for doing so. See also item 5 in the Bibliography – “Trunk Roads Assessment”.

(ii) What type of transport spending should be prioritised to best support Regional and National growth?

3.5 TWNW supports a number of committed major high cost transport investments in the NW such as the Manchester Hub, the expansion of Metrolink and HS2. It is regrettable that current circumstances are likely to constrain and/ or delay future spending on transport.

3.6 Aside from the big schemes there are a large number of low cost interventions which could have relatively high returns5 and which TWNW believes could be prioritised. These include many which have the potential to beneficially alter modal split.

3.7 Passengers value reliable and punctual public transport which makes it possible to predict travel time and to rely on making connections. They would also value Smart ticketing, ticket interavailability and through ticketing schemes which can remove the interchange penalties incurred when different operator’s buses and trains are used. Associated Park and Ride provision (including increased capacity at packed out rail station car parks), cycling and walking links are not only sustainable but are also cheap by comparison with high capital cost schemes. Investment in sustainable transport creates more direct/indirect employment than investment in less sustainable modes of transport and in roads6. Grants could for example be made available to support experimental taxi bus services7 in mainly, but not exclusively, rural areas. All these integration interventions for which TWNW has long campaigned8 and which often incur relatively little capital expenditure could well be prioritised.

3.8 The desperate shortage of suburban and inter Regional train rolling stock in the North of England is caused not only by a lack of capital investment but also by insufficient revenue support and by Train Operating Companies’ (TOCs) not being permitted to lease existing spare stock. The problem, which is arguably more acute than in the South East, could be addressed if TOCs were to be given longer franchises, more operating freedoms and

4 “Sustainability of Rural Transport Projects” Countryside Agency/Sheffield Hallam University 2004 5 One of the Campaign for Better Transport’s five principles - Rail Magazine 28/7/10 6 “Employment and sustainable transport” CBT August 2010 (commissioned by PTEG - Rail Magazine 28/7/10) 7 Enabled by the Local Transport Act 2008 and now to become a government pilot scheme in Rural areas. 8 “Integration – are we getting there?” Challis G and Fawcett P, RPC for NW England May 2003 realistic revenue support9. (TWNW is responding to the current DfT consultation on rail franchising.)

(iii) Should the balance between revenue and capital expenditure be altered?

3.9 The DfT has long preferred making capital grants to providing subsidy through more open ended and thus less controllable revenue support. The assumption behind programmes such as Kickstart, Urban and Rural Bus Challenge and Rural Transport Partnership Funding has been that these would pump prime innovative public transport initiatives so that they become commercially viable. This, however, rarely happens, and services become “at risk” once capital assets are fully depreciated and/or operating costs outstrip revenues.

3.10 Local Transport Authorities (LTAs) often suffer “innovation fatigue” from constantly having to amend services they are funded to support to make them somehow new and different and so able to benefit from this often applied but artificial criteria governing the continuation of services! What is needed instead is certainty of longer revenue support for unremunerative but socially desirable services in recognition of the fact that many of these never will be fully commercial.

3.11 The same arguments apply to rail, viz. that longer franchises would give Train Operating Companies (TOCs) an incentive to partner investment in the infrastucture they use and which is currently provided for them by Network Rail. (See response to previous question).

3.12 Local Transport Authorities have a duty to secure by tender those bus services which are unremunerative but socially desirable10.

3.13 In the present recession operators are deregistering more and more services previously believed to have been commercial and revenue support to continue these is increasingly difficult to provide. This is true in most rural areas and also more and more often in some urban and suburban areas. Evening and Sunday services are being lost for lack of revenue support11. If the cross sector benefits (including the benefits to LEAs of school buses) of these services could be captured many might be able to continue to operate. TWNW has consistently tried, but without success, to establish how many deregistrations are made “tactically” by operators planning to tender to run their replacement but now as a subsidised, rather than commercial, services?

3.14 DfT has recently consulted on ways, short of Statutory Quality Partnerships/Contracts, in which PSV operators can be better regulated. In responding12 TWNW suggested a number of relatively low cost initiatives which might be taken to address this issue.

3.15 The current overview of Operators’ reimbursement for concessionary travel (which TWNW fully supports) and of the makeup of the Bus Service Operators’ Grant (BSOG) also

9 In line with government’s coalition accord as reported in Local Transport Today 28/5/10 10 Transport Act 1985 11 “Sustainability of Rural Transport Projects” Countryside Agency/Sheffield Hallam University 2004 12 “Improving Bus Passenger Services through the Regulatory Framework”: TWNW’s Response to DfT April 2010 suggests a number of relatively low cost initiatives. Amongst these is the proposal by the Association of Transport Co-ordinating Officers (ATOC) for the establishment of a number of Tendered Network Zones within which BSOG would be paid to LTAs.

3.16 The economics of running bus services is likely to deteriorate because of rising costs and decline in funding from LTAs, partly related to Concessionary Fares remuneration . TWNW believes that a high priority should be given to whatever mechanisms emerge for supporting local bus services, even if this means some rebalance of funding from capital grants to revenue subsidies.

3.17 There is a counter argument to prioritising revenue spending where lack of capacity is constraining economic growth. In that situation where it is not possible to procure extras services or lease extra vehicles from revenue, capital grants should be given a higher priority.

(iv) Are current methods for assessing proposals satisfactory?

3.18 TWNW agrees with some recent criticisms of current methods of assessing proposals13. Events over the DfT’s current time scale of 60 years cannot be accurately predicted, and discount rates will vary widely in that time. As already noted (above) they also fail to capture cross sector benefits.

3.19 The original Cost/Benefit Analysis model (CoBA) failed to capture non user benefits. It was a useful tool which relied on quantifying aggregations of a multiplicity of small savings, but was also quasi objective in that it assigned subjective and often disputed monetary values to events such as a traffic fatality or a few minutes time saving.

3.20 CoBA’s incorporation into the DfT’s New Approach to Appraisal (NATA 199814) was an improvement, as this allowed non user benefits and other unquantifiable data to be used to help rank competing schemes. NATA was “refreshed” in 2008 to enable further “drivers” such as opportunity costs and costs of “better use options” to be taken into account.

3.21 TWNW considers NATA to be the best currently available appraisal tool but believes that work on refining it should be ongoing, particularly on the assessment of time savings which tend to benefit road investment. It could be said that some schemes are so patently deserving of prioritisation as to not need elaborate and expensive assessment exercises to be conducted on them. Some of these may be schemes of national importance (such as HS2), and with the demise of the Infrastructure Planning Commission15 mechanisms need finding which can protect these where a region’s ‘balkanised’ local government has difficulty in doing so.

(v) How will schemes be planned in the absence of regional bodies and the abolition of RSS?

3.22 TWNW is very concerned about the demise of Regional Assemblies and now Regional Development Agencies. By developing Regional Spatial Strategies (which included

13 Local Transport Today No 527 28/8/09 “consultants claim current appraisal models have intractable problems” 14 “A New Deal for Transport” ODPM, TSO 1998 15 Decentralisation and Localism Bill TSO 2010 Transport Strategies) and Regional Economic Strategies together with robust mechanisms for prioritising spending of their Regional Funding Allocations (RFAs) they put in place a system of regional planning which gained the approval of the sub regions and whose advice the Regional Government Offices (themselves now to be scrapped) clearly valued. This action seems to be contrary to government policy of decentralisation.

3.23 There appears to be no obvious replacement for RFAs. – granting LTAs their own planning powers will not fill the vacuum except perhaps in newly designated city regions16. It is possible that Local Enterprise Partnerships may come to offer co-ordinated approaches to planning when the promised national planning framework is revealed but this is presently very unclear17.

3.24 What is clear from a public transport perspective is that the present “localism”18 trend is unlikely to be helpful where services need to be co-ordinated within wide sub regions including “city regions”. There is a clear need for a regional co-ordinating body to resolve cross border issues.

3.25 It is also clear that Local Transport Authorities will need to be more imaginative in developing new funding packages (like the exemplary Greater Manchester Transport Fund). There now exists an extensive and confusing menu from which they can assemble funding packages, including, in no particular order, the following:-

• Congestion charging, road pricing and work place parking levies with revenues hypothecated to public transport (Local Transport Act 2009) • Supplementary Business Rates and Land Value Capture (Business Rates Supplements Act 2009) • Planning Gain – non site specific and site specific developer contributions and Community Infrastructure Levies (Highways Act 1980 s 278; Town and Country Planning Act 1990 s 106 and Community Infrastructure Planning Act 2008 respectively) • Urban Challenge (replacing TIF) • PFIs and PPPs • Bonds supported by revenue streams and judicious borrowing.

The list is not exhaustive, and each can be used jointly or separately to assemble an LTA’s individual funding packages.

4. Summary

4.1 Priority for Transport Funding should be given to mainly revenue support for low cost projects with predictable high value outcomes.

4.2 High Cost projects of national importance where funding is not already committed should be protected and progressed when affordable, or where there is a clear high CBR – for example as with the Manchester Hub.

16 PTEG favour “single capital pot” funding in newly created city regions, where it anticipates its member ITAs will be subsumed into “combined authorities”. Local Democracy etc Act 2009 TSO 2009 17 Guardian 6/8/10 18 Decentralisation and Localism Bill TSO 2010

4.3 Local Transport Authorities will need to assemble imaginative funding packages from a variety of government and private sources.

4.4 Mechanisms should be created for capturing cross sector benefits

5. Bibliography

1. Decentralisation and Localism Bill (TSO 2010) 2. Local Democracy etc Act 2009 (TSO 2009) 3. “Sustainability of Rural Transport Projects” Countryside Agency/Sheffield Hallam University 2004 4. “Rural Transport – a guide” Fawcett P Iceni Press 2009 5. “Trunk Roads Assessment” Standing Advisory Committee on Trunk Road Assessment (SACTRA) Reports 1980 (HMSO) and 1999 (TSO) 6. “Transport’s role in sustaining the UK’s productivity and competitiveness” Eddington Sir R. TSO December 2006 7. “Employment and sustainable transport” CBT August 2010 8. “Integration – are we getting there?” Challis G and Fawcett P, RPC for NW England May 2003 9. “Rural Transport Funding” TWNW, August 2006 10. “Planning – local difficulties” Guardian editorial 6/7/10 11. “Transport and the Environment” Royal Commission on Transport and the Environment (RCTE) - Houghton Sir J., OUP 1994. 12. “Improving Bus Passenger Services through the Regulatory Framework” : TWNW’s Response to DfT April 2010.

September 2010 Memorandum from National Alliance Against Tolls (TE 24)

SUMMARY

* A good system of roads is part of a successful economy.

* Drivers are paying for such a system many times over, but the taxes are largely spent elsewhere.

* Any expenditure on improvements to the system should not be at the expense of failing to maintain what we now have.

* Drivers would be more likely to have smooth journeys if all main roads were the responsibility of the Highways Agency.

* Any increase in taxes on roads use will be unfair and unpopular, but if they have to be increased then the best way is through fuel duty.

* Any improvements to the existing roads should not require drivers having to pay some form of tolls.

Introduction

1. The Committee are conducting an inquiry into transport and the economy, particularly in the context of spending cuts, and have invited interested parties to submit evidence.

2. This is the submission of the National Alliance Against Tolls which is a loose alliance formed in 2004 by local groups protesting against tolls in England, Scotland and Wales. We don't have a formal organisation as a company, charity or anything else, and we do not seek funds from anyone or any organisation. Our opposition to tolls covers euphemisms such as “road user charges” and “congestion charges”.

3. Our submission includes an annex on the possibility that the Government may be considering cutting net spending by increasing taxes on roads users and / or using some form of tolls to pay for any new roads capacity. The UK’s economic conditions and the relationship between transport spending and UK economic growth

4. It is evident that the economic outlook is worse than before the banking crisis. It is also evident that the Government intends to make substantial reductions in net public spending. Individuals and organisations who use a public service, or receive a subsidy or who benefit from any tax allowance will be arguing that they are a special case and should be exempted from any action to reduce net spending.

5. In our view, roads really are a special case as a good system of roads is essential for the movement of people, raw materials and goods. Other services and other forms of transport may be very important but most of the population could survive without them. Without any roads, the country would virtually be back in the Stone Age.

6. Spending on maintenance and improvement of roads is already inadequate. Life goes on because traffic is a bit like water, in that if a particular route is inadequate it will try and take another course. Though a major problem with roads is that alternative courses are frequently blocked by the authorities, thus causing increased congestion on the allowed routes. And these allowed routes are themselves narrowing due to the effects of spending on measures which seem to be designed to discourage and slow traffic rather than to ease its flow.

7. It seems that those who make the decisions to deter road traffic have no conception that this traffic is part of the economy and that if you stifle it, then you will eventually kill the goose that has been laying the golden eggs for you.

8. There is already a vast difference between the taxes levied on roads users and the amount of money that is spent on roads. The NAAT submitted evidence on this to the Committee’s Inquiry into “Taxes and charges on road users”, the report of which was published in July 2009. Depending on what was included, our figure for taxes ranged from 40 to 57 billion pounds a year, whereas spending on roads was between 5 and 9 billion pounds. Any further widening of this gulf between roads taxes and roads spending will be counter productive. If drivers stop using the roads there will be less income from them and if they switch to public transport there will be a need for bigger public spending, particularly if capacity is increased.

The type of transport spending which best supports economic growth

9. The best type of transport spending from an economic point of view will be that which removes bottlenecks and eases congestion at the lowest cost. This is not necessarily spending on increased capacity to and within congested areas such as London. It might be better to improve infrastructure elsewhere in order to attract people and businesses to less congested locations. The spending, wherever it is, is not necessarily on transport infrastucture, you might for instance subsidise bus operators to lower their fares or increase frequency of services or you might reduce the need to travel at busy times.

10. Another way of looking at this, particularly when there are financing difficulties, is to see which schemes have the shortest payback period. in terms of generating economic benefits for the country. Schemes which are more likely to have a short payback period are small road schemes designed to remove bottlenecks, rather than large scale schemes whether they be on roads or other parts of the transport infrastructure.

Balance between revenue and capital expenditure

11. To a large extent the benefits that we all enjoy come from the countless generations that have preceded us. This is a completely free benefit for society as a whole, though there may be money transfers for some part of this. Arguably we owe a moral debt to previous generations not to squander our inheritance but to add to it. But adding to it does not mean letting what we already have decay while you build new roads or whatever. As a general rule it is bad housekeeping to fail to repair and maintain an asset, unless the intention is to scrap the asset in the near future.

12. Expenditure is usually classed as capital where there is something tangible created whose benefits will be with you for a long period of time. “Capital” expenditure largely uses the same resources in terms of labour, plant and materials as does “revenue” expenditure. But in a capitalist economy, this capital expenditure may be financed by some form of loan which may be paid back over many years. A capital scheme does not necessarily result in an asset that will produce net benefits, as there could be a liability that results in ongoing costs which are greater than the benefits. An example of this could be a tram scheme, that might require an operating subsidy. Planning in the absence of regional bodies

13. Many people don’t want traffic in the particular locality where they live. They want measures to restrict traffic, slow it down and ideally divert it to anywhere other than their own “back yard”.

14. But most people, including those who oppose traffic in their own area, have a different viewpoint when they are wearing the hat of a driver trying to get from A to B. In this case they want to have as smooth, safe, cheap and as fast as possible journey. They do not share the concerns of people in the area that they are merely passing through.

15. It is the views of local residents that seem to dominate in local authorities. As the membership of regional bodies is usually dominated by representatives from local authorities, these bodies may give little importance to having an adequate roads system.

16. To some extent the aims of both local residents and those passing through could be met by segregating traffic from the areas that it is passing through. This would cost a lot of money, but drivers are already paying far more than would be needed for a massive increase in the provision of facilities such as bypasses around towns and villages and tunnels under city centres. Unfortunately, that money is not being spent on the roads and it is unlikely that this will change.

17. Whatever is spent on improving and maintaining the main road system, it would be better if the management of all roads that carried significant amounts of non local traffic was put under an expanded Highways Agency (which covers England). There would be a potential for economies of scale, even if part of the maintenance function was still carried out by local authorities or local firms. But more importantly what is spent could be spent on improving the highway system and reducing congestion.

Other issue

18. The elephant in the room is the possibility of the Government deciding to reduce net spending by increasing taxes on roads users and / or using some form of tolls to pay for any increase in roads capacity - building new roads or river crossings or adding lanes to existing roads. We have added an annex on this.

ANNEX to NAAT submission on Transport and the Economy –

Increasing taxes on roads users and / or using some form of tolls to pay for any increase in roads capacity

Increasing taxes on roads users

19. Taxes on roads use are already too high. But if it is decided that they will be increased anyway, we would remind the Committee that though most roads users feel that fuel duty is excessive they believe that it is the fairest method of charging for roads use. Fuel duty is also one of the cheapest taxes of all to collect as it is assessed at the refineries. Other taxes such as vehicle excise duty are expensive to collect and subject to wide evasion.

20. Vehicle excise duty is also unfair as it takes no account of miles travelled and takes little account of the amount of fuel used, and thus of the amount of exhaust gases. Smaller engine cars do carry a lower rate of duty but as the Committee will realise a car with a big engine might travel a lot less miles in a year than one with a smaller engine and thus produce less exhaust gases. The Committee may also be aware that a car which is driven aggressively or in heavy traffic will consume a lot more fuel than a car which is driven more carefully and in light traffic. These variations in fuel used and exhaust gases can only be reflected through a duty on fuel and not on vehicles.

Charging further tolls to travel on existing roads

21. The Government may be considering adding some form of tolls on some existing roads. If this is in the context of reducing net spending, then the assumption is that either these tolls would be an additional tax, or that any reduction in other taxes would be less than the net income generated from the new tolls.

22. Those who propose such systems usually turn a blind eye to the cost of setting up and administering the systems. Drivers are given the false impression that all the income would be used to offset other roads taxes or that if overall taxes did increase then this increase would all go to something like improvements in public transport.

23. The reality is that tolls are very expensive to collect, and a massive amount would have to be collected just to break even.

24. In 2003 Alistair Darling commissioned a “Feasibility study of road pricing in the UK” which was carried out by Deloitte and published in 2004. The study included an estimate of the costs, Deloitte said that it was very difficult to estimate, but that at 2004 prices, a national scheme would cost between 10 and 62 billion pounds to implement, with annual running costs of up to 5 billion pounds on top of that.

25. Based on the experience of other Government IT based schemes it would be reasonable to assume that the higher Deloitte estimate is more realistic, but if a mid figure of 36 billion is taken and if that is spread over say ten years, then the amortised cost is about 5 billion pounds a year, when the running costs are added, this gives a total figure of 10 billion pounds a year at 2004 prices. UK road vehicles use about 47 billion litres of fuel a year, so this annual cost is about the same as adding another 21.3 pence tax a litre to the cost of fuel. At 2010 prices that is about 25 pence a litre tax just to break even, the Government would not net anything at all.

26. We would also point out that not only are tolls so unpopular that other names for them have been invented, they also have the effect of reducing road capacity and increasing congestion and accidents at the points at which tolls are collected. Retrofitting any form of toll collection on roads would be somewhere between very difficult and impossible. There would be disruption to traffic during the construction phase and if there were traditional toll barriers, and if the system ever became operational, the resulting queues would be so bad that there could be total gridlock.

27. There is currently some discussion about using a barrierless system at the Dartford crossing to reduce the congestion that has been suffered by drivers over many years because of the tolls. The Committee should be aware that barrierless systems require a massive backup system to try and enforce toll collection. The nearest example of such a system in Britain as the moment is the London “Congestion charge”. The cost of collecting and enforcing that works out at about five pounds per vehicle day. Even if that cost was somehow halved, then the annual cost for Britain’s vehicles would be about 20 billion pounds a year, which is even higher than the top estimate produced by Deloitte in 2004.

Using some form of tolls to pay for any increase in roads capacity

28. Given the vast amount of other taxes on roads use there is no justification for existing tolls let alone adding to them. Yet that is what various groups have been proposing. The increased capacity that has been proposed for tolling includes new roads and river crossings and added lanes on existing roads.

Tolling new roads

29. The peak in motorway construction was around 1970. When the 27 miles of the opened at the end of 2003, it was the longest new road for nearly 18 years. Some people including the Prime Minister apparently think that this road has been a success and is a model for the way in which any new roads should now be built.

30. The amount of traffic that the concessionaires, Midland Expressway Ltd (MEL), were expecting is not known but the road has failed to make the contribution that it could have made in relieving congestion not just on the old M6 but in the region.

31. Traffic on the old M6 was running at about 175 thousand vehicles a day. At one stage the traffic on the new road reached about 55,000 vehicles a day, but is now at about 40 to 45,000 vehicles a day. That may seem a lot, but that volume means that a modern motorway appears to be empty. It is obvious that most of the traffic that could be using the road is avoiding it because of the tolls, and the class of vehicle that is avoiding it the most is HGVs who are still using the old M6 and various non motorway roads west of Birmingham.

32. This under use of the new road is not only bad for the people who live in the West Midlands and the economy, it is also bad for the owners. MEL is part of Maquarie Atlas roads, but still publishes separate accounts in Britain. The last set of accounts available are those for the year up to 30 June 2009. At that point the company had negative capital of 13 million pounds and appears to be wholly reliant on financial support from a parent company.

33. The M6Toll is not unique in having financial difficulties. Various other tolled operations have had difficulties due to drivers avoiding them, including the Southern Connector in South Carolina which filed for section 11 bankruptcy in June, the South Bay Expressway in

California filed for section 11 bankruptcy in March, and the Lane Cove Tunnel at Sydney which went into receivership in January.

34. It is most unlikely that a private company will build another tolled road in Britain unless it receives help from the authorities. That help could be in the form of loans or guarantees or subsidies or by making sure that drivers are given little choice on whether to use the road.

Tolling new crossings

35. There is one tolled new crossing which is already in the pipeline. This is a proposal for a new bridge over the Mersey. The scheme was the subject of a major public inquiry in 2009, but the inspector’s report has not been published. The principal objector at the inquiry was an alliance of Friends of the Earth and the North West “Activists Roundtable” of the Campaign for Better Transport, who were opposed to the principle of a new crossing. Other objectors were mainly either concerned about the tolling or about the routing of the traffic.

36. The plan is to not only toll the proposed crossing but to also toll the existing free crossing. On the opening day of the Inquiry, the Leader of the Council explained on the BBC that - "The two bridges will be so close together that to have one bridge free and the other bridge charged would be a waste of money as people would not use the new bridge and everyone would try and trundle across the present bridge".

37. It has been claimed that the new crossing will be a major economic boost over a very wide area and create thousands of permanent jobs. As we told the Inquiry this is implausible. Improved infrastructure is usually an economic benefit but tolling will have a negative effect, as was reflected in the official traffic projections, which forecast that when the new bridge was opened and both bridges tolled, the traffic would actually fall below the current levels with only one bridge.

38. As part of the economic case for the new bridge it was stated that Halton was the 77th worst out of 354 local authorities on the Indices of Social Deprivation. Down river from the new bridge are Liverpool and Wirral which are joined by the tolled Mersey Tunnels. Those authorities are the 2nd and 8th worst on the Employment indicator. We suggested to the Inquiry that this seemed to imply that tolled crossings were not a boost to an economy.

Tolling lanes added to existing roads

39. The idea for such lanes seems to have started in America. Initially the lanes were “HOV” (High Occupancy Vehicle) intended for cars that were relatively full. As with other lanes that are reserved for a particular category, the HOV lanes were a waste of road space. So many of these lanes have become “HOT” (High Occupancy Toll) lanes, and allow drivers without passengers to use the lanes if they pay a toll. The most recent development of all is the building of lanes which were intended from the start to be toll lanes.

40. Tolled lanes in America are sometimes referred to as “Lexus” lanes, as the users of them are mainly the relatively well off. Though some of those who have suggested similar schemes in Britain have implied that poorer drivers were more likely to use the lanes. had pushed the idea of these tolls on 7 October, 2006. The then Tory Shadow Roads Minister told them that the poor would be more likely to use the tolls as “The rich have the time to rearrange their lives more easily whereas the poor are less able to get off work early and may have more time constraints on childcare.”

41. Whether the Shadow Roads Minister was correct or not in his prediction that the poor would be the main users of tolled lanes, the NAAT view is that it is unfair to charge any driver extra for something that they are already paying many times over for through fuel duty and other taxes.

42. There are two other problems with tolled lanes. One is that as with the M6Toll it is probable that the added road capacity will be underused. The other problem is accidents. Having some lanes tolled and others not, adds to the problems of drivers changing lanes.

September 2010

Memorandum from Virgin Atlantic Airways Ltd (TE 25)

Introduction

1. Virgin Atlantic Airways welcomes the Committee’s inquiry into Transport and the

Economy and is pleased to submit comments for consideration.

2. Virgin Atlantic was established in 1984 to provide a competitive alternative for business

and leisure passengers on long-haul routes between the UK and major destinations. We

now serve 29 destinations in the US, the Caribbean, Africa, India, Asia and Australia from

Heathrow, Gatwick, Manchester and Glasgow. We operate 38 long-haul aircraft, employ

over 7,500 people and carry more than 5 million passengers and 200,000 tonnes of high-

value exports and imports each year.

3. Successive authoritative studies have confirmed the compelling link between effective

transport systems and economic prosperity and have recognised the particularly vital role

of aviation in delivering global connectivity. The 2003 Aviation White Paper, the 2006

Eddington review and the Transport Select Committee’s own 2009 The Future of Aviation

report all came to a similar conclusion: that aviation plays a “crucial role in the UK

economy and in the lives of many residents and visitors.” 1

4. The importance of aviation to the British economy is not in doubt, yet policy-makers,

politicians, and to an extent the country as a whole, take the sector somewhat for

granted. It sometimes takes something bad to happen, such as the insolvency of a big

company, to make people truly realise the importance of an industry. For aviation it took

the eruption of the Icelandic volcano Eyjafjallajökull in April to starkly demonstrate just

how reliant our everyday lives are on air travel. From cancelled business meetings and

stranded tourists, to wasted perishable goods, thinning supermarket shelves and

disrupted production lines, the crisis was a potent reminder that air travel is integral to

modern economic life.

1 HC 125–I, House of Commons Transport Committee, The future of aviation, First Report of Session 2009–10, 2 December 2009, p.3

5. The Department of Transport is facing major public expenditure reductions that will

inevitably impact on its ability to improve the road and rail networks to support the

economy. Unlike road and rail transport, air transport is largely private sector-funded.

Most airports are privately owned and other costs, such as air traffic control, airport

security and the Civil Aviation Authority, are recovered through fees and charges to the

industry.

6. The Department does not use public expenditure to deliver air transport improvements; it

instead relies on setting an effective policy framework. Get policy right and aviation will

make an even greater contribution to economic growth. Virgin Atlantic and our British

competitors are revenue raisers for the UK. We are the engines and catalysts of the

economic recovery. So, at a time when public spending is about to be severely

constrained, Virgin Atlantic calls for public policy to support British aviation.

Aviation’s Contribution to the UK Economy

7. The Transport Select Committee’s 2009 The Future of Aviation report found the industry

was both important in its own right and vital to the wider economy:2

• directly contributed £11.4 billion, or 1.1% of UK GDP in 2004;

• supports the wider economy including inbound tourism, finance, knowledge and

technology intensive industries and fresh produce;

• 25% of the UK’s trade by value travels by air; and

• directly employs 200,000 people and 520,000 jobs either directly or indirectly

dependant.

8. Virgin Atlantic directly employs over 7,500 people. Our positions are not just based at

Heathrow and Gatwick – we are currently recruiting 150 people to a new call centre in

Swansea and 150 crew, many of whom will support our Manchester and Glasgow

operations. Our Engineering Training School has trained hundred of engineers in the

industry and our award-winning engineering apprenticeship scheme takes school leavers

2 Ibid, p.8-9

with a minimum of 4 GCSE’s at Grade C and turns out highly competent technicians with

great career prospects.

9. Our operations, particularly our procurement function, support thousands of other jobs

right across the country in our diverse supply chain - from high-skilled engineers at Rolls

Royce in Derby and aircraft manufacturers at Airbus in and North Wales, all the

way through to our new uniform supplier located just outside Birmingham.

10. The most recent economic study of aviation’s contribution to the UK economy was

produced by Oxera Consulting Limited in November 2009.3 It was the first such

assessment since the Oxford Economic Forecasting report of 2006. The study found that

aviation and its supply chain had a total ‘economic footprint’ of £18.4 billion in 2007.

11. In August, the Prime Minister delivered a major speech on tourism, emphasising its

importance to the UK economy. He described it as one of the fastest ways of generating

jobs and ‘fundamental to the rebuilding and rebalancing of our economy.’ 4

12. Aviation is absolutely vital to driving UK inbound tourism. 73.9% of overseas visitors in

2009 came to the UK by air. Inbound tourism is also an essential contributor to the

revenue of UK airlines. Overseas residents spent £2.9bn on fares to UK carriers in 2009.5

Air Passenger Duty and the UK Economy

13. Virgin Atlantic shares the Prime Minister’s desire to increase inbound tourism to deliver

growth in the UK economy. His speech identified correctly the need to be more

internationally competitive. He committed to ‘remove some of the obstacles that put

people off coming here’6 but failed to mention perhaps the biggest financial disincentive;

UK Air Passenger Duty (APD).

3 http://www.aoa.org.uk/admin/uploader/UploadedDocuments/Oxera%20report%20- %20What%20is%20the%20contribution%20of%20aviation%20to%20the%20UK%20economy.pdf 4 http://www.number10.gov.uk/news/speeches-and-transcripts/2010/08/pms-speech-on-tourism-54479 5 http://www.visitbritain.org/Images/Inbound%20Tourism%20Facts%20Sept%2010_tcm139-195878.pdf 6 http://www.number10.gov.uk/news/speeches-and-transcripts/2010/08/pms-speech-on-tourism-54479

14. It is no coincidence that the UK has been falling down the World Economic Forum’s

Travel and Tourism Competitiveness Ratings when at the same time APD has been

increasing so dramatically.

15. In 2006, an American family of four paid £80 in APD to travel in economy to the UK. From

November this year they will pay £240 – a 300% increase in just 4 years. APD payable by

the Chinese tourists that the Prime Minister cited in his speech will have increased, by 1

November this year, by 200% since 2006, and is increasing by 50% this year alone.

Figure 1 – Air Passenger Duty Increases since 2006

Band Class Increase since 2006 Increase since 2007 Increase from Nov 09 to Nov 10

A All 140% 20% 9%

B All 200% 50% 33%

C All 275% 87.5% 50%

D All 325% 112.5% 55%

16. We cannot expect to continue increasing APD without impacting on the number of visitors

to Britain. We have a history, natural beauty and attractions of which we are rightly proud,

but we should not assume that these will somehow override the cost of visiting. Overseas

visitors have many other alternative options.

17. It is not just the disincentive effect on tourists that means ever-increasing APD is bad for

the economy. APD is also a significant addition to the cost of business travel. The

Government is seeking to show that the UK is open for business and is encouraging

international trade and investment. Increasing the cost of travelling to the UK for business

by air contradicts this policy agenda.

18. We understand the need to raise revenue from the aviation sector and have always

agreed that aviation should cover its environmental costs. The Department of Transport’s

Aviation Emissions Cost Assessment 2008 concluded that following the 2007 APD

increases, aviation would cover its climate change costs with an excess of £100m.

Despite that independent assessment APD has continued to rise steeply. As a British

company operating in a truly international marketplace, our concern is that the level of

APD is internationally uncompetitive.

19. The Government is committed to reducing corporation tax to ensure Britain is

internationally competitive, but the very same rationale applies to air passenger taxes.

We understand that the UK has the least competitive aviation tax rates in the G20 and

EU. We are not aware of any other country that taxes air passengers more than the UK.

Virgin Atlantic does not seek special favours for UK aviation, but we do call for a more

level playing field to enable us to compete fairly.

Figure 2 - Comparison of Environmental Aviation Taxation in other G20 countries

• Argentina, Canada, China, India, Indonesia, Russia, Saudi Arabia, Turkey - None • Australia – Air Passenger Tax 47AUD per passenger (£28) • Brazil – VAT on fuel for internal flights • France – ‘Solidarity Tax’ – 1 Euro economy within EU, 4 Euro economy non-EU, 10 Euro First and business within EU, 40 Euro First and business non-EU • Germany – has announced plans for per passenger ‘Departure Tax’ (less than 2,500kms EUR 8, 2,500-6,000kms EUR 25, 6000+kms 45 EUR) • Italy – ‘Government Fund Levy’ – 4 euro per passenger • Japan – VAT Air Transportation (‘Consumption Tax’) – 5% • Mexico – Tourist Tax - MXN 261.89 (£14) • South Africa - VAT on fuel 14% internal flights only & Air Levy on Cargo of 12p per litre • Republic of Korea – Departure Tax on international flights of 10,000 KRW (£5.74) • USA – Air Transportation Tax on international flights of $16.10

20. We understand the Government needs tax revenue to tackle the deficit and that it is

difficult to unpick tax decisions hard-wired into the Budget numbers, but this Government

and future governments should resist the temptation to make any further increases

beyond the new November rates.

21. Virgin Atlantic is opposed to a Per-plane Duty as an alternative policy solution. By

incentivising passengers to fly long-haul via Continental hub airports and by taxing

transfer passengers for the first time, a Per-plane Duty threatens the viability of direct

long-haul services from the UK and would be subject to carbon and tax leakage. This will

damage British long-haul haul airlines and business. The main beneficiaries would be our

European and Gulf competitor airlines and airports.

22. The APD banding system can be reformed to deliver the Government’s desired economic

and environmental policy objectives. Adjusting the banding system so that domestic and

short-haul journeys (where alternative transport options are more likely to be available)

would encourage a shift to lower carbon travel at the same time as raising the same

amount of revenue for the Treasury.

Conclusion

23. A constrained public spending environment represents an opportunity to concentrate on

aviation policy because it rarely involves public money and a successful aviation sector is

integral to a successful economy.

24. This submission has concentrated on Air Passenger Duty. By being massively out of kilter

with aviation tax regimes in other countries, APD places the UK economy at a competitive

disadvantage with its international rivals.

25. The need to create a more level playing field is not limited to aviation taxation. Different

international regulatory frameworks and constrained airport capacity are just two other

policy areas that limit our ability to play our part in delivering economic growth.

26. We would be pleased to provide oral evidence to expand on the points made in this

submission.

September 2010

Memorandum from VisitBritain (TE 26)

Introduction

1. VisitBritain is responsible for promoting Britain overseas. It works in partnership with the tourist boards in England, Scotland, Wales, Northern Ireland and London to ensure that the UK is marketed around the world in mature and developing markets, providing an export platform for the industry. Tourism, like domestic transport, is a devolved matter.

2. Our mission is to build the value of inbound tourism to Britain by inspiring visitors from overseas to explore Britain, delivering a global overseas network to support tourism promotion in mature and developing markets, championing tourism and engaging industry and Government in support of its growth and maximising the long-term tourism benefits of the London 2012 Olympic and Paralympic Games.

• Our activity contributes £1.1 billion to the economy and delivers £150 million directly to the Treasury in tax take each year; • This translates into supporting 28,000 jobs across Britain; • VisitBritain delivers £159 million in efficiency benefits to the tourism industry through its role, strategy and innovations.

Summary of response

3. Tourism is a major part of the UK economy. It is Britain’s third highest export earner, generating £115 billion a year and providing employment for 2.6 million people, as well as supporting over 200,000 small and medium sized businesses. Altogether this amounts to nearly 10% of the entire economy.

4. Promoting the growth of tourism is a priority for the new Government. In his speech on 12 August, the Prime Minister set out his ambitions for the tourism industry. These include returning Britain to the top five destinations for tourists globally, as well as increasing Britain’s share of tourism from emerging markets such as India and China. A half a percent increase in market share would yield an additional £2.5 billion for the economy and create 50,000 new jobs.

5. In his speech the Prime Minister recognised that action was necessary across Government. He singled out infrastructure as one such area. A successful transport system is central to the achievement of the Government’s aims for the tourism industry to be a successful, growing part of the UK economy. The cost of visiting the UK, the capacity and quality of ‘welcome’ at our international gateways, and the quality of our national transport infrastructure are vital to ensuring the success of tourism, and thus maximising its contribution to the UK economy.

6. In particular, the UK’s international route network is a key asset for the development of tourism. International aviation is vital, as is improving the quality of the UK's 'welcome'. Immigration controls at ports of entry remain a bottleneck. London is the main destination for visitors to the UK, attracting 50% of all visitors to the country. A strong domestic transport network, which is easily navigable by international visitors and includes high speed rail in the future, will encourage visitors to travel elsewhere in the country, spreading the economic benefits of tourism.

The economic value of tourism to the UK

7. Tourism is one of the largest industries in the UK. According to a recent Deloitte study The Economic Contribution of the Visitor Economy – UK and the nations (2010), tourism was worth £115.4bn to the UK economy in 2009 once the direct and indirect impacts are taken into account, equivalent to 8.9% of UK Gross Domestic Product. (Full report available online: The Economic Contribution of the Visitor Economy Deloitte June 2010)

8. The Deloitte study found that tourism would account for a similar proportion of the overall UK economy in 2020 as it did in 2008 (8.8%). The number of jobs that tourism supports is forecast to increase by 250,000 between 2010 and 2020, from 2.645 million to 2.899 million. One in twelve jobs in the UK is currently either directly or indirectly supported by tourism.

9. Tourism is the UK’s third highest export earner behind Chemicals and Financial Services, with inbound visitors spending more than £16bn annually and contributing over £3bn to the Exchequer. Its future success can play a part in developing a strong, rebalanced economy.

10. The long-run GVA growth rate of the visitor economy is forecast to be 3.5% per annum over the period 2010 to 2020, given the right support. This is well ahead of the 2.9% forecast for the economy as a whole.

Transport and tourism

11. International transport is vital to delivering the economic benefits of tourism. The importance of air travel to the UK inbound visitor economy was evident during the disruption seen in April 2010 due to the cloud of volcanic ash from Iceland resulting in the closure of airspace. VisitBritain has assessed the cost to the tourism industry as £425 million. In 2009, International Passenger Survey (IPS) statistics show 74% of overseas visitors travelled to the UK by air, 15% by sea, and 11% by Tunnel.

12. CAA figures reveal the number of nations with direct scheduled air links to Britain in 2009 stood at 119. There are 1,435 separate scheduled air routes operating from overseas to the UK. This makes Britain one of the best internationally connected nations of its size in the world. This connectivity is a vital asset for our tourism industry’s future growth.

13. The UK’s five largest markets in 2008 (France, Ireland, the USA, Germany and Spain) are forecast to remain the five largest in 2014, accounting for an additional 3.3 million visits between them. Faster growth is forecast from the USA (30%) and Germany (29%). France is expected to remain top of the ‘visits league’, growing by 12% itself. (Source: Tourism Economics 2010)

14. Visits from China to the UK are expected to grow at a faster rate than from any other source market (89%) by 2014, making it the UK’s 30th largest market, one place behind Brazil (which is expected to grow by 18%). (Source: Tourism Economics 2010)

15. Improvement of the UK’s domestic and international transport systems is vital if we are to achieve the sustainable growth of tourism which the Prime Minster has outlined, in order to extract the maximum benefits of tourism for the wider economy. In particular the cost of visiting the UK, immigration controls at ports of entry and capacity constraints all act as barriers to potential visitors.

Barriers to growth

Cost of visiting the UK

16. The cost of a UK visitor visa increased on 1st April 2010 from £67 to £68. This particularly affects key markets in China, India, Russia, Thailand, South Africa and the United Arab Emirates, and, depending on prevailing exchange rates, can represent a value for money challenge in comparison with a visa to explore the Schengen bloc, priced at €60 (£50).

17. Visitors from key growth markets- particular Russia, India, and China (BRIC nations) are likely to want to visit a number of European nations as part of a tour. The ability to access 25 nations within the Schengen bloc, rather than just the UK, combined with a higher cost, places Britain at a disadvantage when competing for a share of these new markets. A European-extension visa which provided a simpler process for visitors already applying for a Schengen visa to acquire one to travel to the UK, at reduced cost, would benefit our tourism and transport industries.

18. Visa costs are in addition to already high taxes on aviation. The last three years have seen a succession of increases in the rate of APD - passengers flying to the UK from a long-haul destination will have to pay up to £170 in tax from 1 November 2010, compared to a maximum of £80 just four years ago. At present no other country enforces an aviation tax at a comparable rate, which places the UK at a significant competitive disadvantage when trying to encourage overseas visitors.

19. Aviation is not an under taxed activity. Excluding APD, aviation’s tax to Gross Value Added (GVA) ratio was 32.5% in 2007/8, slightly higher than the economy average 32.1%. With APD included the ratio rises to 54.5%. UK aviation already covers its environmental costs. The tax burden on aviation is £0.6 billion higher than the external costs as assessed by DfT. The tax burden will exceed these costs by up to £1.1 billion in 2012 following the entry of aviation to the EU Emissions Trading Scheme (Oxera Consulting Ltd. 2009).

20. As just one example, at present it costs a family of four at least £412 more to travel from China to London than China to Paris or Frankfurt (see table below). France received 688,000 Chinese visitors in 2008, while the UK managed only 108,000.

Table 1: Cost of visiting the UK for a family of four, compared with Paris and Frankfurt

LONDON PARIS FRANKFURT

Visa Charge £272 (£68pp) £200 (60€/£50pp) £200 (60€/£50pp)

APD – Economy £340 (£85pp) £0 £0

APD – Non economy £680 (£170pp) £0 £0

Minimum price £612 £200 £200

Maximum price £952 £200 £200

Appear in person for visa application Yes Yes Yes

Visa in local language No Yes* Yes

*Chinese translation available but form must be completed in French or English

21. The relatively high cost of visiting the UK is a barrier to tourism. The expense of a trip to Britain is frequently mentioned by both visitors and prospective visitors. Whilst this perception has largely been shaped by the strength of the pound (2003 - 2007) relative to other key international currencies, consumers also talk about the expense of getting to Britain. Reducing the cost of travelling to the UK, compared to our competitors, would stimulate international tourism, increasing the number of visitors and delivering increased economic benefits. This would require reductions in the cost of visas and Air Passenger Duty.

Immigration controls at ports of entry

22. In research carried out for VisitBritain on departing visitors by the CAA in 2008, airports were mentioned most frequently as the place where visitors felt least welcome. Immigration was also specified, but less frequently. Passenger perceptions of have been improving: 94% of passengers at Heathrow now rate their journey as good, very good or excellent.

23. VisitBritain is working with a wide range of stakeholders on the ‘Welcome to Britain’ initiative, including the UK’s major ports and airports, in preparation for these major events, in particular the 2012 Games. This will be a major opportunity to showcase Britain at its very best and the Welcome we offer our visitors will be a crucial measure of the success of the Games, both in London and Britain as a whole. 2012 offers an unparalleled opportunity to act as a catalyst for accelerating improvements in the quality, services and welcome in Britain as a lasting legacy and a firm foundation for future tourism growth.

24. VisitBritain does have concerns about the welcome passengers receive at UK immigration. The UK Border Agency (UKBA) sets out a standard queue time for non-EU passengers of 45 minutes. This issue has been picked up by the Department for Transport’s South-East Airports Taskforce. This level of basic service is poor, and harms visitors’ perceptions of Britain as a tourist destination. Providing a good passenger experience should be integral to UKBA’s work, along with maintaining a secure border.

25. Action across Government departments is necessary if we are to ensure that UK immigration is able to cope with, and provide a welcoming service, to the influx of visitors expected for the 2012 Olympic Games and beyond. Investment in improved immigration controls which facilitate the fast, convenient movement of travellers into the UK will improve the quality or service at, and perception of the UK’s major points of entry, and generate a tourism dividend.

Capacity

26. In 2009 74% of the 29.9 million overseas residents who visited the UK travelled by air, and with a much higher average spend per visit than those using either the Channel Tunnel or a ferry, airborne visitors accounted for 83% of the £16.6bn worth of inbound visitor spend last year. Air travel is vital to the economic contribution of tourism.

27. For long-haul visitors the main entry point to a country will be through a hub airport. For the UK this is Heathrow. The chart below shows the annual number of aircraft arriving at Heathrow, which has dipped by almost 4,000 in the past few years, but remains on a par with the likes of Paris Charles de Gaulle, Frankfurt and New York JFK.

Aircraft arrivals at major hub airports

500,000

450,000

400,000

350,000

300,000

250,000

200,000

150,000

100,000

50,000

- Amsterdam - Chicago - Dubai Frankfurt Hong Kong London - New York - Paris - CDG Singapore - Schiphol O'Hare Heathrow JFK Changi Source: capstats.com 2006 2007 2008 2009 2010 28. Recently published figures from the United Nations World Tourism Organisation revealed that countries such as Malaysia and Turkey are gaining ground on the UK in terms of visitor arrivals and international tourism earnings. The UK is also falling behind in terms of seat capacity from India and China.

Top destinations for seat capacity from India

8,000,000

7,000,000

6,000,000

5,000,000

4,000,000

3,000,000

2,000,000 capacity in year to November 2010

1,000,000

- Source: capstats.com UAE Saudi Arabia Singapore UK Thailand Oman USA Malaysia Germany

Top destinations for seat capacity from China

8,000,000

7,000,000

6,000,000

5,000,000

4,000,000

3,000,000

2,000,000 capacity in year to Novemebr capacity in 2010 1,000,000

- UK UK UAE USA India Japan Macao Russia France Taiwan Canada Vietnam Thailand Australia Malaysia Germany Singapore Philippines Hong Kong Hong Netherlands Source: capstats.com Korea South

29. Whilst the UK is the fourth best-served destination from India, the number of seats available on direct flights between the UK and India is only a third that available on flights to the United Arab Emirates. The UK is in 19th place for seat capacity from China.

30. India, China and other emerging economies offer substantial opportunities for growth as business and tourism links mature. Visits from China are expected to grow by 89% by 2014. Increasing the UK’s share of the Chinese tourism market by half a percent would yield an additional £2.5 billion for the economy and create 50,000 new jobs. The economic case for tourism growth is clear.

31. Achieving this level of growth is dependent on the provision of sufficient airport capacity in the long term. The cost of travelling to the UK is already high due to Air Passenger Duty, and visa costs. A shortfall in airport capacity would inflate costs further, harming the UK’s competitiveness. The Committee on Climate Change, reporting in December 2009, found that growth in airport capacity by 60% to 2050 was consistent with the UK’s climate change targets. Domestic transport and spreading the benefits of the visitor economy

32. Transport is essential to ensuring that the economic benefits of tourism can be shared across the UK. VisitBritain research over a long period has found that perceptions of Britain are dominated by London. The capital receives 50% of overseas visitors, compared to 9% in Scotland and 4% in Wales.

33. In absolute terms, London had 11 times the number of the visitors to Edinburgh, 18 times the number to Manchester, 20 times the number to Birmingham and 23 times the number to Glasgow. Enhancing our domestic transport system in order to make it more easily accessible to overseas visitors could play an important part in increasing the number of visits to areas other than London.

Intermodality

34. Major ports of entry must be integrated into the domestic transport network, thereby establishing intermodal hubs where travellers can change from one mode of transport to another. This would enable passengers to make intelligent decisions when planning domestic and international journeys, informed by a market for air, sea, road and rail journeys which would reflect their environmental cost and convenience.

35. There is a clear need for a joined up approach amongst transport operators to timetabling, ticketing arrangements and information provision. For example: Caledonian MacBrayne ferries already include train departure and arrival times from / to Glasgow. There are, however, mismatches in the timetabling. The 1221 train from Glasgow Queen St. arrives at Oban at 1527. Passengers require a minimum 30 minutes to check in for a ferry. The ferry to Barra sails at 1540- only 13 minutes after the train arrives. There is a potential coordinating role for Government. Further, domestic transport networks need to identify and take into account the transport needs of tourists.

36. Equally, it is important to make it simple for overseas visitors to move conveniently between modes of transport in order to ease their journey. VisitBritain already works with Transport for London, and other organisations, to sell items such as Oyster Cards, and tickets for the , and trains, though the VisitBritain online shop. This allows overseas visitors to plan and prepare for their journeys on arrival in the UK in a convenient way.

37. More generally, travel around the UK for overseas visitors, particularly those who do not speak much English, can be challenging, and expensive as they are often unable to book in advance to take advantage of better deals for rail travel. This can act as a further disincentive for visitors to travel beyond London and the Greater South East.

38. The BritRail pass, which is available only to non-UK residents, has been created in order to allow tourists to access lower-priced rail travel and encourage them to visit parts of the country they would not otherwise go to. Through-ticketing which allows overseas travellers to plan travel in the UK once they arrive at an international gateway has the potential to significantly increase the regions’ share of overseas visitors, with the result that the economic benefits of tourism would both grow and be more broadly-based. High speed rail, but an ongoing role for domestic air

39. VisitBritain supports proposals for a high speed rail network linking London with cities in the north of the UK, which will encourage visitors to travel beyond the Greater South East, broadening the economic contribution of tourism to the whole of the UK.

40. High speed rail is complementary to aviation. It is not an alternative. HSR cannot replace short haul and domestic air journeys. Airports can, broadly speaking, be connected to any other airport on earth by the establishment of an air route. Rail depends on geographically fixed infrastructure- a track- which cannot necessarily link any two points in the UK, particularly where there is a major sea crossing involved. In 2008 more than 530,000 passengers flew between London Gatwick and Belfast’s two airports. A further 780,000 made the journey between Belfast and Heathrow. 17,000 people flew between Aberdeen and Exeter (CAA 2009).

Conclusions

41. Tourism is a major part of the UK economy. It is Britain’s third highest export earner, generating £115 billion pounds a year and providing employment for 2.6 million people, as well as supporting over 200,000 small and medium sized businesses. Altogether this amounts to nearly 10% of the entire economy.

42. Tourism has the potential to grow, and increase its contribution to a rebalanced UK economy. The long-run GVA growth rate of the visitor economy is forecast to be 3.5% per annum over the period 2010 to 2020, given the right support. This support includes ensuring that the UK’s international and domestic transport networks are able to meet the demands placed on them.

43. Improvement of the UK’s domestic and international transport systems is vital if we are to achieve the sustainable growth of tourism which the Prime Minster has outlined, in order to extract the maximum benefits of tourism for the wider economy. In particular the cost of visiting the UK, immigration controls at ports of entry and capacity constraints all act as barriers to potential visitors.

44. The relatively high cost of visiting the UK is a barrier to tourism. Reducing the cost of travelling to the UK, compared to our competitors, would stimulate international tourism, increasing the number of visitors and delivering increased economic benefits. This would require reductions in the cost of visas and Air Passenger Duty.

45. Action across Government departments is necessary if we are to ensure that UK immigration is able to cope with, and provide a welcoming service, to the influx of visitors expected for the 2012 Olympic Games and beyond. Investment in improved immigration controls which facilitate the fast, convenient movement of travellers into the UK will improve the quality or service at, and perception of, the UK’s major points of entry, and generate a tourism dividend.

46. Achieving this tourism growth is in part dependent on the provision of sufficient airport capacity in the long term. The Committee on Climate Change, reporting in December 2009, found that growth in airport capacity by 60% to 2050 was consistent with the UK’s climate change targets.

47. Effective domestic transport networks are vital to ensuring that visitors to Britain are able, once they arrive, to travel beyond the Greater South East and enjoy the tourism opportunities the rest of the UK has to offer. In so doing, they will spread the economic benefits of tourism, stimulating job and wealth creation across the country, supporting the wider economy.

48. Major ports of entry must be integrated into the domestic transport network, thereby establishing intermodal hubs where travellers can change from one mode of transport to another. Equally, it is important to make it simple for overseas visitors to move conveniently between modes of transport in order to ease their journey.

49. VisitBritain supports proposals for a high speed rail network linking London with cities in the north of the UK, which will encourage visitors to travel beyond the Greater South East, broadening the economic contribution of tourism to the whole of the UK. High speed rail is complementary with, not an alternative to, domestic aviation.

September 2010

Memorandum from the Independent Transport Commission (TE 27)

This paper reflects recent research by the Independent Transport Commission and is relevant to the following lines of enquiry outlined in the call for submissions: i. How should the balance between revenue and capital expenditure be altered? ii. Are the current methods for assessing proposed transport schemes satisfactory?

THE CASE FOR TRANSPORT INVESTMENT: A REVIEW OF SOCIAL COST BENEFIT ANALYSIS

1. Summary

1.1 Overview: The Independent Transport Commission (ITC) believes that transport is good at showing returns on investment. The combination of stringent tests prior to spending, and before-and-after measurements of delivery means that the Treasury can be confident every penny spent on transport earns good returns. This strong sentiment led to this submission on Social Cost-Benefit Analysis (SCBA), the current method of spending appraisal.

1.2 The Strength of Transport’s funding case: Social Cost-Benefit Analysis came into transport in the 1960s, to appraise spending on road building. Today it is used for all transport investments in excess of £5 million and many smaller scale local investments. The basic principles underpinning SCBA have not changed: it measures what we deliver to society in return for expenditure on transport. Unlike other spending areas, transport currently only claims as ‘benefits’ those things directly part of transport – such as increased revenues, reduced costs, reduced accidents, and travel time savings. All those extra impacts which transport schemes have on jobs, education, health, society count as “below the line” in transport, but they are often included “above the line” in other spending areas. This rigour often means that Transport investment plans understate benefits that other Departments would overstate. In the October review, therefore, it is critical that Treasury demands the same rigorous analysis in other spending areas.

1.3 Opportunities for Improvement: The UK has a well-developed methodology for SCBA and strong expertise in its application. That said, the Independent Transport Commission proposes improvements to the SCBA method: better consideration of non-monetary impacts; greater room for citizen-led prioritisation of policies; more explicit risk assessment around forecasts given their long timescale, and an audit trail between the value-for-money assessment and political decision-making. 1.4 Recommendations:

1.4.1 What should be done? The ITC recommends: In the short term, the following aspects of the technique should be reviewed: 1.4.1.1 Carbon savings should, given the difficulties of monetising their effects, be assessed on a least-cost rather than a benefit-cost basis. 1.4.1.2 As not all time savings have the same value and as they are sometimes used as proxies for local spending and increased employment, they need reconsideration. 1.4.1.3 The costs and benefits of transport investment differ depending on social group and geographical area. Recent developments in mapping social and local transport impacts should be used. 1.4.1.4 Given the prospect of cuts, cost-benefit analysis should be adapted to deal with infrastructure contraction as well as expansion. For example, the narrow terms used by Dr Beeching to decide railway cuts in the 1960s failed to recognise the varied impacts of closure.

1.4.2 In the longer term, transport appraisal needs to be subject to a root and branch review that would incorporate approaches used in other industries and countries. The current moratorium on major schemes presents a unique opportunity to undertake a fundamental review without prejudicing investment.

2. Background

2.1 The ITC, the UK’s only independent transport commission, held a discussion evening on 17 June. Chaired by Willy Rickett, previously the author of Government’s “10 Year Plan” transport development strategy, and hearing from speakers Stephen Glaister, Elizabeth Gilliard and Andrew McNaughton, the group debated the subject “How would you spend £50bn on improving Britain’s Infrastructure?”. A summary of that discussion is available on the ITC’s website entitled ‘Rethinking how we spend money on Transport’.

2.2 Some significant part of the discussion concentrated on the method of how we appraise and justify major transport spending decisions. Some people argued strongly in favour of the rigour of the existing Social Cost-Benefit Analysis (SCBA) method; while broadly supporting the approach, others seemed to be more sympathetic to adopting a modified version of the system which takes more fully into account the value of reducing CO2 emissions and some modifications to the current treatment of time savings, while some felt that the method was fundamentally flawed. But equally arguments were made that we need a methodology that could be used now. At the end of the discussion, the Chair attempted to assess the mood of the meeting and was surprised that only a modest array of hands were raised in unequivocal support of the current SCBA methodology.

2.3 Only two days’ before the ITC meeting, the new Secretary of State speaking at a London First event “The Transport Priorities of the New Government” had displayed similar reservations about the rigours of the SCBA method, indicating, in an answer to a question, that he would also wish to see local issues appropriately taken into account and a requirement to distribute investment around the country as additional criteria for informing transport decisions. So SCBA has very recently been exposed to greater public scrutiny.

3. The need for Appraisal

3.1 Where consideration is being given to investing in major transport infrastructure projects, there is a need for a method that will help both to determine whether a scheme offers ‘value for money’ and is cost effective, and to assist in prioritising among a long list of potential schemes – some very different in nature (e.g. motorway building vs. rail electrification) - given that funds are invariably limited.

3.2 In the commercial sector these requirements can be achieved through established methods of financial appraisal, but in the case of transport where much investment involves the public sector, the SCBA method has evolved in recognition of the fact that: 3.2.1 The costs and benefits of both transport investments and operations are not confined to those who provide and use them, but affect non-users and the community as a whole, to a greater degree than almost any other sector of the economy. The clearest examples are noise, congestion and atmospheric pollution. 3.2.2 The use of the majority of transport infrastructure – the road network – is not allocated by the market in this country, but is provided free at the point of use. This means that the user benefits

cannot be assessed directly through willingness to pay for the service (other than crudely through the fuel duty and Vehicle Excise Duty). 3.2.3 Even where services are provided by the market and directly priced (e.g. public transport fares), relatively straightforward pricing structures are often used and so provide an imperfect measure of the benefits that users derive from the service. 3.2.4 Major transport infrastructure is costly and has a long operational life – hence the need for a comprehensive and rigorous appraisal of the investment.

3.3 So in light of these considerations, some kind of evaluation method is required.

4. The emergence of SCBA

4.1 Although the principles of SCBA can be traced back to 19th century welfare economics, the method was first developed and used by the US Army Corps of Engineers to prioritise investment in the irrigation schemes that they were building as part of the New Deal in response to the Great Depression.

4.2 It was taken up in this country in the 1960s, where it was applied to transport schemes through a retrospective analysis of the (Beesley) and the Victoria Line (Foster and Beesley). It was then adopted by Ministry of Transport in the 1960s and applied to a number of small projects in the roads programme. Since then it has been applied both to major road and rail schemes, and is formally embodied in the methods required for appraising transport investments in excess of £5m (i.e. as set out in NATA in England and Wales, and STAG in Scotland).

5. SCBA today

5.1 The basic principles underpinning SCBA have not changed. The core elements of the process are: 1) Specify options; 2) Identify the costs and impacts; 3) Predict the costs and impacts over the life of the project; 4) Monetise those impacts for which sufficient data and justification exists; 5) Discount the costs and impacts to obtain present values; 6) Conduct sensitivity analysis and 7) Compare the net present value of the alternatives. 5.2 Whilst in its early applications SCBA focused almost solely on time savings, vehicle operating costs, fares and accident reduction as the monetised benefits of a scheme, a range of additional measures are now monetised including improvements in journey experiences at interchange and noise. Values for impacts such as agglomeration benefits and other wider economic impacts are being developed as are estimates of air pollution damage costs and climate change emissions. There remain a number of factors that sit outside of the SCBA calculation, but which form part of the overall assessment of the value for money of a project, including impacts on the built and natural environment, water quality and regeneration benefits. These other factors are all presented as part of a wider Appraisal Summary Table under the New Approach to Appraisal (NATA). 5.3 In studying the application of this framework to the 1998 road review of 68 trunk road schemes, a study found that the Appraisal Summary Table information appears to have corrected for the traditional in-built bias towards monetised impacts and that the scores for noise, landscape, heritage, reliability and regeneration were “all significant explanators of the decision pattern”.1 5.4 The project appraisal period for most projects has, in the recent past, been extended to 60 years since the discount rate has been reduced to between 3 and 3.5% from 6%. In addition to this, evidence of a systematic bias in cost underestimation for projects has led to the introduction of an ‘optimism

1 Nellthorp, J. and Mackie, P. (2000) The UK Roads Review—a hedonic model of decision making, Transport Policy, 7, 127-138.

bias’ uplift to projected costs which varies with the nature of the project and the degree of risk mitigation identified, but can be as high as 66% at pre feasibility stage.

6. Problems with the current method

6.1 A wide range of concerns have been raised about the present SCBA method, by academics, policy makers, practitioners and interest groups. These can be grouped under five broad headings: 6.1.1 Questions concerning how current benefits are valued (e.g. travel time savings, where the same unit rates are used for small and large time savings, and for time savings and time losses); 6.1.2 Impacts that are not captured by the current method, such as the severance impacts of road traffic; 6.1.3 Forecasts – both of behaviour change and of costs and the monetary value of future benefits – are very difficult to assess and carry large margins of uncertainty that are not fully reflected in the appraisal; 6.1.4 The method is not consistent with the setting of objectives and targets, which is how Local Transport plans are produced; and 6.1.5 Evidence that political decisions do not mirror the outputs from SCBA (i.e. the benefit/cost ratio).

6.2 In relation to (5), the limited evidence base which does exist in Norway, Sweden and the UK suggests that factors other than the benefit/cost ratio are more important in decisions taken by politicians and that the benefit/cost ratios might be more influential as a filter to remove poor projects at an early stage and to appropriately rescope other proposals to achieve a stronger benefit cost ratio.2

7. The answers?

7.1 The UK has a well developed methodology for cost-benefit analysis as part of a broader appraisal method. Considerable skills and expertise exists within government and consultancies which allows the procedures to be applied. The government has invested heavily in providing guidance on how to develop such proposals. Any change from the current system should be able to demonstrate that it would lead to more effective outcomes – we should not ‘throw out the baby with the bathwater’. Though we note that other countries such as Germany use multi-criteria analysis to rank investment projects and so alternative approaches do exist.

7.2 We suggest that the answers lie in a twin-track approach: In the short term, make good the major weaknesses within the existing SCBA approach, and In the longer term, take a more fundamental look at appraisal: what is it for? In what context is it being applied? What kinds of outputs are most useful and defensible?

7.3 The Short-term

7.3.1 The treatment of CO2 costs 7.3.1.1 There is a strong debate suggesting the need to include a monetised estimate for carbon dioxide emissions which reflects the long-term costs of climate change. This is one solution to raising

2 Eliasson, J. and Lundberg, M. (2010) Do cost-benefit analyses influence transport investment decisions, Paper presented at the 11th WCTR Conference, Lisbon; Odeck, J. (2010) What determines decision-maker’s preferences for road investments? Evidence from the Norwegian Road Sector, Transport Reviews, 30(4), 473- 494 and Nellthorp, J. and Mackie, P. (2000) The UK Roads Review—a hedonic model of decision making, Transport Policy, 7, 127-138.

the importance of the environment in the decision-making process, but it seems to be very difficult to agree on the current costs of CO2 emissions, and forecasts of future values vary by a factor of ten or more. However, as noted above, decision-makers have been shown to be able to include these wider factors without their monetisation. It is not necessarily the case that monetising carbon will lead to decisions which are consistent with achieving our carbon targets. It could remain the case that time savings dominate the appraisal process (as is the case with High Speed Rail as well as road projects) and this actually diminishes the importance of carbon in the decision-making process.

7.3.1.2 The existence of targets for carbon dioxide reduction also potentially changes the nature of the investment package proposed. Whilst the government will look for the most cost-effective reduction strategy across all sectors it is likely that transport will be asked to make savings which require the adoption of some carbon reduction policies that do not perform well in benefit/cost terms (a hypothetical example might be speed limit reduction). Here a least-cost rather than benefit/cost approach may be more appropriate.

7.3.2 The treatment of time savings

7.3.2.1 This is one of the most controversial aspects of existing SCBA applications. Time savings often dominate other benefits, yet there is growing dissatisfaction with the current assumptions that all (non-work) travel time savings have the same unit values. In particular: i. small time savings may be too small to be perceived by travellers, and have been found to have smaller unit values empirically; ii. losing time is valued more highly per unit time than saving time; iii. transport schemes where time during travel is used productively (e.g. rail) show smaller benefits from time savings, so investment goes into enhancing the less the productive modes. Wider concerns have also been expressed.

7.3.2.2 Two issues in particular stand out. First, that time savings are only short-run gains since daily travel time budgets have not reduced in response to the cumulative improvements to the UK transport system over time (Metz), Second, the measured wider economic benefits are much less than the time savings which are regarded as proxy values for the former (Wenban-Smith). Enough data exist to begin to explore the implications of changing the treatment of time savings within the existing SCBA.

7.3.3 Distributional issues

7.3.3.1 The costs and benefits of schemes vary both spatially and socially – something which has been paid very little explicit attention in SCBA methods. The benefit/cost ratio provides a net estimate of all costs and benefits combined, and do not highlight the groups or areas that gain or lose from a proposed scheme. For example, the areas which benefit from time savings may well be different from those which suffer increased noise or air pollution resulting, say, from the construction of a town by- pass, or a high speed rail line. There is considerable experience of mapping impacts in geography and elsewhere that could be formally incorporated into SCBA, showing how social groups and areas are impacted in different ways.

7.3.4 Dealing with contraction 7.3.4.1 Does benefit/cost work in the same way for projects aimed at infrastructure contraction as it does for expansion? Clearly, the calculation should be different - the cost is not one of construction and operation but of savings in operation and the cost of decommissioning the kit. As Spending Departments are required, in the Spending Review, to analyse what they do, what they do not need to do, what they could do better, then perhaps it is necessary to consider whether the use of the SCBA approach could usefully contribute to such debates. When the last significant railway closures ignited under the direction and enthusiasm of Dr Beeching, the basis on which each line was closed was based on its immediate individual financial viability. No account was taken of the effect of closure on the totality of the railway, nor of the economic or social impacts (CO2 or other) of closure; nor were routes safeguarded for potential future transport requirements. We might usefully avoid this narrow, accountancy-based analysis in the current climate.

7.3.5 Un-monetised impacts 7.3.5.1 Transport schemes have significant impacts which are not monetised, as described above. A comprehensive review of these is needed, with the flexibility to add more as needs and values change over time. This review should, therefore, include a structure for taking account of non-monetised benefits and disbenefits in the decision making framework.

7.3.6 Decision making: SCBA’s role

7.3.6.1 Where does SCBA sit in the decision making system? A scheme which goes through the ‘option appraisal to npv’ process described above could still be pointless if it works against other schemes taking place (e.g. a public transport system to reduce car use alongside a road widening – as happened in several cases in the 1980s and 1990s); or if it doesn’t contribute to the town / regional / national objectives; or if it suffers widespread opposition and protests, even closure, because of failures of consultation.

7.4 The longer term

7.4.1 Track two would involve taking a much more fundamental look at appraisal, in two respects. First, by looking afresh at why appraisals are needed and what purposes they serve – in the context of the tasks carried out by, and statutory duties placed on, different bodies (e.g. local highway authorities, Integrated Transport Authorities, the Highways Agency).

7.4.2 Secondly, by looking at how appraisal is carried out on different sectors and in different countries. For example, cost-effectiveness is more widely practised in some sectors (e.g. where there are firm standards or targets that have to be met), and some countries prefer a multi-criteria approach to a benefit/cost approach.

7.4.3 It is always problematic to carry out a fundamental review of this nature, because of the uncertainties and implications for schemes in the pipeline or at public enquiry. But, in this respect the current economic cloud has a silver lining, in that the current near moratorium on progressing major new transport schemes presents a once-in-a-lifetime opportunity to carry out such a fundamental review without prejudicing major transport investment programmes.

8. The proposition

8.1 The Commission provides an independent assessment of the transport issues of today. Based on the lively debate at our discussion evening, and parallel debates in the technical press, it is evident that there is a broadly based unease as to the fitness-for-purpose of current appraisal methods. This concern needs to be addressed as a matter of urgency, and the current restraints on developing major new transport schemes provide an ideal breathing space to do so. We will also have to take into account various developments including the impacts of an ageing population, advances in technology (in transport as well as in other forms of communication) and the increasing globalisation of business and society. All will have major impacts on requirements placed on our transport systems.

8.2 Taking a pragmatic view, we recommend a two-track approach:

8.3 First, Patches and quick fixes: adding into the existing framework updates that are do-able within a short time frame and meet some major concerns. These are likely to include revisions to the treatment of time savings, better incorporation of CO2 impacts, and an explicit requirement for SCBA to be within a decision making framework and not the entire argument.

8.4 Second, A root and branch review: a fundamental reassessment of what why we carry out appraisals and what we could learn from the approaches used in other sectors and countries.

NOTE: The Independent Transport Commission was Britain’s first transport and land use think tank and founded in 1999. It has ten unpaid Members, a part-time Secretariat, and enjoys links with the Universities of Southampton and Oxford. The current chairman is Simon Linnett, vice-chairman of N.M.Rothschild & Sons. The ITC is a charity funded through private donations. Its chief sponsors are Go-Ahead Group and Stagecoach.

September 2010

Memorandum from David Simmonds Consultancy Ltd (TE 28)

IMPROVING THE ASSESSMENT OF PROPOSED TRANSPORT SCHEMES

1 INTRODUCTION 1.01 This Memorandum is written in response to the Committee’s invitation to submit evidence relevant to its inquiry into Transport and the Economy. It refers to the question: “Are the current methods for assessing proposed transport schemes satisfactory?” 1.02 Within that broad question, I am addressing one specific issue, which is about the appraisal of time savings and the identification, measurement and interpretation of the benefits which flow from time savings.

2 BACKGROUND 2.01 The discussion of these issues follows on from a discussion which has been going on over the summer of 2010 in response to articles written by Alan Wenban-Smith (see Local Transport today, issue 552, 20 August 20101) which are highly relevant to the Committee’s current inquiry. The Committee may well receive submissions from other participants in that discussion; what follows has benefitted from their contributions to the debate but is strictly my personal view. 2.02 I must point out an interest in that the consultancy of which I am a director is involved in some aspects of transport appraisal, particularly in relation to assessing the land-use and economic impacts of transport schemes.

3 SHORTER-TERM IMPROVEMENTS 3.01 The analysis of “time savings” is an essential part of the process of assessing the economic value of transport proposals – known in current practice as “Transport Economic Efficiency analysis” or TEE. Much of the debate about TEE centres on the way in which some time savings may be converted into economic growth. My analysis of the issues is set out in more detail in the attached paper. In summary I submit that current methods for assessing proposed transport schemes need to be improved in five ways. 3.02 The first improvement is largely one of terminology. It is usual to refer to the benefits of faster transport opportunities (or more reliable transport, or more frequent transport services, etc) as “time savings” or “user benefits in travel time”. This is somewhat misleading. Faster, more reliable transport obviously does result in some users simply making the same journeys more quickly than they would otherwise have done. However, an important effect is that improved transport allows and encourages people and firms to make more frequent, longer or different trips which would otherwise have been impractical, unattractive or unprofitable. In the process of making more

1 http://www.transportxtra.com/magazines/local_transport_today/news/?id=23860 frequent, longer or different trips the people affected may well end up spending as much or more time travelling as they did before, but they will do si because they are gaining equal or greater benefit from being able to visit different destinations, to undertake new business, etc. 3.03 The benefits from providing faster, more reliable travel therefore take a wide variety of forms of which simple “time savings” – making the same journeys more quickly – are only a part. I would suggest that the terms “time savings” or “travel time benefit” should be avoided, and the term “benefits due to faster travel” used instead – to emphasise that faster, more reliable travel is the change that leads to a range of possible benefits, not necessarily the form that those benefits take. 3.04 A second improvement would be that where the existing methods of forecasting and appraisal do show that more and/or longer journeys will result from transport improvements, the consequences in terms of congestion, emissions etc should be clearly identified and taken into account as negative effects tending to reduce the net benefits of the scheme. 3.05 In current appraisal practice, it is generally assumed that • the benefits due to faster travel can be measured by the standard methods of estimating travel time savings for existing and new users, and that • any subsequent changes – in land-uses and additional economic activity – transform the “time savings” into other forms but do not change the total volume of benefit. 3.06 Present appraisal is therefore done mainly on the assumption that the land-uses and economic activities for future years are fixed. There are some exceptions to this rule, for example in relation to regeneration and agglomeration impacts. However, it is important for consideration of the social and environmental consequences to make all of the land-use, social and economic effects more explicit. Even if in conventional terms this does not modify the total amount of benefit, the form and the distribution of benefits should be taken into account – as should the environmental consequences, which may not be neutral. One particularly important case is that if faster travel tends in the longer term to encourages patterns of living and working which result in longer journeys, the environmental impact may be markedly more negative than is considered in current appraisals where it is assumed that patterns of land-use are fixed. My third suggestion for improvement is therefore that the consequences of transport changes in terms of economic, land-use and other effects resulting from faster travel should be explicitly forecast and examined.

4 LONGER-TERM IMPROVEMENTS 4.01 The fourth and fifth improvements proposed in the attached paper would involve • extending the formal benefit calculations so as to apply to the whole of the land-use/transport system rather than just to the transport system, so as to be able to measure benefits arising from land-use planning

• developing the methods of analysis and appraisal so as to allow the benefits arising is the indirect consequences of transport improvements to be identified more precisely. 4.02 For example, one of the “benefits due to faster travel” (to use the term proposed above) will often be that some people enjoy a greater choice of where to live and work – the benefit to them would ideally be identified as “benefits of living in more preferred location”. At the same time it would need to be recognized that competition in the housing market means that transport improvements may sometimes lead to price or rent increases resulting in some people being priced out of particular markets – so the same transport improvement might also result in “disbenefits of living in less preferred location” for some people. Ideally the pattern of gains to some groups in society and losses to others should be made explicit. 4.03 These fourth and fifth improvements require new developments in appraisal methodology, so I am not suggesting that they can be immediately adopted, only that these developments need to be pursued.

5 CONCLUSION 5.01 The first three improvements I suggest can all be put in hand using methods already available – indeed the first one is a matter of terminology rather than a substantive change. I would therefore recommend these for more urgent attention: 1. using terms such as “benefits due to faster travel” to reflect more exactly what is meant by the current TEE calculations of “time savings”; 2. ensuring and demonstrating that where “time savings” result in more and longer journeys, these are reported and their social and environmental impacts are clearly included in appraisals; 3. providing more systematic information about land-use and economic impacts (including property market effects) to clarify what forms the “benefits due to faster travel” will take, to inform assessment of the wider social, economic and environmental impacts of transport schemes. 5.02 These improvements would, I believe, enable a clearer and better informed debate about the longer-term impacts of transport strategies and schemes. In particular it would recognize that there are many such impacts which are of genuine public concern but which are not recognized as either benefits or disbenefits in the existing TEE calculations. 5.03 The question posed by the Committee which I have addressed is about the methods of assessment for transport schemes. There are obviously related questions about the application of these methods. I would argue that more emphasis should be placed on the detailed assessment and appraisal of transport policies, strategies and programmes, particularly in terms of wider economic and regeneration effects, with the assessment and appraisal of individual schemes being correspondingly reduced. Similar arguments have been put forward by many others, including Eddington. 5.04 I hope these suggestions are helpful to the Committee, and would be happy to expand on any of the points made here or in the attached note.

September 2010

Memorandum from ADEPT (TE 29)

1. Summary

1.1 ADEPT represents local authority strategic directors who are responsible for delivering public services that relate to the physical environment and the economy.

1.2. We strongly support the Government’s primary aims of reducing the public spending deficit and ensuring economic recovery. Indeed, we see sustainable economic recovery as a vital component of deficit reduction.

1.3 We consider that in order to achieve this there is a need to continue to invest in transport infrastructure; and in particular to recognise the key role of local authorities in its financing and delivery.

1.4 We support the central tenet of the Eddington study: that the performance of the UK’s transport networks is a crucial enabler of sustained productivity and competitiveness. However, we believe that some of his recommendations need revisiting, in particular, to give priority to the need to address the poor condition of existing assets, including local roads.

1.5 Priority for new transport schemes, including investment already planned but not committed should be given to those: • with strong economic benefits, • that support wider regeneration/growth strategies, • that complete gaps in the network, where this unlocks economic benefits.

1.6 We are encouraged by Eddington’s analysis which suggests that whilst transport projects can offer remarkably high returns generally, some of the best projects are small scale, such as walking and cycling schemes, and schemes that tackle bottlenecks. Therefore some degree of rescheduling of “grands projets” would release resources for investment in network maintenance and smaller scale projects with potentially greater returns.

1.7 There is some interchangeability between capital and revenue spending. For highway maintenance, the most important balance is that between planned, preventative maintenance, and reactive repairs. If preventative maintenance on any asset is less than adequate, this can initiate a ‘vicious circle’ where reactive repairs soak up an ever increasing proportion of available preventative maintenance budgets

1.8. Whilst we acknowledge that cost-benefit analysis provides a very useful starting point for assessment of transport schemes, we agree with the Secretary of State that there is a need for discretion which recognises that there are other relevant factors affecting prioritisation.

1.9 Following the revocation and abolition of regional spatial strategies ADEPT considers that significant changes are needed to improve strategic planning at the national and sub-national levels. County and unitary councils should prepare strategic spatial plans through robust partnerships at functional geographic levels. Investment in local infrastructure, for much of which county and unitary authorities are responsible, will be key to their delivery

1.10 We recognise, of course, the difficult spending decisions that lie ahead, but we also believe that through reducing bureaucracy, eliminating inefficiencies, taking a cross-agency approach to public spending at all levels and a willingness to explore alternative sources of funding, there is a way forward that balances the need for spending and investment and the need to cut the budget deficit.

2. ADEPT

2.1 The Association of Directors of Environment, Economy, Planning & Transport (ADEPT) represents local authority Strategic Directors who manage some of the most pressing issues facing the UK today. ADEPT membership is drawn from all four corners of the United Kingdom. Operating at the strategic tier of local government they are responsible for delivering public services that relate to the physical environment and the economy.

2.2 At the local level, ADEPT members, with their wide-ranging briefs, will have a key role in supporting and helping to deliver sustainable economic growth and quality of life throughout the country. We do this from a perspective of deep experience in delivering services in the context of politically driven ambitions and priorities and an understanding of the views and interests of our communities. Our approach is to focus on efficiencies and offer solutions rather then agonise over problems.

2.3 We strongly support the Government’s primary aims of reducing the public spending deficit and ensuring economic recovery. Indeed, we see sustainable economic recovery as a vital component of deficit reduction.

2.4 ADEPT considers that in order to achieve this there is a need to continue to invest in transport infrastructure; and in particular to recognise the key role of local authorities in its financing and delivery. In our view, investment in local transport infrastructure is not an option but a pre-requisite for supporting sustainable economic growth.

3. The Economic Impacts of Transport

3.1 Eddington recognises that transport impacts on the economy in a number of different ways, which can be assessed through a series of micro economic drivers of growth: business efficiency, investment and innovation; agglomeration economies; labour markets; competition; trade; and globally mobile activity. Such impacts are made by improvements to the speed, cost, reliability, network coverage, comfort or safety of the journey.1

3.2 For example, he states that a 5 % reduction in travel time for all business travel on the roads could generate around £2.5 billion of cost savings – some 0.2 per cent of GDP. Delays and unreliability on the network have direct costs to people and businesses, increasing business costs and affecting productivity and innovation. Eliminating existing congestion on the road network, if that were ever feasible, would be worth some £7-8 billion of GDP per annum. Although the emphasis of this paper is on economic impacts, ADEPT would also wish to emphasise the beneficial effects of congestion reduction on air quality and carbon reduction.

3.3 On the basis of this and other similar evidence, ADEPT supports the central tenet of the study: that the performance of the UK’s transport networks is a crucial enabler of sustained productivity and competitiveness. However, we would wish to emphasise the significance of local transport in reaching this conclusion.

1 The Eddington Transport Study: Volume 1, Chapter 2, December 2006

4. Local Transport

4.1 Local authorities are responsible for local roads, public transport, and car parks. Of the £22.6 billion spent by central and local government on transport in 2008/2009, nearly 54% was by local authorities.2

4.2 Their responsibility for roads embraces the construction, improvement, management and maintenance of highways in the interests of all road users including drivers of cars and goods vehicles, bus passengers, cyclists and pedestrians.

4.3 Local roads carry 68% of all road traffic (measured in vehicle km). Moreover, although the motorway and trunk road network carries the remaining 32%, nearly all of those trips begin or end on local roads also. In terms of road length nearly 97% of the GB road network is the responsibility of local highway authorities.3

4.4 Given the scale of the activity, it is disappointing that local transport does not have the same high profile as national and international transport, and its role in the national economy and in serving travellers is often undervalued. However, without good quality local transport infrastructure, the benefits of national level transport investment in, for example, reducing inter-city travel times would be undermined.

5. The Eddington Transport Study: Changes in Economic Conditions

5.1 Although the role of transport in the economy has not fundamentally changed since publication of Eddington’s report in December 2006, the demand for movement of people and goods in the short-term is clearly being affected by changes in the economic environment.

5.2 We therefore believe that some of his recommendations need revisiting. In particular, he considered that because the UK is already well connected, there were three strategic economic priorities for transport policy where “there are clear signals that (existing) networks are not performing”4: • Congested and growing city catchments • Key inter-urban corridors • The key international gateways that are showing signs of increasing congestion and unreliability5

5.3 He did not appear to give similar priority to the need to address the poor condition of existing assets, including local roads.

6. Spending Priorities to Support Economic Growth

6.1 ADEPT considers that protection for funding to maintain existing assets, particularly the highway network and its future resilience, is the first priority. This position would appear to be supported by the Chancellor, who made the point in his

2 Transport Statistics Great Britain, 2009, DfT 3 ibid 4 The Eddington Transport Study: The Case for Action, December 2006, para 9 5 We have some comments to make on the approach he adopts to reach these conclusions, in section 8 below, which could lead others to a different set of priorities.

emergency budget statement that it does not make sense to allow the existing infrastructure to crumble.

6.2 At a local level, highway condition and road safety frequently feature at the top of residents’ complaints lists. The severe winter weather of 2008/9 and 2009/10 and the consequent peppering of the nation’s roads with potholes have served to highlight this as well as the vulnerability of the network.

6.3 Priority for new transport schemes should be given to those: • with strong economic benefits, • that support wider regeneration/growth strategies, • that complete gaps in the network, where this unlocks economic benefits. Investment already planned but not committed should also be assessed against these priorities where necessary.

6.4 New schemes may be large or small, but we concur with Eddington6 in his view that High Speed Rail and other major rail improvement schemes should be subject to the same scrutiny and value for money tests as any other transport investment. At the very least, some degree of rescheduling of “grands projets” would release resources for investment in network maintenance and smaller scale projects with potentially greater returns.

6.5 We are therefore encouraged by Eddington’s further analysis which suggests that whilst transport projects can offer remarkably high returns generally, some of the best projects are small scale, such as walking and cycling schemes, and schemes that tackle bottlenecks.7

6.6 Significant reductions in overall investment would risk the loss of essential skills and capacity, both in the public and private sector, which will be needed when the economy allows headroom for expansion. Bearing in mind the long lead times associated with transport schemes, loss of capacity now would make it slower and more expensive to deliver investment later.

7. The Balance between Revenue and Capital Expenditure

7.1 In 2008/9 local authority investment in transport accounted for 24% of overall local authority capital spending – slightly less than on housing (25%) and slightly more than on education (23%)8

7.2 Approximately 56% of net local government transport expenditure is current spending on roads, revenue support for public transport, and concessionary fares, with some net income generated from car parking charges. The remaining 44% is capital, mainly invested in roads and public transport.

7.3 Although ADEPT supports the need for local authorities to retain flexibilities between sectors, it is concerned to protect as far as possible the overall level of local transport expenditure, including the avoidance of leakage from the sector entirely, rather than focus simply on the split between capital and revenue.

6 Eddington, ibid, paras 1.140 et seq. 7 Eddington, ibid, para 1.84 and paras 1.99 et seq 8 Source CLG 8 April 2010 7.4 As we state above, ADEPT considers that protection for funding to maintain existing assets is the first priority. In the case of highway maintenance there is some degree of flexibility in the definitions of capital and revenue expenditure. The key issue here is therefore not the balance between them, which the public may not understand or care about anyway, but between planned, preventative maintenance, and reactive repairs.

7.5 If preventative maintenance on any asset is less than adequate, this can initiate a ‘vicious circle’ where reactive repairs soak up an ever increasing proportion of available preventative maintenance budgets, compounding the problem by reducing still further the amount that can be spent on planned maintenance. (See Figure 1.)

Fewer Resources for Planned Inadequate Maintenance Maintenance

More Urgent Road Reactive Condition Repairs Deteriorates

Needed

Figure 1: The Vicious Circle of Inadequate Maintenance

7.6 The resulting deterioration in road condition and increase in reactive repairs have an impact on all road users and therefore on the economy generally in terms of increased vehicle running costs, increased journey times and decreased journey reliability, and ability and willingness to travel.

7.7 There is international evidence of these economic impacts and their links to inadequate road maintenance (although some are difficult to quantify). For example, research by the OECD9 on the relationship between road user costs and road condition suggested that road user costs on a very poor condition road could be up to double those for a comparable journey on a very good road.

7.8 With public transport, there is similarly some interchangeability between capital and revenue expenditure. For example, investment in bus lanes, bus stops, real-time information systems and indeed in the vehicles themselves can help reduce

9 Pavement Management systems, OECD, 1987

operating costs and therefore the need for revenue support. The appropriate balance between capital and revenue should be a matter for local appraisal.

8. Assessment Methodology

8.1 The Department for Transport has a cost benefit analysis model which produces for each major highway project a net present value. Local Highway Authorities are expected to use that model in assessing options for their major highway schemes, if they are seeking grant aid from DfT.

8.2 The Eddington Study appears strongly to endorse cost-benefit analysis, but expresses concern that “current methodologies do not reflect other potentially significant impacts on the economy. Assessments of overall benefits on a project-by- project basis could increase by up to 50% in some cases if new evidence concerning the importance of reliability and agglomerations were to be included in the appraisal of transport schemes…In addition, current methodologies do not fully encompass the environmental impact of projects.” He therefore recommends that “transport strategy and appraisal should continue to develop as our understanding evolves, and in particular that the full range of effects should be incorporated into appraisal as a matter of urgency.”10

8.3 Whilst we acknowledge that cost-benefit analysis provides a very useful starting point and we respect these aspirations, ADEPT’s experience over many years dating back to the Roskill Commission11 is that over-emphasis on cost-benefit analysis can produce outcomes which don’t necessarily reflect social and environmental impacts, and it can be very complex. Therefore we agree with the Secretary of State that there is a need for discretion which recognises that there are other relevant factors affecting prioritisation, both locally and in terms of national ranking (or indeed between modes of transport). Public consultation and independent scrutiny are important elements of this decision-making process.

8.4 ADEPT research12 shows that all areas can make a contribution to economic recovery, and we need to ensure that growth is supported as well as investment in declining areas. However, there is a clear risk that over-rigorous prioritisation on the basis of cost-benefit analysis could result in an increasing focus on a small number of areas of the country, where for example congestion problems are greatest.

8.5 Equally, we must avoid the trap of focusing only on under-performing city regions and other areas of the country with economic problems. This would be counter- productive and illusory as Eddington states13.

9. Future Strategic Planning Arrangements

9.1 Following the revocation and abolition of regional spatial strategies ADEPT considers that significant changes are needed to improve strategic planning at the national and sub-national levels.

10 Eddington, ibid, para 1.25 11 In 1971, the Report of the Roskill Commission on the Third London Airport selected as the location of a proposed third airport for London on the basis of cost-benefit analysis. The government later rejected the recommendation due to quality of life concerns in favour of a site at Maplin Sands, Foulness. It was eventually built at Stanstead 12 Making the Most of our Economic Potential – Looking Beyond the Core Cities. ADEPT/CEDOS 2007 13 Eddington, ibid, para 1.32 9.2 A national framework for spatial planning, informed by local government practitioners and other relevant stakeholders, is needed to guide local areas on assisting delivery to meet national priorities and join up Government policy in areas of crucial importance.

9.3 ADEPT considers there is a need for a single tier of strategic spatial planning between national and local levels. County and unitary councils should prepare strategic spatial plans through robust partnerships at functional geographic levels. These councils have the expertise and knowledge of cross-boundary working on strategic matters and are also the providers of key infrastructure. The plans would identify and co-ordinate cross-boundary issues and provide a policy approach on key issues including transport and other infrastructure.

9.4 There is no “one-size-fits-all” solution to defining the geographic area of cross- boundary working, which will vary according to local circumstances and should reflect economic, social and environmental realities. This approach would seem to fit well with the Government’s initiative on LEPS.

9.5 Local infrastructure investment is key to the delivery of sustainable communities and economic recovery, and county and unitary authorities are responsible for delivering much of it. They have developed considerable expertise in preparing Local Transport Plans over the last decade. These are essentially medium-term investment programmes embracing highway maintenance, integrated transport packages and major local schemes.

9.6 County and unitary authorities often have to rely on developer contributions to fund transport infrastructure. Various models for securing such contributions are available, including securing site-specific infrastructure through planning obligations and using levies/tariffs for infrastructure that is needed to address the cumulative impact of new development. ADEPT supports both approaches but more needs to be done to ensure that necessary infrastructure is delivered.

9.7 ADEPT has expressed some specific concerns about the Community Infrastructure Levy (CIL) because in two-tier areas, County Councils are neither Charging Authorities nor Planning Authorities even though they provide a large proportion of the infrastructure. In the absence of effective safeguards, ADEPT considers that these strategic local authorities need to retain the power to secure such contributions via Section 106 and Section 278 agreements.

10. Creating Headroom

10.1 We recognise, of course, the difficult spending decisions that lie ahead, but we also believe that through reducing bureaucracy, eliminating inefficiencies, taking a cross-agency approach to public spending at all levels and a willingness to explore alternative sources of funding, there is a way forward that balances the need for spending and investment and the need to cut the budget deficit.

10.2 For example, there is real potential for: • the Government to rationalise existing agencies and funding streams to reduce the administrative costs and central constraints on public service organisations that lead to sub-optimal outcomes and inefficiency; • a much more collaborative ‘joint team’ approach with Government to deliver major transport schemes; • better joining up of Government policy to make it possible to deliver more efficiently in localities e.g. putting hospitals where there is good access; • greater drive/direction for central agencies to pursue collaborative procurement with local government;

• protecting maintenance spend and planned asset management which will deliver efficiency savings • focusing on behavioural change to make more efficient use of the transport infrastructure and reduce the need for investment; • control of utilities to prevent them undermining efforts to manage and maintain highways and ensure full cost recovery; • investment in high-speed broadband to maximise economic competitiveness, to reduce travel demands and to tackle digital exclusion and the growing digital divide.

September 2010 Memorandum from Wharf Weston (TE 30)

1. Summary

1.1. This submission addresses one of the questions that the Select Committee for Transport have asked:

‘Are the current methods for assessing proposed transport schemes satisfactory?’ ’

1.2. The submission argues that the DfT’s approach has serious defects, resulting in recommendations that are wasteful of public funds. The key concerns are:

ƒ Inappropriate forecasting methodology for long term projections of demand where demand saturation is an increasing risk ƒ Inadequate account of uncertainty is taken which requires flexibility for long term projects ƒ Lack of a visible framework for generating and assessing project ‘alternatives’ to ensure objectivity and value for money drives the choice of publicly funded projects ƒ The unit values attributed to journey time savings by DfT ignore key developments ƒ A material monetary cost (property blight) is excluded from DfT’s assessment approach ƒ The impact of competition is persistently ignored.

1.3. Some of these criticisms are not new, but the DfT has failed to learn lessons of previous projects, despite studies investigating past failures. The assessment prepared by High Speed 2 Ltd (HS2 Ltd) and DfT for HS2, is a revealing current case study and is used to illustrate the concerns.

2. Introduction

2.1. Appraisal should not be a process justifying investments that are politically driven, ignoring or discarding facts and options that are impediments to reaching the ‘right’ answer. The misallocation of public funds to unneeded and over-expensive projects must be avoided. The arrangements must ensure that only schemes that represent good value for money and are superior to alternatives are selected.

2.2. The DfTs approach is in principle reasonable:

ƒ It combines limited cost benefit analysis (for impacts apt for expression in terms of money) with other criteria that, while capable of objective assessment, are less readily monetarised eg environmental impacts. The decision maker is left to consider the particular combinations of value for money and other factors in making a choice. ƒ The methodology and many of the assumptions or parameters to be used for assessing transportation schemes are published by DfT in webtag (guidance on the DfT web site). This promotes consistency and the use of validated assumptions.

2.3. However there are weaknesses in DfT’s approach which may lead to poor decision making.

2.4. DfT continue to apply a ‘predict and provide’ approach to rail demand, despite its abandonment for roads, and recent effective abandonment for air (with a policy for no new runways for London airports). While not developed in this submission, with increasing environmental concerns and the creation of a portfolio responsibility for ‘non travel’, a reconsideration of this policy for rail seems overdue.

3. Uncertainty and demand projections

3.1. DfT have been criticised for over-estimating demand for major rail projects previously. The Select Committee on Public Accounts criticised persistent over-estimation for CTRL.1 3.2. HS2 Ltd’s demand estimates are high compared to other reputable forecasts.

Table 2: Long distance rail growth forecasts

Source Date Period Increase Annual rate (DfT2 2007 (July) 2006-2027 65% 2.4% (1.8% from 2017)) DfT3 2007 (July) 2006-2030 73% 2.3% Network Rail4 2010 (August) 2008-2034 70% 2.1% Prof J Dargay5 for ITC 2010 (January) 2005-2030 35% 1.2% HS2 Ltd (Atkins) 2010 (February) 2008-2033 133%6 3.4% Average (based on rates) 2008-2033 75% 2.3% ITC is the Independent Transport Commission

3.3. There are strong reasons to believe that all these forecasts will prove overestimates, as they are founded on elasticities with GDP (so that forecast demand increases more quickly than GDP), but this relationship has been breaking down for domestic travel. Clear evidence of saturation limiting recent growth to that of the population has been emerging (see National Travel Survey7, Dr D Metz8, Bluespace Thinking9. The graph shows that since 1995 increases in wealth (real Gross Value Added per capita) have not been matched by any increases in domestic travel.

3.4. DfT correctly observed in their 2007 analysis10 that the relationship between transport demand and GDP has been changing. But this is not generally recognised in demand forecasts.

Figure 1: Travelling time, journey numbers and distances per person (cf real GVA/capita)11

250 GVA/capita (YBGT)

200

150

100

3.5. Just projecting forward recent trends in rail demand ignores the broader picture. There is no long term relationship between GDP and long distance rail travel. From the 1950s to the early 1990s, despite massive increases in GDP, rail usage enjoyed no increase. It is likely that the recent increases are a response to rail improvements, and modal switching in the context of saturating overall demand, not a consequence of economic growth.

3.6. Inadequate account is taken of market maturity and saturation. This, if uncorrected, will lead to a major misallocation of funds when applied to assessing long term projects, as expenditures will be made to accommodate demands that will not materialise.

3.7. At minimum there is risk that the high levels of growth (267%) predicted by HS2 Ltd will not occur. This has important consequences for the choice of options. HS2 is inflexible – a new railway is built to Birmingham or it is not: it is all or nothing. In contrast the rail and road alternatives for improvement existing infrastructure are incremental, have short lead times and can be implemented against the emerging trend in demand. The alternatives are robust to shortfalls in demand, HS2 is not. Any consideration of risk (as commended by the Treasury Green Book and DfT’s 2007 White Paper) favours adoption of the alternatives. A methodology is needed to make this happen.

3.8. To illustrate, if we consider each of the estimates in Table 2 equally likely, the expected NBR of HS2 becomes 1.3512. In contrast the NBR of the alternative schemes might increase, as only the easier and cheaper options would need to be implemented.

3.9. The 2007 White Paper recognised the problems of long term forecasts and the need for flexible solutions:

‘Forecasts have been wrong before, and any strategy that tried to build a rigid investment programme based on fixed long-term forecasts would inevitably be wrong again. To overcome this challenge, the guiding principles in this strategy are: • To invest where there are challenges now, in ways that offer the flexibility to cope with an uncertain future; and • To put in hand the right preparatory work so that, as the future becomes clearer, the necessary investments can be made at the right time.’13

3.10. Unfortunately DfT’s assessment methodology does not reflect this advice.

4. Alternatives and their assessment

4.1. DfT’s processes neither generate an appropriate range of alternatives, nor are they properly employed in option selection. The effect of this deficiency is that DfT recommend projects that are inferior to entirely feasible alternatives. This is a persistent problem. The Foster Report14, observes inadequate assessment of alternatives to the Intercity Express Programme

‘I am not convinced that all the credible alternatives to Intercity Express Programme (IEP) have been identified, worked up and assessed on an equal footing with it…….. The team’s preliminary analysis suggests that these alternatives could achieve better value for money than IEP, realising a greater proportion of the currently desired IEP benefits with reduced expenditure over the coming 15 to 20 years, and especially during the next decade.’

4.2. Similarly for HS2 there are weaknesses in the option development and the selection process:

ƒ The ‘do minimum’ case is inadequate– it cannot meet the projected demand and so when compared with HS2 causes key benefits (on crowding) to be overestimated ƒ The HS2 Ltd alternative is only for a new railway (not an improved existing one) and the DfT developed alternatives are not required to be used in the selection process ƒ DfT alternatives do not include a least cost option that meets the projected demand ƒ The assessment rejects alternatives that have better Net Benefit Ratios than HS2 (on the basis they do not provide surplus capacity – yet they do meet the demand required) ƒ There is no assessment involving incremental benefits over incremental costs of HS2 compared to the best alternative

The HS2 Ltd ‘do minimum’ reference case

4.3. For HS2, the assessment is done against a ‘do minimum’ reference case for rail and road network development, which essentially only incorporates committed future developments or those very likely to happen within the next 10 years. This means it will fail to meet the projected demand growth.

4.4. Appraising HS2 against this case will overestimate key benefits, eg crowding. This is because, with predicted passenger trips into London greatly outnumbering those originated from London15, an all day load factor of 81%16 is unachievable. Like commuter trains, those running against the flow will be sparsely occupied – but unlike commuter trains, passenger numbers cannot be expected to continue to grow if this necessitates increasing levels of standing.

DfT developed alternatives

4.5. DfT had some credible alternatives developed by Atkins, but they were not seriously considered as alternatives to HS2, or used as a basis against which to assess HS2.

4.6. Importantly, no attempt was made to develop the least cost means of meeting this demand. Generally this is achieved by running longer trains. This option was developed as ‘Rail Package 1’, but was dismissed as it could not accommodate all the projected demand without infrastructure amendments that were claimed to be impractical. But it was also deliberately not incorporated in other packages of changes17, although it would have made them both less expensive and less disruptive means of meeting demand. Indeed it was not even costed.

4.7. To omit the least cost approach only makes sense if there is no interest in developing the best value for money option. A 65% increase in demand could be accommodated by longer trains18 with no further infrastructure works beyond that scheduled for 2012 and part of the ’do minimum’ reference case (except perhaps some limited work at Euston). Currently WCML Pendolinos have four of their nine cars as first class. With the decline in first class travel, it may be possible to reduce this to increase overall capacity without loss in revenue. Consequently, over half the projected demand (a 133% increase without HS2) could be satisfied with no disruption to services at all. Typically this means of satisfying additional demand is commercially justified, and would not require DfT subsidy.

4.8. Rail Package 2 (RP2)19 allows projected demand to be met, and while HS2 Ltd predict that it would generate less benefit than HS2, it has much lower costs, and so has a better Net Benefit Ratio (NBR). But DfT do not use RP2 as the comparison basis for HS2, to judge whether the additional benefits of HS2 justify the additional costs of HS2. This is not because it had been rejected on the basis of other criteria in the assessment framework, as it has better sustainability.

4.9. RP2 is rejected primarily because it does not provide as much additional capacity as HS220 – despite the fact that on HS2 Ltd’s demand estimates there is not actually any need for this additional capacity. The creation of un-necessary capacity hints at the misallocation of resources rather than compelling justification. Other ways in which HS2 is held superior (journey time, reliability) are already incorporated in the assessment of NBR for which RP2 is better than HS2.

4.10. In a climate of public spending cuts, to reject a more cost effective solution on the basis it does not provide as much excess capacity is profligate. As RP2 satisfied the forecast demand, it seems common sense to use this rather than an unrealistic ‘do minimum’ case.

4.11. Had RP2 been used as the base against which to assess HS2, this would have shown that HS2 could not be justified in terms of its NBR. The table below summarises the costs and benefits for HS2 and the best value for money alternatives. If we assume that all the benefits of RP2 and half those of Road Package 2 are benefits that HS2 would otherwise deliver, we can see that HS2 has a net benefit ratio of 1.88 (instead of 2.7).

Table 1: HS2 and alternatives: net benefit ratios

Against ‘do minimum’ case (source: HS2 Ltd) Incremental case HS2 Rail Package 2 Road Package 2 HS2 Present value of benefits 32.3 7.35 5.14 22.38 Present value of net cost 11.9 2.03 1.40 11.9 Net Benefit Ratio 2.7 3.63 3.66 1.88 4.12. In reality some combination of parts of Rail Packages 1 and 2 would be necessary to accommodate the demand growth projected by HS2 Ltd before HS2 is completed.

4.13. DfT’s process also fails to do justice to alternatives, assuming a common start date for HS2 and the alternatives of when HS2 could be complete. This fails to credit the alternatives with a benefit stream that could predate that of HS2. This means that the NBRs for the alternatives will be significantly understated compared to an assessment that allows phased early implementation of alternatives against emerging demand.

4.14. Under DfT’s methodology there is no requirement to adopt the best value for money solution, nor, when selecting a different option, is there a requirement to justify this in terms of the other criteria in the assessment framework (but not incorporated in the cost benefit analysis).

5. Value of time savings

5.1. Time savings are the principle benefit used to justify government subsidy in transport investments. However, the webtag values fail to take account of some travelling time being useful and are based on out-of-date data.

Usefulness of some travelling time

5.2. Webtag values for time savings derive from a resource cost for business travel (the cost to the employer of the time) and a willingness to pay basis for commuting and leisure travel.

5.3. Time spent travelling is not split between useful and non-useful time. For both business and other travel, any saving of time spent on trains is credited at the full value of the entire time saving. This is inappropriate for long distance rail journeys. It ignores that some of the time within rail journeys is useful and productive. Mobile phones, laptops and mobile broadband can make the train as productive as the office, and similarly useful for commuters and leisure travellers.

5.4. However, DfT’s webtag guidance disregards the usefulness of this time – despite it being generally recognised21 that shortening long distance journeys may have little or no value for saving productive time, including in work sponsored by DfT:

‘Rail Business travellers in the UK are now using travel time highly efficiently. Marginal reductions in travel time (10, 15, 20 minutes) are not guaranteed to lead to much extra productive time at work, whether in the 'usual workplace' or elsewhere.’ 22

5.5. For business travel, if saving travelling time does not reduce unproductive time, the time saving has no value to business. For a project starting in 15 years time, it is not credible that technology will not permit business travellers to be fully productive.

5.6. For leisure travellers and commuters, willingness to pay is the basis for valuing time savings, which relates to the degree of disutility of travelling time. Different values are identified for different travel activities – ie waiting for transport is costed at 2.5 times actually travelling, walking to access public transport is valued at twice the value of travelling23, but there is no value specific to useful time on trains.

5.7. While leisure and commuting time on trains cannot be used as flexibly as time at home or some other free time, it may be used in an increasingly broad range of activities that must be substantially eroding previous disutility24.

5.8. HS2 Ltd estimate that time savings are worth more than £13bn25 (£23bn26 including reliability) and this is mainly the value to business. It seems unlikely that the savings are worth more than a small fraction of this (perhaps a quarter). A £10bn reduction alone would reduce the NBR from 2.7 to 1.87. The road and rail alternatives would not be similarly affected: time in cars is likely to remain much less useful, and the rail package benefit is mainly crowding reduction (worth £5bn27 for HS2, and trains are less crowded under RP2 than HS2) and from increasing service frequency (reducing waiting time that is not useful time). 5.9. The cost of business time will increase with employee costs, which are expected to rise due to continual improvements in productivity. However, if the relevant travel time is productive, increases in the unit value have no effect. For commuting and leisure time, the money value of time can be expected to increase, because the utility of money falls with increasing income. But the disutility of time during long rail journeys is or will become low, so that while the value of time savings generally can be expected to increase in money value, these savings will be of modest value.

5.10. Serious crowding may prevent travelling time from being useful. This is a further reason for increasing capacity incrementally in line with emerging demand and in advance of HS2’s start data.

Out of date data

5.11. The value of business travel time on trains has not been updated to reflect recent trends. Business travel by train is increasing (despite a fall in total business travel), so that while rail business travellers’ average salary was previously much higher than the all transport average, the additional business travellers will have reduced the rail average.

5.12. By using 2002 information28, DfT are substantially overestimating business rail travellers’ salary levels. If the numbers of business travellers increase by a further 360%29 to 2033 (as HS2 Ltd forecast), while population only grows by 16.6%30, using 2002 data will give a substantial overestimate of value.

5.13. This illustrates how important it is that webtag parameters are evidence based and properly reflect known trends.

6. Ignores a material monetary cost

6.1. DfT assessments deliberately leave out a social cost that can be monetarised – the reduction in value of properties near line of route31. This cost is not included anywhere in DfT’s assessment framework. The costs of compensation are included, but these are relatively small. Blight is not due to a redistributive effect (with losses offset by gains elsewhere), but a result of degrading the local environment.

6.2. Property blight data is not readily available because currently the individual and not public purse meets the costs of the blight that transport infrastructure projects generate. It is, however, not difficult in principle to estimate the costs of property blight, as relatively simple techniques can establish divergences in property value trends for a locality. An unsuccessful attempt was made in the 1990s, as reported by the Interdepartmental Work Group on Blight32 However, modern positional software has been extensively used to map dwellings and other buildings, making the identification of the large numbers of properties needed to provide reliable analysis easier. A study to quantify the effects of blight is being planned for HS233.

6.3. Just as social benefits (eg time savings) are included in the cost benefit assessment, the social cost of blight should also be included – irrespective of who pays it.

7. Competition

7.1. DfT assessments are persistently marred by a failure to adequately consider competition. The Channel Tunnel failed to take account the response of ferry companies. The CTRL failed to addressed the impact of low-price air travel. The high speed Kent commuter services have failed to recognise that passengers would prefer the residual ‘classic’ services with lower fares and overall shorter journey times to commuters’ places of work.

7.2. HS2 Ltd assume-away the competition between HS2 and conventional services:

‘ HS2’s approach has effectively assumed a regulatory framework that allows the joint (social) optimisation of both high speed and classic rail services.’34 7.3. Unless competition is suppressed, conventional long distance services will compete with HS2. Competition will reduce both the number of passenger on HS2 and overall revenues, which may force HS2 to run with an operating subsidy. The natural use for surplus long distance rail capacity is not to provide more local services (that are already only provided at their current level due to subsidy) but to undercut the high speed services on price (as does to the WCML services for London-Birmingham).

7.4. If HS2 fails to deliver additional fares income because of competition, this alone reduces the NBR to 1.20. The DfT assessment process should involve proper consideration of competition.

1 Select Committee on Public Accounts, Thirty eighth Report, 27 March 2006 2 ‘Delivering a Sustainable Railway, Summary of Key Research and Analysis, July 2007’, DfT. Slide TPF9a, page 27 3 ‘Delivering a Sustainable Railway’, Cm 7176, Dft, July 2007, paragraph 6.6, page 60 4 ‘Planning Ahead 2010’, page 6, section 2.10, Network Rail, ATOC and Rail Freight Operators Association, August 2010 5 ‘The prospects for longer distance coach, rail, air and car travel in Britain’ J M Dargay, January 2010 6 ‘Command Paper 7827’, March 2010, section 5.38 page 91, growth without HS2 uplift 7 National Travel Survey, 2009, Tables NTS0403 and NTS0404 8 ‘Saturation of demand for daily travel’, David Metz, May 2010. published in’ Transport Reviews’ 9 ‘A review of high speed rail – HS2 proposals’, Bluespace Thinking Ltd, April 2010, section 4 10 DfT op cit, slide EST1, page 3 11 After Dr Metz based on NTS 2008 Table 2.1 with GDP trend added 12 Reducing all benefits in the proportion to the reduction in forecast passengers (assuming HS2 uplift equals background growth in demand, as in HS2 Ltd analysis) 13 ‘Delivering a Sustainable Railway’, Cm 7176, Dft, July 2007, page 9 14 ‘A Review of the Intercity Express Programme’, Sir Andrew Foster, June 2010, page 22 15 Webtag elasticities for rail travel on GVA for journeys to London are 2 to 3 times those of journeys from London (Table 11.1, Tag 3.15.4), meaning that growth will be predominantly to London 16 High Speed 2 Strategic Alternatives Study Strategic Outline Business Case, Table 3.7, page 38 17 ‘High Speed 2 Strategic Alternatives Study: Rail Interventions Report’., page 34 18 Lengthening 31 sets to 11-car from 9-car and having 4 new 11-car sets are planned for operation in 2012. This increases capacity by 32% (source Virgin Rail 31 July 2008). Lengthening the rest of the fleet to 11-car creates a further increase in capacity of 14%, and extending all to 12-car a further 19%, totalling 65%. 19 described in High Speed 2 “Strategic Alternatives” Study: Rail Interventions Report, and the economic assessment is in ‘High Speed 2 Strategic Alternatives Study: - Strategic outline business case’ 20 Command Paper 7827, Section 2.20 to 2.22 21 See for example ‘Travel Time Use in the Information Age: Report’, Centre for Transport & Society, UWE, Bristol, and Centre for Mobilities Research, Lancaster University, October 2007, or ‘The use of travel time by rail passengers in Great Britain’, Glenn Lyons, Juliet Jain and David Holley, January 2007 22 ‘The Productive Use of Rail Travel Time and Value of Travel Time Saving for Travellers in the course of Work’ The Mott MacDonald IWT Consortium, 2008 23 Webtag 3.5.6D, paragraphs 1.2.19 and 1.2.20 24 See ‘Values of Travel Time Savings in the UK’, P J Mackie, M Wardman et al, January 2002, page 50 25 ‘High Speed 2 Demand Model Analysis’ section 10.4.3 26 From HS2 Ltd spreadsheet HS2_Day1cWiderImpacts_MidRange.xls, sheet SummarybyArea, obtained under FOI10-039 by Dr J Savin, 4 June 2010 27 ‘High Speed 2 Demand Model Analysis’ section 10.4.3 28 Tag Unit 3.5.6, Dft, March 2010 29 24% of Virgin Rail’s customers are travelling on business (source ‘National Passenger Survey Wave 2,1 Autumn 2009, ’ Passenger Focus, page 21), which is forecast by HS2 Ltd to increase to 30% with an overall demand that increases by 267% 30‘ National Population projections 2008 base’ ONS, 21 October 2009, Table 1 31 HS2 Ltd gives this explanation of the assessment that they had made in a meeting on 17 August 2010 32 ‘Interdepartmental Working Group on Blight : Final Report’, December 1997 33 by HS2 Action Alliance working with Councils, eg Buckinghamshire County Council 34 ‘Outline for Technical Annex’, 091123-ACP technical note, HS2 Ltd, page 19 ‘Remaining Issues’, This document records issues raised by the Analytical Challenge Panel

September 2010 Memorandum from BAR UK (TE 31)

Introduction The Board of Airline Representatives in the UK (BAR UK) welcomes this enquiry, and also the opportunity to provide a response on behalf of its member airlines.

BAR UK represents the interests of almost 90 scheduled airlines with UK operations or sales networks.

Oxford Economic Forecasting’s ‘The Economic Contribution of the Aviation Industry in the UK’ (2004) established that the industry generated £11.4 billion value-added in 2004, directly employed 186,000 people (full-time equivalents), and helped to support an additional 520,000 jobs.

London is a key ‘hub’ airport, whose success is reliant on providing connecting passengers and freight within, and between, airlines. Without such connectivity, the profitable economics of many routes and airlines would be called into question.

However, even today it is not at all clear that policymakers understand the concept of hub airports, and the development of competing hubs in other states.

Terms of reference It is wholeheartedly agreed that the Committee’s term of reference that ‘ a good transport system is a pre-condition of the long-term growth required to drive the UK’s economic recovery’.

Points of submission 1. Whilst BAR UK is not party-political, it is heavily involved in the effects of the aviation and transport policies of the government of the day.

2. In the times since the Eddington Report was commissioned and published, those policies have changed.

3. Whereas then there was a distinct policy of enabling aviation infrastructure growth, within strict environmental targets, the current policy seems to be one of denial.

4. Today, there is an outright policy of denying additional infrastructure where it is needed most. However, the Coalition’s policy of ‘Better not bigger airports’ is simply not a sustainable business model for the economic growth of the UK.

5. This ‘denial’ policy is epitomised by the policy of not permitting additional runway capacity in South East England, the region that is the main economic driver of the UK.

6. It is a fact that London Heathrow Airport is the prime location amongst all UK airports, and that is where the current policy will prove most negative.

Competing airports abroad have their pleasure at the current policies, and cannot believe their good fortune. Similarly, airline executives from the UK and overseas

express great dissatisfaction and frustration at being denied the opportunity to expand their businesses.

7. Growth in aviation infrastructure is urgently required. It is needed for: a. Runway capacity b. Aircraft stand and parking capacity c. Aircraft taxiway capacity d. Resilience capability e. Protection and enhancement of domestic and regional flights f. Increased ‘hubbing’ capability g. Minimising air traffic control stacking of aircraft prior to landing.

8. Allied to the lack of mainline and High Speed rail connectivity, aviation taxation, and evermore demanding visa requirements and their high costs, there is the distinct threat that lack of investment in aviation infrastructure will see opportunities for economic growth simply by-passing Great Britain.

The compromise proposals contained within the Mawhinney report would lead to high-cost fares for a low-speed service.

9. Consequently, without a change of policy, BAR UK contends that the capacity for economic growth of this country is greatly inhibited, and will quite possibly decline if international companies find it easier to trade elsewhere.

10. The concept of hub airports is either not understood by policy-makers, or is being ignored. Whatever the reason, the point is made that hub airports have been developed in other states, in direct competition to the UK, and their numbers are growing.

11. Competition is no longer in the domain of a few European cities like Amsterdam, Paris or Frankfurt. It now extends to various cities in Europe and other regions in Africa, Asia and the Middle East.

12. Until there is a positive and defined UK aviation strategy, this country is in danger of facilitating the erosion of economic activity and watching it happen from the sidelines.

13. The prospect of a airport has featured as an alternative to Heathrow. Apart from the fact that it is totally unclear who would pay for such a multi-billion pound development, I can advise that the BAR UK airlines are firmly against any such scheme. There are a number of very good reasons, details of which can be found at http://www.bar-uk.org/topics/thames.htm .

Funding 14. In respect of expenditure, the Committee is asked to bear in mind that UK airport infrastructure is fully-funded by airport operators and their airline customers. The scale of any public spending related to such additional infrastructure is minimal, yet the great benefits that would accrue are to the country as a whole.

15. It is also most worthy of note that the airline industry, which is operating in its leanest of times, is unequivocal in stating its willingness to pay its share of new aviation infrastructure investments, and that includes those airlines based at competing hub airports abroad.

Summary a. A revised and positive aviation policy, for the good of the UK, is urgently required.

b. New aviation infrastructure is largely privately funded, with minimal impact on Treasury expenditure.

c. A positive policy of rail connectivity at major airports is required.

d. Economic activity in the UK is already being lost. The longer the policy limbo, the more that Britain will be by-passed.

e. Doing nothing is not a viable option.

September 2010

Memorandum from North of Tyne Transport Group (Supported by Inclusion North) (TE 32)

Where has this information come from?

The information below has been brought together by a group from the North East region. Most of this group belong to their local Learning Disability Partnership Boards. It includes the views of the group and views taken from a North East regional event attended by 150 people. The group is supported by Inclusion North.

The focus of the event was to make transport the best that it can be for disabled and older people in the region. This group want to carry on this work and includes:

• Voluntary and community sector representatives • Local authority representatives • Self advocates • Regional transport executive representatives

Overview

People with learning disabilities (and the disabled community) do not have the same life chances and opportunities as the non disabled community. This includes:

• Access to health services • Access to Education • Access to Employment

One of the main barriers to these life chances is access to the right transport in the right place at the right time.

This means people with learning disabilities (and often their family members) do not get the same life chances to become full citizens who can make their full contribution to the local and national economy.

The main headings

1. Better access to public transport would mean that disabled and older people would have better access to their area (and beyond). This means they could contribute to local businesses and tourism.

2. Better access to transport would mean that more people with learning disabilities could get into paid jobs and move away from state benefits. This includes people starting up their own ‘micro‐enterprise’ creating work for themselves and others.

Many people with learning disabilities also volunteer. To keep this going access to good transport is essential. The move towards big society means that volunteering will be a big part of this and people with learning disabilities have a big part to play.

3. Access to the right transport means people with learning disabilities often experience ill health. One person said that not having access to public transport meant he felt depressed at not being able to see his friends and family. He also had little chance of getting a job due to transport issues.

The result was that he would often spend (expensive) time in hospital being treated for depression.

4. Personalisation (choice and control) ‐ This gives disabled and older people the chance to spend the money they are entitled to for their support in a much more flexible and cost affective way. This includes moving away from expensive block transport contracts.

For example; people with a personal budget might use this money to pay for a friend or neighbours road tax. In return they would give them lifts to where they want to go.

Another example might be paying towards some bodies’ season ticket to the football. In return the person would receive support to use public transport to get to the match.

September 2010

Memorandum from the Norfolk Chamber of Commerce (TE 33)

1. Introduction

Norfolk is a great place to work with many thriving businesses and several sectors with great potential.

However, the county’s transport links leave much to be desired. Improvements will provide a great boost to Norfolk’s economy and its businesses, and will help right the current perception that the county is rather isolated.

2. How do the failings of the transport networks impact upon business productivity?

Norfolk businesses’ lack of confidence in the county’s infrastructure is highlighted by the fact that only 55% think that they will benefit from the 2012 Olympic Games due to transport deficiencies.1

“Norwich is one of the UK's top 10 shopping destinations, but despite that some major retailers have held back from investing there because of the threat of hold‐ups to deliveries on the A11.” (Simon Wright MP)2

3. What sort of schemes should be prioritised and why?

3.1 A11 Dualling Scheme

• The A11 Fiveways to Thetford dualling scheme will offer time savings of £355.5m for businesses travellers out of an overall economic benefit of £557.5m. Wider economic benefits are estimated at £135m. 3 • Currently there is a perception that Norfolk is isolated; improved roads and reliability of journey times will give confidence to existing businesses to expand and new ones to start up in the Norfolk area.

3.2 London‐Norwich Rail

• Currently the journey time from London‐Liverpool St to Norwich takes around 1hr 50mins, a long time when compared to the London‐York journey of just 2hrs. • Reducing the journey time to 90minutes can bring £3.5bn of direct and wider economic benefits. • Facilities on trains are also below standard compared to many other lines.4

3.3 The Northern Distributer Road (NDR) & the Postwick Hub Improvement

1EDP Tourism Business Survey 2010, http://services.edp24.co.uk/norfolk/tourism‐business‐survey‐ 2010/olympics_2012.aspx 2 Hansard House of Commons Debates, 27 July 2010 3 EEDA, A11 Wider Economic Impacts Study, Final Report, Jan 2008. 4 SNF (Norwich in 90), Response to DfT, Greater Anglia Franchise Consultation

• The construction of the NDR will help facilitate the East of England Plan’s (EEP) allocation of 35,000 jobs to the Norwich Policy Area. Two of the three strategic employment areas identified by the EEP - Norwich Airport and Thorpe St Andrew – will be served by the NDR • The envisaged building of 6000 homes in the north-east of Norwich will be impossible without the NDR • The NDR will also result in the removal of through traffic of an estimated 19,000 cars per day from the city centre.

The Postwick Hub improvement will:

• Release existing employment development land, namely Broadland Business Park Phase 2, which cannot proceed due to lack of highway capacity at the Postwick Junction; • Allow for the development of 60,000 square miles of business park (Broadland Gate); • Make available more land for business park development and housing growth (including 600 houses at Brook Farm); and, • expand the highly popular Postwick Park & Ride.

4. What is our experience of transport decision‐making? And how is a private sector perspective accommodated in that decision‐making process?

Case Study: A11 Fiveways to Thetford dualling scheme

• The Norfolk Chamber of Commerce and Shaping Norfolk’s Future were heavily involved in the campaign to complete the dualling of the A11 and brought their supporting evidence to the Public Inquiry (Nov 2009‐Jan 2010). • 16,000 representatives from the Norfolk business community signed a petition which was presented to Government in November 2008.

Overall, Norfolk businesses and local authorities have a successful background in working together and have developed strong partnerships.

September 2010

Memorandum from the Northern Way TE 34)

Summary

• This submission is by the Northern Way, the public and private sector partnership established to promote the North’s productivity and output growth and currently funded by North West Development Agency, One North East and Yorkshire Forward.

• UK economic conditions have materially changed since the Eddington Transport Study but we see no evidence that the recession has changed the relationships between transport connectivity and economic growth that Eddington considered or Eddington’s prescription, namely the economy needs adequate and appropriate connectivity within and between city regions, as well as to and from port and airport international gateways.

• Our evidence identifies key differences between transport demand in the North and the South. Existing travel patterns in the North are more sustainable. Car trips are shorter, bus use higher and rail use is growing but before the recession every percentage point of economic growth in the North led to transport demand growing more strongly in the North when compared with the South. Evidence shows that the North has a higher elasticity of transport demand.

• The recession has brought to the fore the importance of well targeted investment to facilitate economic growth. This is pressing in the North given that it has been most affected by the recession and the projections that the North’s economy will be most affected by public sector spending cuts. As we move out of recession, without investment the more sustainable pattern of transport demand in the North will be lost.

• The Northern Way’s evidence shows that what is needed to foster the North’s economic growth is a balanced approach that looks at the connectivity needs of travel within city regions and the links between the North’s city regions. Also important are links between the North and London with its World City functions, and international connectivity via port and airport gateways within the North and elsewhere in the country.

• The split between capital and revenue budgets can be a potential barrier to implementation. We would welcome further relaxation of the demarcation between capital and revenue budgets.

• The Northern Way supports the concept of NATA appraisal but considers that development of its processes and practices is needed. Also consideration needs to be given to how cost benefit analysis is used in decision making.

• There has been recent very valuable work on how transport investment can influence the size of the economy as measured by GVA. Our evidence is that more work needs to be done before such techniques can become part of mainstream appraisal.

• The Northern Way has filled a ‘strategic gap’ by acting as a counterbalance to Scotland and London where there are strong statutory bodies in Transport for London and Transport Scotland to make the strategic case for transport investment and progress implementation.The abolition of regional apparatus has the danger of creating a strategy gap for the identification and promotion of transport interventions of sub-national importance. Local Enterprise Partnerships will need to work together and be sufficiently resourced if they are to fill this gap. The Northern Way 1. This submission has been prepared by the Northern Way, a public and private sector partnership currently funded by the three Northern RDAs (North West Development Agency, One North East and Yorkshire Forward). Our goal is to improve the sustainable economic development of the North towards the level of more prosperous regions by growing the North’s economy faster. The Northern Way Growth Strategy 2. The 2004 Northern Way Growth Strategy Moving Forward: The Northern Way sets out how the Northern Way seeks to bridge the output gap in the North’s economy. It highlights transport as a priority for transformational change. It identifies three transport investment priorities: • to improve surface access to the North’s airports; • to improve access to the North’s sea ports; and • to improve links within and between the North’s City Regions. The Northern Transport Compact 3. The Northern Way has established the Northern Transport Compact to provide advice on transport priorities at the pan-northern level linked to productivity. Chaired by Professor David Begg, the Compact includes City Regional, private sector and RDA members from the North’s three regions. The Compact has led the development of the Northern Way’s Transport Strategic Direction and Priorities as well as subsequent work. The Strategic Direction for Transport 4. The Northern Way’s Strategic Direction for Transport is an evidence-based assessment of the most appropriate transport interventions that will promote productivity gain, while at the same time seeking to protect and enhance the North’s natural and built environment, and contributing to the nation’s commitments regarding climate change. Looking over 20 to 30 years, it sits below the three high- level transport goals of the Growth Strategy and above the level of individual priority schemes and projects. The Strategic Direction sets out the types of interventions which will have the greatest productivity impact, as well as where in the North those interventions will have the greatest impact. 5. While the Strategic Direction for Transport pre-dated the Eddington Transport Study, its prescription and that of Eddington are consistent, namely what is needed is a balanced investment strategy that considers transport links within our city regions, between the city regions of the North and between the North and the rest of the country, as well as links to port and airport international gateways located in the North and elsewhere is the country. The Northern Way’s Short, Medium and Long Term Transport Priorities 6. Having established our Strategic Direction for Transport, we then identified Short, Medium and Long Term Transport Priorities. Our prioritisation work shows that while the transport proposals being pursued by stakeholders across the North will make worthwhile contributions to productivity growth, taken together they do not allow our Strategic Direction for Transport to be met. Consequently, if the North’s productivity growth is to be maximised a number of the “Strategic Delivery Gaps” need to be addressed. We have identified strategic delivery gaps for the rail network, the road network and associated with network integration. The rail gaps are the (the strategy to transform rail in the North), rail gauge enhancements for multi-modal container traffic, a rail rolling stock strategy and strategies for trans-Pennine and north-south rail (including high speed rail). The road gaps relate to the need for a long term strategy to keep the strategic road network moving and a north-wide approach to behavioural change. For network integration the strategic gaps relate to pan-Northern smart ticketing and strategic park and ride.

TRANSPORT AND THE ECONOMY

1. Have the UK’s economic conditions materially changed since the Eddington Transport Study and, if so, does this affect the relationship between transport spending and UK economic growth? 7. As work published by the Northern Way in March this year has shown, the recession has significantly affected car and public transport demand, as well as the number of air passengers and volume of domestic and international freight. However, we see no evidence that the recession has changed the relationships between transport connectivity and economic growth that Eddington considered, nor the basic prescription that he put forward, namely the economy needs adequate and appropriate connectivity within and between city regions, as well as to and from port and airport international gateways. What the recession has done is bring to the fore the importance of well targeted investment to stimulate and facilitate economic growth. This is most pressing in the North given that it has been most affected by the recession and the projections that it will be most affected by public sector spending cuts. 8. Importantly, our Transport Demand in the North report showed key differences between the North and the South. Our work has shown that travel patterns in the North are more sustainable than in the South. Car trips are shorter, bus use is higher and rail use is growing (and continued to grow during the recession). However, in the years leading up to the recession, transport demand in the North grew more strongly than in the South. Every percentage point of economic growth in the North led to transport demand growing more strongly in the North when compared with the South. In the period of recession that followed, indications are that demand also fell away more in the North. In short, the North has a higher elasticity of transport demand than the South. Car trips are getting longer, rail trips are growing in number while bus use is now declining again. 9. In the North and without further intervention, a continuation of the pre-recession trends would suggest that transport demand in the North is likely to become more like that in the South. 10. The trend of re-structuring employment and economic activity as the North moves to a more private sector focused knowledge economy, is set to continue for many years to come. As we move out of the recession, it should be anticipated that the trend in the North of increased car use, increased rail use, but declining bus use will resume (and mooted changes to the concessionary fares regime and to BSOG would accelerate this decline). This reinforces the need for a balanced strategy of policy interventions that seeks to facilitate economic growth through targeted enhancements to the North’s transport system, combined with measures that seek to exploit the more sustainable pattern of transport use that currently exists in the North and wherever possible, supports the use of more sustainable modes. 2. What type of transport spending should be prioritised, in the context of an overall spending reduction, in order best to support regional and national economic growth? 11. Speaking in Shipley at the end of May in his first major speech as Prime Minister, identified the Coalition Government’s goal of rebalancing the economy away from the heavy reliance on the South East, and through the growth of private sector businesses. 12. As we have already set out, the Northern Way’s evidence shows that what is needed to foster the North’s economic growth is a balanced approach that looks at the connectivity needs of travel within city regions and the links between the North’s city regions. Also important are links between the North and London with its World City functions, and international connectivity via gateways within the North and elsewhere in the country. Enhancing connectivity within city regions is focused on expanding labour supply across functional labour markets. Improving the connectivity between city regions facilitates the movement of goods, business to business links and allows the expansion of labour markets, most notably for entrepreneurial high level skills. International connectivity facilitates trade. 13. Clearly the outcome of the Spending Review will be less funding to enhance strategic and local transport networks in the North. Given the importance to the economy of capital investment in our transport networks, we contend that both enhancement and maintenance budgets need to share the burden of programme reduction. There will be a high economic cost if the spending reduction is met by the enhancement programme alone. Of course, spending reductions means there is a need to prioritise. To contribute to the Spending Review we have submitted to the Secretary of State our evidence-based assessment of what these should be. Our submission is summarised in the Annex to this memorandum. 14. We are also mindful of the time taken to develop significant transport interventions and the importance of bringing forward investment proposals in a timely manner. This means that it is important that funds are continued to be made available to Network Rail, the Highways Agency and local authorities for scheme development. As well as identifying priorities for which construction can start by 2014/15, we have also set out priorities for proposals that we consider should be taken through the business case, powers and other statutory processes for implementation subsequent to 2014/15. These too are summarised in the Annex. 3. How should the balance between revenue and capital expenditure be altered? 15. We are concerned that the split between revenue and capital funding could be seen as a barrier to implementation of measures that the Northern Way has identified as delivering productivity benefits to the North. For example, more widespread implementation of the Managed Motorway programme (and beyond that greater integration between Highways Agency and local authority intelligent transport systems) has a revenue as well as capital implication. In the case of Managed Motorways, this relates to the costs of operating control centres and provision of Highways Agency Traffic Officers amongst other things. A further example would be the more widespread and mainstream implementation of smarter choices measures, where Northern Way research has identified worthwhile productivity benefits but also that constrained revenue capital budgets are hindering implementation. 16. We would welcome further relaxation of the demarcation between capital and revenue budgets. 4. Are the current methods for assessing proposed transport schemes satisfactory? 17. In short, more research and development work needs to be done to develop approaches that quantify the impact of transport investment on the size of the economy and so they can be incorporated into the appraisal mainstream. 18. The Northern Way’s focus is on promoting the North’s economic growth while at the same time promoting a low carbon economy, but these are not the only reasons to support transport investment, nor is it just the economy and carbon that are affected by transport investment. The Northern Way strongly supports the conceptual approach of the New Approach to Appraisal (NATA) as it is an important decision making tool that offers a methodology and framework to consider positive and negative impacts of transport schemes. 19. This does not mean, however, that the further development of NATA is not warranted. Attention needs to be given to the methods and parameters employed in cost benefit analysis (CBA) and how this is used in assessing the value for money of transport investment. We welcomed the extension of the conventional cost benefit framework to include economic wider impacts, the largest and most significant of which is agglomeration. Also we contend that insufficient weight is given to carbon in the appraisal process. In this regard, we welcome the Coalition Government’s decision to review the process by which transport schemes are prioritised. 20. A particular area of interest is the potential role in appraisal of assessments of the Gross Value Added (GVA) impacts of transport investment in determining overall transport spending as well as the prioritisation of transport investment. The Greater Manchester authorities, Greengauge21, Network Rail and the Northern Way have each promoted work to develop and apply techniques in this area. Collectively, this work suggests that monetised GVA impacts of well targeted transport investment could be up to three times the welfare benefits in a conventional transport CBA. 21. Given the Northern Way has identified the criticality of transport connectivity to the North’s economic growth and the important potential impacts of GVA analysis on funding availability and scheme prioritisation, we commissioned the Institute for Transport Studies (ITS) at the University of Leeds to review the methods that have been developed to assess the GVA impacts of transport investment. Their findings are important to this inquiry. ITS identified a number of new insights that have come from the GVA assessment work. In particular: • Transport investment can both stimulate a local economy and lead to redistribution of economic activity from elsewhere. The redistribution of economic activity due to a transport investment is important. The available evidence suggests that redistribution effects are stronger than local productivity gains. • In turn, this reinforces the benefit in distinguishing between people-based productivity effects and place-based productivity effects. People-based effects come about from the migration of productive labour and are principally associated with re-distribution. It is place-based effects (such as greater agglomeration) that determine the net increase in national productivity. • From the work to date, the contribution of different transport modes to productivity appears very different. The GVA benefits of rail investments can be large and overall the evidence thus far suggests that on a per traveller basis, rail investment has a greater productivity impact than road investment. • Changes in productivity associated with rail schemes are particularly driven by productivity changes of medium skilled workers. 22. There are a number of further issues which are important when considering how these new approaches are used to inform decision making: namely, how much is spent on enhancing the transport system and where is that expenditure directed. Conventional cost benefit analysis takes an equity approach, that is the value for money case of a transport investment is a function of its use and how much it costs, not where it is located. In the GVA benefit calculations, both location and the area over which impacts are assessed are important influences on the derived estimates of GVA uplift. More work needs to be done to understand the area over which a transport intervention influences the economy. 23. ITS also identify that the estimates of GVA uplift are a measure of economic potential rather than are an assessment of the actual impact on the economy of a particular transport investment. For this potential to be realised, further investments may be needed in, for example, sites and premises or skills and training. The nature of these additional investments is unspecified and uncosted in the GVA assessment methods. It seems important that alongside the GVA assessment, work is undertaken to understand the capacity of a local economy to deliver the projected economic potential. 24. Considering the GVA assessment work in the context of the conventional approach to cost benefit analysis, the ITS review also identifies that well specified transport investments in the North have equal if not greater potential to deliver GVA benefits per pound invested when compared with investments in the South East. This concurs with findings from the Northern Way’s own work when considering conventional cost benefit analysis incorporating economic wider impacts (principally agglomeration), namely well specified transport investments in the North have equal if not greater potential to deliver welfare benefits per pound invested when compared with investments in the South East. However, what the ITS work also clearly concludes is that prioritising on a basis of GVA benefits per pound would give a different answer to a conventional benefit cost ratio. 25. Bringing all these points together, the key finding from ITS is that techniques to quantify the impacts of transport investments on the size of the economy are in their infancy. The work that has been done to date has helpfully furthered our understanding, but more research and development work needs to be done before such approaches can become part of the appraisal mainstream. 5. How will schemes be planned in the absence of regional bodies and following the revocation and abolition of regional spatial strategies? 26. Many of the strategic weaknesses in the North’s transport system cross city region boundaries. The journey to work catchments of the city regions overlap. What the work of the Northern Transport Compact has done is identify the key investments needed in the North’s transport networks to address these weaknesses. It has also overseen progress towards delivery through the early planning stages for a number of significant interventions, such as the Northern Hub. It has done this by fastidiously avoiding duplication of work best undertaken at a city regional level and adding value to what can be achieved by city regions or regions acting in isolation. The Compact’s approach of building the evidence-base on the links between transport and economic growth has been widely welcomed and is described as influential by Department for Transport. Independent evaluation of the Compact’s work has identified tangible benefits to the North. 27. It is the Government’s intention that Local Enterprise Partnerships (LEPs) will lead the development of strategy and identification of investment priorities for their functional economic areas. This will be challenging as individual local authorities will be both key partners in LEPs and transport scheme promoters. The intended geographic scope of LEPs will ensure that they have a natural focus on journey to work catchments and therefore on city and local transport networks. While the strategic road network and national rail network will be important to LEPs, the development of plans and programmes for investment in and management of these national networks will be directed nationally. 28. Over the last five years, the Northern Transport Compact has led for the three northern regions on pan-regional links and links between the North and the rest of the country, with representation from city authorities and the PTEs/ITAs, as well as private sector interests. It has filled a ‘strategic gap’ or ’market failure’ by acting as a counterbalance to Scotland and London where there are strong statutory bodies in Transport for London and Transport Scotland to make the strategic case for transport investment as well as progress implementation. The removal of the regional apparatus would mean in transport terms that there will be a strategy gap between nationally led initiatives and what will be the local focus of the LEPs. This appears to be recognised by the Secretary of State in his recent evidence to the Transport Committee where he expressed interest in sufficiently strategic coalitions of LEPs on some strategic transport issues. 29. We are considering how the work of the Northern Transport Compact can continue on strategic transport issues in the North. This would be supported by LEPs, where they are established, being given a statutory duty to cooperate on cross-boundary transport issues as well as ensuring they have sufficient resources to work collectively to continue the evidence building and early scheme development work that the Transport Compact has led over the last five years. ANNEX A: NORTHERN WAY’S PRIORITIES AS SUBMITTED TO THE SECRETARY OF STATE FOR SPENDING REVIEW CONSIDERATION Strategic Road Network Scheme Implementation by 2014/15 • M62 Managed Motorway between Leeds and Bradford • Completion of the upgrade of the A1 in North Yorkshire to motorway standard • Upgrade of the A556 between the M56 and M6 in Cheshire • M60 Junction 15 to 12 – additional lane Scheme Development by 2014/15 • M1 Managed Motorway around Sheffield • M60 Managed Motorway around Manchester • Low cost interventions for the management of the A1 Gateshead Newcastle Western Bypass Rail Scheme Implementation by 2014/15 • Network enhancement between Liverpool and Leeds • Network enhancement between London and Sheffield • Electrification of the lines between Manchester and Liverpool, Manchester and Preston, and Liverpool and Preston • Enhancements to the , including the introduction of a standard hour timetable Scheme Development by 2014/15 • Northern Hub, for implementation by the end of Control Period 5 • Intercity Express Programme • New rolling stock for Northern and Trans Pennine franchises • Trans-Pennine electrification International Gateways Scheme Implementation by 2014/15 • Rail gauge clearance for the east Coast Main Line north of Doncaster to Scotland, between Doncaster and the East and West Midlands, to Teesport and to the north and south banks of the Humber. • A160/A180 upgrade Scheme Development by 2014/15 • A5036 to the Port of Liverpool • Gauge clearance (associated with electrification) of trans-Pennine rail routes September 2010 Memorandum from South Yorkshire Passenger Transport Executive (TE 35)

Introduction 1. This response is submitted by the South Yorkshire Passenger Transport Executive. We plan, procure and promote public transport across South Yorkshire, encompassing Sheffield, Rotherham, Doncaster and Barnsley. We also lead on strategic transport issues across the city region in support of the South Yorkshire Integrated Transport Authority. 2. This response is focused on issues are of particular concern to South Yorkshire and Sheffield City Region. SYPTE have also input into the pteg response, which is focused on the generic views of metropolitan cities outside of London. 3. We welcome this examination of the relationship between transport and the economy. Our draft ‘Local Transport Plan 3’ for the city region is strongly focused on transport’s role in supporting economic growth. In this response we will outline the evidence that has guided the development of our strategy in addressing the questions posed.

Have the UK's economic conditions materially changed since the Eddington Transport Study and, if so, does this affect the relationship between transport spending and UK economic growth? The relationships between transport and economic growth examined by Eddington hold. However, the macro-economic context means transport spending is at risk and should be focused on interventions supporting economic growth in areas hard hit by the recession. 4. Macro economic conditions and forecasts of growth have clearly changed in recent years. However, we see no evidence that any structural changes in the economy have occurred that have altered the relationship between transport and economic growth as set out in the Eddington Report. 5. However, as the response to the recession is on cutting the public sector deficit through, among other things, reduced public spending, it appears inevitable that funding for transport be further reduced. 6. We have identified a shift in priorities for businesses, from reducing congestion, to improving the reliability of our transport networks. Research undertaken for the Yorkshire and Humber Chamber of Commerce1 identifies that, 83% of businesses that took part said the region’s inadequate transport capacity had a direct negative impact on them. The figure for Yorkshire & Humber (83%) is higher than any of its neighbouring regions and above the national average. 7. We are concerned that a reduction in funding to deliver transport schemes that support economic growth will slow recovery, particularly in South Yorkshire, where there are a number of transport schemes that are needed to unlock development and support regeneration. The more these interventions are delayed, the more expensive they become. 8. As local transport funding is not ‘protected’ either by longer term agreements (as with Network Rail), or political power (as in London), we are extremely concerned that we will be disproportionately affected by such cuts. Our funding streams have already suffered a 40% cut in our in-year funding (£10.7m down to £6.3m). 9. There is a real imperative for balancing the economy so that areas hard hit by the recession, such as South Yorkshire, experience investment and grow the private sector. Public investment on strong value for money schemes is essential to provide the conditions for private sector growth. This is particularly important given the persistent funding gap that exists between low levels in the North

1 Yorkshire and Humber Chamber of Commerce (2010) Reconnecting Yorkshire and Humber (including the Midlands) against much higher levels per head in the South East (including London) on transport spending2.

What type of transport spending should be prioritised, in the context of an overall spending reduction, in order best to support regional and national economic growth? We strongly support investment to maximise economic returns and promote private sector growth, in those places where transport would make a real difference. In South Yorkshire our evidence suggests investment in unlocking unique strategic sites is critical, as well as linking people to jobs. 10. Our LTP3 strategy has based its interventions on: (1) supporting regeneration, (2) linking people to jobs, and (3) improving connectivity. We very much see transport as an enabler of economic growth in South Yorkshire. 11. For re-generation there are two specific examples to evidence from a South Yorkshire perspective. The first is an example where existing planning conditions prevent development without better connectivity. This is the case in the Lower Don valley (next to the M1 in Sheffield/Rotherham) where without interventions to relieve congestion on M1 junction 34, development cannot take place. The solution involves some road infrastructure and a bus priority system to serve the sites and labour catchments. The importance is in the nurturing of a manufacturing and precision engineering hub that is of national significance. This in turn will grow and attract in new business, and support apprenticeships and up-skilling in these critical sectors for the national economy. 12. It is the uniqueness of the regeneration opportunity that must be recognised when considering how transport can support economic growth. A good example of this is the Doncaster – Robin Hood airport growth corridor. Private contributions will provide much of the funding for the road needed to unlock this corridor, as would be expected given the commercial opportunities it presents for an inland rail freight interchange, housing and employment. However, to fully cover the costs, some public investment is required. So public investment in transport is essential to lever in substantial private sector investment. 13. Bluntly without transport investment these unique strategic economic initiatives will fail. We feel these are the types of investments that should be prioritised to maximise economic growth opportunities in areas where public sector dependency is currently high. 14. However, we are also very mindful of the importance of linking people to employment and training, particularly where unemployment or low skills levels are focused. Our worklessness research3 has investigated the extent to which a spatial mismatch between skill levels and jobs exists. Whilst job seeker claimants are largely based around the centre of districts, more often than not jobs are further outside and can be difficult to reach by public transport. The main occupations where a spatial mismatch was found include elementary occupations, process plant and machine operators and secretarial and administrative occupations. The challenge is to secure sufficient revenue support to facilitate connecting workers to these opportunities, and then identify how to deliver this connectivity in the most cost effective way. 15. Alongside this, improving the connectivity for the Sheffield City Region (SCR) to national and international gateways, especially by rail, has been shown to be a priority as it has significant benefits for productivity4. Our research into the benefits of High Speed Rail5 identifies that a route to the East of the Pennines would deliver an estimated c.£60 billion in standard transport benefits and a further £2.3 billion of productivity benefits. 16. The priorities identified here have provided the focus for the development of our draft SCR Transport Strategy (available at www.southyorks.gov.uk). Alongside the three areas for action, our LTP3 strategy also identifies our obligation to ensure sustainable growth, and that we reduce carbon

2 Transport spending per head is £642 in London compared to £241 in the North and Midlands 3 ARUP (2010) Economic Structure of Sheffield City Region 4 Centre for Cities (2010) On Track 5 Sheffield City Region and Leeds City Region (2010) High Speed Rail, Summary Report emissions through better planning and targeted interventions. It is vital that funding opportunities, such as the Regional Growth Fund, prioritise schemes that are linked to an agreed strategy and are targeted for areas where the need is greatest.

How should the balance between revenue and capital expenditure be altered? Government should give more flexibility to local authorities to determine the balance between capital and revenue, and give more freedom so that authorities can maximise efficiency and effectiveness of revenue streams. 17. The creation of a Local Enterprise Partnership (LEP) provides the opportunity to allow local decisions on the balance between revenue and capital spending. The local stakeholders know best how and where investment can have the greatest impact. 18. Our Draft SCR Transport Strategy presents a focus on making best use of the assets we have, and acknowledged that substantial revenue is needed to maintain our assets. We also know we can get the most from our transport network by investing in traffic management, another initiative that is revenue hungry. 19. We want to focus funding for the provision of public transport service on improving access for people to employment and skills (as discussed above). And we want to continue with other initiatives to help people back to work and training (such as smarter choices travel planning and initiatives such as ‘Wheels to work’). All of these small scale interventions help with the economic recovery but require more revenue than capital. 20. Within existing revenue streams we would also wish for more flexibility to increase efficiency. For example we feel strongly that if BSOG (a payment made to bus operators largely on the basis of their fuel consumption), were given to PTEs, we could work in partnership with operators to get more from that revenue support – for example if it was spent on bus priority and punctuality measures, customers would benefit, and operators would benefit from increased patronage.

Are the current methods for assessing proposed transport schemes satisfactory? No – the current methods are too complex, remain biased against public transport, and fail to take sufficient account of health, economic and other benefits. If the full benefits were incorporated, the case for increasing the proportion of government spending on transport would be stronger. 21. Current appraisal methods tend to bias against public transport, and modes such as walking and cycle. For example, because Government methods assume people who use public transport value their time less than people who drive. 22. Current methods underplay the practical economic benefits. We would like to see the ‘wider economic benefit’ analysis, developed as a result of the Eddington study, be formally included in appraisal to lock-in economic analysis. We would also like to see this improved and made less deterministic – methods need to be found to capture the transformational nature of some transport schemes. 23. The process is also very centralised. We wish to see scheme assessments decentralised to those authorities with the capabilities to do it, as now happens in London. Methodologies are currently overly complex and need to be rationalised. As Local Enterprise Partnerships will need to be able to prioritise effectively and appraise value for money, we would welcome more partnership between authorities and Government in determining appraisal methods. In South Yorkshire we are developing a ‘centre of excellence’ in appraisal to be able to undertake this role for transport schemes. 24. We would like to see central government methodological requirements proportionate to its contribution, and a more fixed timetable set out for appraisal and approval, so that schemes are not subject to the current uncertainties. As it stands Government cannot give any commitment to progress small schemes any faster than larger ones through its processes.

How will schemes be planned in the absence of regional bodies and following the revocation and abolition of regional spatial strategies? In our experience schemes have always been planned and promoted locally, not regionally. ITAs are well placed to join up planning and decision making previously undertaken by the Regional Spatial Strategies. 25. The promotion of transport schemes has always been from the bottom up, with the drive coming from local authorities. The LEP model will provide the mechanism to build on this and will bring private sector expertise to the planning of schemes. This combination of public and private sector input will ensure realistic schemes are proposed that focus on economic benefit and have clear links to the Transport Strategy. 26. The importance of regional planning was in managing development patterns, and ensuring unsustainable development patterns were avoided. There is a gap now that the RSS has gone. However, ITAs are well placed to assist. For example in South Yorkshire we are leading the way through our Land Use Integration (LUTI) techniques to achieve the same result at a city region level. 27. LUTI is a tool that is used to highlight the ‘sustainability’ of development locations through public transport/active travel accessibility mapping. Importantly, all the planning authorities in South Yorkshire are signed up to the process and its guidance, and of the role of the PTE in undertaking the technical work and monitor progress. 28. The approach taken by SYPTE, and partners, in developing this tool needs to be embedded into all planning decisions. This has already started to happen in South Yorkshire, with partners in East Midlands looking to follow in due course. This will ensure sustainable land-use patterns are established at the outset of development planning, whether at a local, regional or national level. September 2010 Memorandum from Edward A. Gibbins (TE 36)

Summary 1. Introductory remarks 2. Transport spending should give preference to electric traction. 3. Conversion of railways to roads has been advanced for 55 years – but is physically impractical. 4. Lower road speed limits would cut costs and accidents. 5. High Speed rail projects should be deferred, as potential gains are long term. 6. Privatisation of railways has not delivered economic improvements and is proving excessively costly. 7. Re-nationalising railways would cut government subsidies substantially. 8. Guided buses offer no real value for money, and every UK scheme has been over budget and delivered late. 9. Road trains offer no real benefits, but involve many risk areas.

CV I had 40 years experience in railways – private & public sector – most at management/senior management levels. This included management of railway owned road transport1. Since retirement, I have conducted considerable investigation and research into transport, leading to the writing of six books2 and several articles. The latter included articles demolishing the case for guided buses and road trains3.

1. Introductory remarks 1.1 Economic conditions have materially changed since 2006. Given cuts in police, defence, health, etc., they must be accepted in transport. The test for current expenditure is to fall in the short term. Current expenditure justified by higher income forecasts are unreliable, due to over optimism. Capital expenditure should be limited to that which cuts current expenditure in a year by more than the capital expenditure. 1.2 Less oil consumption will benefit the balance of payments, and may cut oil prices in the medium term.

2. Transport spending preference 2.1 Transport spending should be prioritised to reflect the prospect of world oil reserves failing to keep pace with increasing demand and its consequential escalation of fuel prices. 2.2 Electric cars as an effective and economic option to petroleum powered cars are still a long way off, even for relatively short distances – there are no real prospects of electric lorries. 2.3 Replacing oil by bio-products depends on re-allocating land from food production. Existing land resources cannot feed the world’s population which is forecast to grow alarmingly. There are forecasts of world shortages of man-made fertilisers, with reports of sources being bought up by a few major countries. 2.4 Coal is a finite source which can only be applied effectively and economically for transport via electric generation. It has unpopular by-products which are nearly as lethal as carbon emissions from oil. 2.5 Wind and wave power are less unpopular but costly to install and will only ever provide limited supplies. 2.6 Nuclear generated electricity is unpopular, but offers the only real hope of ‘limitless’ electric power. 2.7 Hauliers and DfT unrealistically propose world oil shortages could be alleviated by non-transport users of oil turning to other fuels, leaving a declining resource to keep hauliers in business longer4. 2.8. Electric powered transport is limited for all practical purposes to rail. An idea postulated years ago that lorries could be powered by overhead wires is impractical. They would be confined to left hand lanes because overhead power line geography would not permit changes of lane. It would be very costly.

3. Conversion of railways to roads 3.1 Converting railways to roads has been dismissed as physically impractical by my book “Railway conversion – the impractical dream”, even if there was not a prospect of decline in oil supplies5. 3.2 The recent promotion of conversion by Transwatch ignores that the concept was advanced 55 years ago, and quickly demolished by road engineers and road transport operators at a presentation at the Institution of Civil Engineers in April 1955. Transwatch claims the “debate continued until 1958 in The Engineer”. After reporting the 1955 presentation, that journal makes no mention of it until January 1958. It was raised then by its promoter, after an engineers’ conference took place to consider ways of reducing road congestion. The one idea not considered was railway conversion, although the conference included engineers who were present at the presentation. The idea was rejected as impractical by Transport Minister Ernest Marples, who was partner in a construction company which could have benefitted therefrom. 3.3 The idea was supported by Sir David Robertson, MP, who advocated converting the Inverness-Wick line to an all-weather road in July 19556. When the line was proposed for closure by , he was the leading opponent, saying that “the gravest hardship would beset the people in the northern counties if the line closed”7. Bus companies said they could not run economic services on the route8. 3.4 Transwatch claims that all displaced rail passengers would transfer to untimetabled buses, making it impossible for operators to draw up manpower rosters and establishment. Every rail closure led to most passengers transferring to car, and eventually all doing so after buses subsidised by BR (on a direction by the Minister) being withdrawn due to lack of patronage and higher fares. The assumption of 100% transfer to buses is essential to conversion theory, because even partial transfer to cars would create gridlock. 3.5 The only route conversion study (37 miles of main line from Liverpool Street to East Anglia plus 93 miles branches) was funded in the 1970s by the Dept for the Environment which rejected it as impractical. I have studied it and found it was totally flawed. Its assessment of staff, vehicles and profits was seriously inaccurate. The crucial changeover plan envisaged replacing two tracks of the four heading out towards Brentwood over a period of nine days, during which a flyover would be demolished. Despite claims by other conversionists that railway bridges had sufficient clearance for HGVs & double- deck PSVs, 17 over-bridges were listed for raising, reconstruction or formation excavation to improve clearance - which would still be below DfT standards after alteration. Some bridges would be demolished inconveniencing users. 3.6 Demolishing the Ilford flyover would prevent trains running beyond Ilford, whereas the scheme requires double-length trains up to 24 coaches (itself impractical) running for the nine days, whilst a thin layer of asphalt was laid on raw formation of the two nearside tracks so that PSVs could offer a service after the nine days. The diagram shows that trains require the flyover. There is no route for inbound trains around the flyover. An outbound route bypassing the flyover could not cope with bi-directional traffic, even if adapted with crossovers and signalling. The link for outbound trains would be restrictive.

Liverpool Ilford Car Sheds Street Bethnal Green Jcn Manor Park platforms 8-14 to Brentwood

platforms 15-18 convert in first week convert in first week

flyover to be demolished

3.7 The authors overlooked that the essential retention of two tracks for the nine-day period would prevent PSVs from leaving the initially converted tracks towards public roads on the wrong side of the tracks. This access would be blocked until conversion of the other two tracks was completed ‘two months later’. 3.8 Within the nine days, overhead power lines would need to be removed above the tracks to be converted. The authors overlooked that at 20 crossover junctions, the overhead line runs between the tracks to be removed in stage 1 and the tracks to remain in stage 2. This would be no swift job, and requires power off all lines. There would be no trains running – as envisaged – to maintain a service during partial conversion. 3.9 Contrary to the claim advanced to your Committee by Transwatch9 on a previous occasion, the area between fences is not adequate for road widths, as the Liverpool Street scheme (which it praises) required property to be acquired at 13 locations to permit widening for the minimum road width envisaged. 3.10 At the exit from , the scheme includes one road lane in each direction, which is not feasible. As four of the six tracks10 in the tight cutting approaching Liverpool Street must remain, only one lane is possible, requiring traffic signal control. The flow of buses could not be handled. 3.11 Part of Liverpool Street station was to be converted to a bus terminal. The plan required departing buses to cross a walkway used by passengers to get to/from buses. In the peak hour, 28,000 passengers would be crossed by a departing bus every nine seconds. The H&SE would not permit it. There was no alternative solution. Multi storey would require demolition of the roof which is of a protected status. 3.12 Conversion was to be ‘paid for’ mainly by non-cash benefits based on time saved by 39.3m motorists expected to transfer to the new roads. (This undermines Transwatch claims to the Committee based on exclusive bus lane capacity). A secondary source is land released for entrepreneurs evidently uninterested in millions of hectares of brownfield sites already served by roads & mains utilities. These became vacant as imports rose and industry closed down or transferred abroad – due to wage levels – not inadequacies in inland transport infrastructure, as Transwatch implies. It is patently obvious that if imports can come into the country using existing infrastructure, lack of roads is not preventing new manufacturers emerging. 3.13 Transwatch claims that width between parapets of railway under-bridges and viaducts are adequate for good roads. Most would be no wider than 200,000 miles of road it air- brushes out of comparison between all rail mileage and motorways only. A photo of a viaduct on the North Devon Road posted by Transwatch and claimed to have been a railway viaduct, was a new concrete construction by contractors. The railway viaduct was a single-line steel lattice structure demolished years earlier. The new road had to deviate from the line, as a single line tunnel was too narrow, contrary to Transwatch claims regarding tunnel widths. 3.14 The Transwatch concept for conversion envisages that adequate capacity can be provided for the requisite high number of buses by converting existing one level railway terminals to multi storey terminals. It is ignored that this construction task would take about two years at hundreds of locations11, during which time the area around terminals would be brought to gridlock by construction traffic and the replacement buses. The ensuing disruption to commuting, work, leisure and life would be financially ruinous. 3.15 Conversionists plan to asphalt the raw railway surface between fences is based on an assumption that heavy trains have adequately compacted the subsoil for a minimum width of 28 feet on a double track railway. The reality is that only 16 feet is so compacted, and this is subject to periodic replacement. The area outside has not had more than the weight of a man’s boot on it – some of the area not even that.

Cross section of double track railway The boxed area is the ballasted formation some 16 feet wide, which takes the weight of trains. Level lines either side represent the ‘cess’ which takes the weight of a man, mainly walking alongside the track, either to assess track condition, for maintenance, etc. Lines either side of the “cess” represent uneven verges, ditches, embankments, which only rarely get even the weight of a man. The outer vertical lines represent boundary fences. Conversionists plan to cover the whole area between fences with a thin covering of asphalt on which they plan to run HGVs and PSVs.

3.16 Transwatch bases its claims that converted railways can cope with existing rail traffic in road vehicles on two American sources: Donald Morin and RH Pratt12. Both relate to exclusive bus lanes – there would be no capacity for railfreight: coal, ore, oil, containers, etc, much less millions of road vehicles forecast to transfer from existing roads. Their theories are based on a nose to tail stream of buses - not stopping or slowing to turn off – travelling at 33mph at 8 second headways on relatively short sections of exclusive bus lane. Their theories depend on idealistic conditions and cannot be extrapolated to 11,000 miles of railway, with thousands of flat junctions, cross roads, on which intermediate destinations & origins will have to be served. It would be totally impractical for a bus originating on the route to slip into a gap between nose-to-tail buses. Transwatch claims that buses on converted railways would travel at 60mph. Thus it prays in aid part of the American studies but fails to mention parts that undermine aspects essential to conversion. It fails to mention that the Morin Report stated that his theory was to be subject to a “feasibility study’. The USA Dept. of Transportation is unable to find any record of a feasibility study having been conducted. Transwatch also fails to mention that in Highway Progress13, Morin’s article was preceded by one by the Head of Federal Highways (Morin’s boss) who welcomed Federal plans for rail transit developments. Neither Morin nor Pratt advocates replacement of operational railways by busways. 3.17 The claim that much traffic would transfer from 250,000 miles of roads to 11,000 miles of converted railway – leading to fewer fatalities – will be dismissed by anyone with a grasp of maths & geography. 3.18 Transwatch states that the converted railways would need to be “managed so as to avoid congestion”, but does not elaborate how this is to be done, or at what cost. It is an objective that has eluded the best brains in transport since road congestion was first caused by horse drawn traffic in London. 3.19 Transwatch claims 11,000 miles of railways could be converted to roads in weeks. The Liverpool Street scheme – which Transwatch praises – envisaged conversion of the first 18 miles would take two months. This included lifting & removing two tracks and adjoining sidings over the 18 miles length in 24 hours. 3.20 Since conversion was first advanced, 10,000 route miles have closed, invariably after public hearings in which users and others objected, usually supported by MPs and councillors. There is no public record that conversionists attended to support closure and call for conversion. Against this massive mileage, which included lines up to 180 miles in length, conversionists claim about 250 miles has been “converted”. Their statistics include lengths as short as 109 yards, closed lines crossed at a tangent, new roads which ‘it is unclear if the road has been widened onto the railway or just very close’; ‘A466 widened onto the railway for 0.6 mile’; ‘road took route over river, but unclear if railway bridge re-used’; ‘line closed in 1930s, not clear if bypass actually built on railway’; ‘conversion not confirmed’; ‘looks like realignment’; ‘A148 round Hillingdon - this make14 [sic] not be a conversion, A148 may just be running close to railway’

4. Lower road speed limits would cut costs and accidents 4.1 Imposition and enforcement of road speed limits would reduce oil imports and congestion which largely arises from surges in traffic stimulated by speed variations. These would cut transport costs. 4.2 Police action to tackle tail-gating would cut congestion and delay which arises from inevitable collisions. 4.3 Effective action to reduce dangerous road haulage malpractices such as overloading, inadequate vehicle maintenance and excessive working hours would cut accidents. 4.4 These would reduce fuel consumption and carbon emissions by stationary or slow moving vehicles15.

5. High Speed rail projects should be deferred 5.1 Higher speed trains would not be economically beneficial at this time, nor in long term unless it is wholly electric traction, and the requisite increase in generating capacity is provided in advance.

6. Privatisation of railways has not delivered 6.1 Railway privatisation has been a costly failure. From the beginning, InterCity routes - profitable under British Rail - were given subsidies to accelerate private sector interest. The subsidy was doubled in the last year of nationalisation purely to fragment one business into 100, each cross-charging (plus profit margin) one another. The ‘shadow’ companies set up began to compete for manpower, with poaching facilitated by differing wage levels between companies. The ensuing re-training costs and higher wage scales exacerbated the problem. These financial facts are set out in the accounts of the British Rail Board. 6.2 Privatisation was introduced on the premise that the private sector would reduce the subsidy, cut fares, improve safety and performance and cut complaints. Documentary evidence shows that it has done none of these things. Indeed, in all these benchmarks, standards are now worse.16 6.3 Former Ministers say – ‘with the benefit of hindsight’ - fragmenting railways was a mistake. I argue that there was abundant foresight when privatisation was conceived, plus 150 years of accumulated hindsight17. 6.4 Paradoxically, train operators are calling for and being paid higher subsidies because of increased passengers. Logically, it should reduce the need for government support – it did in the BR era. 6.5 The declared political intention was that new rolling stock should be funded by the “market”. The reality is that it has been funded by the government, and often, the train operating companies are given higher subsidies to pay for leasing new rolling stock – an Alice-in-Wonderland scenario that was never envisaged. 6.6 The infrastructure-owning company was also supposed to fund maintenance and renewal of track, signalling and stations. The reality is that Railtrack extended the track renewal frequency prevailing in the British Rail era from an average of about 25 years (which was and is the common standard in Europe) to 125 years. Track renewal in the very wet and corrosive Severn Tunnel was extended by Railtrack from six to nine years and quickly resulted in dangerous track breaks, the like of which had never occurred under British Rail. The H&SE imposed speed restrictions until more frequent renewal was re-introduced. 6.7 Train operators are protected against recession by the DfT. Is this how the private sector makes profits? 6.8 It has retrospectively been claimed that railways had to be fragmented by a Brussels ruling. No mention at all was made of an external requirement during the years of debate on privatisation. The sole requirement by Brussels to separate operations and infrastructure finance could have been achieved by having separate accounts in similar manner to those produced by holding companies for its subsidiaries.

7. Re-nationalising railways would cut subsidies 7.1 The only practical course to reducing rail costs lies in re-nationalisation. Contrary to political claims it will not cost the Exchequer £200 bns. When 20,000 miles of railways, one million wagons, 20,000 locos and 40,000 coaches were nationalised in 1948, the Exchequer did not lay out a penny. Sequestration was funded by IOUs - British Transport Stock, with interest and redemption paid from revenue over 40 years. Initially that occurred, but government measures kept fares and freight charges below inflation for electoral popularity. Eventually, Stock had to be redeemed by the Exchequer. In the interim, government payrolls benefitted by being held below what would have happened had employees demanded higher pay to ‘compensate for higher travel costs’. UK industry costs were kept down by low fares. A government appointed Law Court and Ministerial interference held fares below inflation for 40 years, so that by the date of privatisation, British Rail had lost £11.8 bns compared with what would have been gained had fares simply kept pace with inflation. At the much vaunted ‘1% below inflation’ bandied about in respect of some selected fares (now being abandoned), British Rail would have been £11.6 bn better off18 7.2 Post-war railways were prevented by government directive from using their own money to modernise for ten years after the war. The motor industry ignored government controls on resources to provide the road transport industry with new buses and lorries.19

8. Guided buses offer no real value for money 8.1 Kerb Guided Buses have horizontal guide wheels on each side at the front, to steer buses - via arms attached to the steering knuckle - within 18cm high concrete ‘rails’. Gauges range up to 2.6m. Articulated buses require centre guide wheels also. The gauge at entry to ‘rails’ is 1m wider to ‘funnel’ vehicles in. 8.2 No other country in the world is now pursuing this concept which was introduced in Germany in 1980. One of the two systems installed in Germany has been shortened and the other system completely closed. 8.3 Only two other countries in the World have installed systems – Australia and Japan. Extensions and additional systems originally planned in Australia have been abandoned. 8.4 UK systems are not continuous but have breaks in them for cross traffic. This makes them completely unlike installations abroad with which British planners make favourable comparisons. The Adelaide system in Australia has no cross traffic at all. Cross traffic is an accident situation waiting to happen. 8.5 Systems installed in Birmingham and Edinburgh have closed, incurring costs to remove guide rails - a double waste of money. Contrary to claims to excuse these reversals – there was no declared intention by either Authority to replace them at a later stage. The Ipswich system had to be closed for the guide rails to be removed to create greater width, because new buses were too wide to enter the original system. 8.6 The objective is to enable buses to bypass queues. Where the worst congestion occurs in city centres, there is insufficient space. They are installed in less congested areas, often as a lane on an existing road. This increases delay to cars and goods vehicles. Speed limits are sometimes reduced for other traffic. 8.7 All other vehicles – except unauthorised use by cycles and motor cycles – can be blocked from entry. 8.8 A bus breakdown would delay following buses which cannot reverse, as guide wheels are at the front, and reversing would damage tyres and may cause it to ride over the guide rail with serious consequences. 8.9 Bus lanes (with, if necessary, rising bollards to block unauthorised use) are less costly, and have the benefit of being available, when other lanes are blocked by accidents or for maintenance. In emergency, bollards could be locked out of use to permit entry by other vehicles. 8.10 Installing systems on closed rail routes is illogical because, by definition, they are in rural areas free of congestion. Cambridgeshire’s system is a typical, with miles of concrete ‘rails’ between open fields. 8.11 Vast costly park & ride car parks are being provided to influence people to use the guided buses. Similar facilities could have benefitted a re-opened rail service. 8.12 Claims that passengers will benefit from using new guided buses because they are fitted with WiFi are absurd. Journeys are so relatively short, and privacy non-existent, it would not be worth booting-up a PC. 8.13 Without exception, UK guided bus systems have costed far more than originally forecast and have not been opened on schedule. The Cambridgeshire system has the worst record – to date - in these aspects.

9. Road trains offer no real benefits 9.1 Road trains have been advanced as a solution to congestion. They are, in effect, double juggernauts – one tractor and two trailers. My article published in Focus (journal of the Chartered Institute of Logistics & Transport demonstrated the dangers and pitfalls which are ignored by promoters of the idea. 9.2 HGV drivers are taught to make wide left turns by invading the right hand lane. Road Trains would present greater dangers and delays in this regard as the leading (of two trailers) projects further into a right hand lane. When making a left hand turn at T junctions, an existing artic blocks both lanes. 9.3 The time taken for road trains to turn at T junctions would extend the delay of cross and following traffic 9.4 Problems caused by motorway accidents, with traffic diverted over unsuitable roads have been ignored. If a road train remained on the motorway until it was cleared, following traffic would be further delayed. Already, delays on diversionary routes are horrendous when accidents occur. When caught by congestion on such roads, motorists and van drivers cause delay to traffic in the opposing direction by trying to turn back and find another route. I experienced this again recently, when, trying to make a local journey, it took me one hour to travel one mile. I did not attempt to turn back, as I guessed alternatives would be no better. 9.5 No thought has been given as to where road trains would be assembled. They cannot assemble at hauliers or customers’ premises that are invariably on minor roads or in towns. If done off-motorway, that means laybys near motorways would have to be kept clear and become part of the hauliers’ premises – and not paid for, as already occurs when they use them for overnight parking, which was not their original purpose. Assembly can only be done at motorway service areas. Extra journeys will be made on the motorway by second artics going to join up with a first artic, and by the second tractor returning light to depot. 9.6 The Road Haulage Association (RHA) said20: “the lorry would only travel on motorways between regional distribution centres. There are 428,000 trucks registered and if we could reduce that to one truck for every two – we’re all for it”. Two thirds of these are rigid vehicles. The RHA did not explain where road trains would be assembled. Because speeds would fall due to delays in attaching and detaching and at junctions, and as many small and one-man hauliers would not invest in such vehicles, at most, it could cut a third of 103,000 artics. With 33.4m vehicles on the roads, the effect on congestion would not be noticed. 9.7 It is admitted: ‘there will be slightly more road wear with 60 tonnes, but if restricted to 58 tonnes, there would be no more wear’. How would that limit be ensured – overloading is common? Fuel consumption and costs are based on full loads, but it is admitted that ‘in practice, full load is frequently not obtained’. Hence, lower costs and fuel consumption is in doubt. It is said fuel consumed per tonne moved gave 3%-8% improvement compared to existing artics. These are small margins in view of probable less-than full loads, congestion, accidents and delays at junctions, which would waste fuel. They ignore fuel consumed by a second tractor hauling a second trailer to the assembly point, and returning light to the depot.

1 Before the 1968 Transport Act, British Rail had the biggest road fleet in the UK. 2 Complimentary copies were supplied to the Commons’ & Lords’ libraries when published. 3 Both published in Focus, journal of the Chartered Institute of Logistics and Transport, April 2008 (road trains) and July 2008 (guided buses). 4 The Last Oil Shock by David Strahan. 5 ibid 6 Hansard Vol 543, col 1682. 7 Letter to Transport Users Consultative Committee which was conducting public hearings on the proposal. 8 Inverness Courier 21.7.59. 9 aka Paul Withrington 10 The immediate 1¼ mile approach has six tracks. Four would remain for main line trains to/from Cambridge, Norwich, Kings Lynn, and for local & commuter trains to/from the North London line, Enfield, Chingford, Hertford and Bishops Stortford which are unaffected by the scheme. These traffic flows together exceed those on the route proposed for conversion. Only two tracks could be replaced by asphalt – which the scheme’s authors accept. The essential safety provision of a boundary wall between fast trains and a road with a footpath for use if buses break down in this steep-sided cutting would leave room only for one lane. 11 Multi-storey terminals would not be restricted – as one might initially think – to cities & large towns. Almost every station (there are 2516) would be replaced by one, because the Conversion plan is to have buses running non-stop to every other destination. Buses making en route stops could not compete on speed with trains.

12 There is no copy of Morin’s Report in any UK library (including British Library & Universities). I eventually tracked it down in the USA at the universities of Indiana and Missouri. The British Library has a copy of the Pratt Report – it is of 500 pages, from which Transwatch quoted 14 words to the Select Committee in 2004. It recognises the problem of terminal capacity to handle so many buses. A vague idea to have thousands of additional buses wandering round a city in the peak to discharge and load is totally impractical in a UK city 13 Transwatch evidence to the Select Committee in 2004 stated that the Morin Report was in Highway Progress. 14 Presumably should be ‘may’. 15 Research into the scale of waste fuel & carbon emissions should be carried out by a University Team. 16 See Britain’s Railways – the Reality for relevant researched data. 17 See my article “With the benefit of foresight” in Focus (journal of the Chartered Institute of Logistics & Transport), June 2004. 18 See Britain’s Railways – the Reality, Appendix A for documentary proof. 19 Ibid, pp 54-55 (Government Economic Surveys (Transport), 20 BBC 11.9.05

September 2010

Memorandum from Town Planning Institute (RTPI) and the Transport Planning Society (TPS) (TE 37)

Introduction, purpose and scope 1. This evidence is submitted jointly by the Royal Town Planning Institute (RTPI) and the Transport Planning Society (TPS). 2. The RTPI is the largest professional institute for planners in Europe, with over 23,000 members who serve in the public service and as advisors in the private sector. It is a charity with the purpose to develop the art and science of town planning for the benefit of the public as a whole. As well as promoting spatial planning, RTPI develops and shapes policy affecting the built environment, works to raise professional standards and supports members through continuous education, training and development. 3. The TPS exists to facilitate, develop and promote best practice in transport planning in the UK and to provide a focus for dialogue between all those engaged in it whatever their background or other professional affiliation. The TPS has approximately 900 individual members and corporate membership of many leading companies in the field. 4. The key messages of this joint submission are: a. that the proper integration of transport and land-use planning systems is the most effective way to ensure that transport benefits the economy; and b. that existing methods for assessing and prioritising proposed schemes are unsatisfactory. 5. The submission responds to all the questions posed in the inquiry terms of reference collectively.

Structure and summary of conclusions 6. The 2006 Eddington Report’s strategic economic priorities for transport investment were: growing and congested urban areas and their catchments; the key inter-urban corridors; and the key international gateways. We consider that these priorities remain valid, but note that they depended upon road pricing to secure the economic benefits for the longer term. 7. The current practices used by DfT to decide investment priorities largely rely on estimates of the value of time savings derived from the sophisticated models used to plan transport infrastructure. However, the reasoning connecting such direct transport effects to economic benefits of the kind referred to by Eddington is increasingly disputed, particularly as regards the most important and longer term impacts such as economic agglomeration and urban regeneration. 8. We conclude that current methods are not a reliable means of directing the very limited transport resources now available towards economic purposes, particularly regarding the balance between road and rail, and between large-scale capital schemes and the smaller kinds of scheme often financed by revenue. We suggest other methods of appraisal that could be employed pending longer-term resolution of the more fundamental issues.

9. Transport decisions affect social structures, quality of life, car-dependency and CO2 output as well as economic productivity. Many of these impacts feed back into economic productivity and are determinants of the longer-term evolution of cities and patterns of settlement and of their longer-term sustainability. The forces involved work at a range of geographical scales (neighbourhood, town, city, subregional and national) and we believe that the forms of local collaboration put in place following abolition of RSSs need to reflect this.

Economic priorities for transport

Eddington’s conclusions 10. The terms of reference for this inquiry include the question of whether conditions have materially changed since the Eddington Report and what the priorities should now be in order to deliver growth, both nationally and regionally. It is relevant to recall Eddington’s words (from his Foreword). 11. He described the UK’s transport networks as “a crucial enabler of sustained productivity and competitiveness.” On value for money he said, “… transport policies offer some remarkable economic returns ...” He concluded “Continued economic success is forecast to lead to rising demands … Given their significance to the economy, my Study shows that the strategic economic priorities for long term transport policy should be growing and congested urban areas and their catchments; the key inter-urban corridors; and the key international gateways.” 12. These conclusions were all placed in the context that “… for economic reasons as well as social or environmental, all transport users should meet all their external economic, social or environmental costs: hence my strong backing for congestion-targeted road pricing”.

Current validity 13. Since he reported in December 2006 there have been major changes with a bearing on Eddington’s conclusions: • GDP in Britain has not grown as anticipated; • the balance of trade has worsened from -£7.0 billion to -£9.6 billion; • unemployment has risen from about 5.5% to nearly 8%; • public sector debt has increased from c. 37% of GDP in 2006 to over 53%; • potential for public investment has been replaced with fiscal retrenchment; • rather than introduction within 10 years1, road pricing has all but disappeared from the public policy agenda. 14. In our view, Eddington’s broad conclusions about the importance to the UK economy of transport in conurbations, on inter-urban corridors and to international gateways remain valid. However, changes in the resource context, the removal of road pricing from the policy mix and our increasing understanding of how transport influences the economy all lead to rather different conclusions as to the kinds of transport programmes and policies needed. The need for transport investment to play its part in economic development has if anything increased since 2006, but how it might best do so may well have changed. 15. The Eddington Report itself placed a good deal of reliance on DfT’s conventional cost-benefit analysis (CBA) processes to prioritise schemes in the chosen areas (in and around conurbations, inter-urban corridors and gateway access). These are areas where the pressures of growth of road traffic are highest, and where (in conventional DfT appraisal) the highest ratios of benefits to costs therefore tend to attach to roads. Under Eddington’s dispensation roads would dominate investment priorities, and road pricing was therefore crucial, not just to raise money but more importantly to ‘lock in’ the benefits of schemes, so that the additional capacity did not simply generate more traffic. 16. The failure to follow up road pricing, increasing doubts about the validity of DfT’s conventional appraisal process and radically constrained resources all point to the need to reconsider Eddington’s priorities.

Deficiencies in current economic appraisal

The conventional appraisal process 17. The Standing Advisory Committee on Transport Appraisal (SACTRA) undertook a major inquiry into the connections between transport and the economy, published in 19992. While noting that the scope for transport improvements to deliver economic benefits in advanced economies with mature transport systems may be limited, the SACTRA Report identified the following possible chains of causation linking transport and economic growth: i. Better transport links allow rationalisation of locations for production and distribution, thus reducing costs and increasing competitiveness; ii. Access to wider labour market catchments, reducing labour costs and increasing choice; iii. Higher productivity (from both the above), increasing output and market share; iv. Stimulation of inward investment by creating internationally attractive locations; v. Unlocking inaccessible sites for development; and vi. Multiplier effects on all of the above leading to further growth in supply chains and dependent services. 18. The scale of these effects can be estimated, but only with some difficulty and uncertainty: in general such estimates are only used where the local incidence of economic benefits is of particular importance (eg in a Regeneration Area – see below). Normally the economic benefit is estimated from the direct transport effects as calculated by the models used in transport network design and planning. The main such benefits are: i. Time savings to users of the network (business and leisure) compared with doing nothing; ii. Reductions in vehicle operating costs (VOC) through quicker or smoother journeys); iii. Accident savings (through better sight lines, etc). 19. These benefits form part of a broader appraisal framework which includes other kinds of effect (such as landscape, natural environment, air quality, noise, etc): this is known as ‘the new approach to transport appraisal’ (NATA) even though it is now some 10 years old. However, the majority of impacts that are assigned a monetary value are user time-savings with smaller contributions from modelled VOC and accident savings. Benefit/Cost Ratios (BCRs) are calculated by comparing the value of monetised benefits with scheme costs (both discounted over time). These BCRs are the determining factor in DfT’s investment priorities. 20. DfT has a highly sophisticated system of guidance for the application of these principles. The web-based Transport Appraisal Guidance (WebTAG) currently runs to over 100 detailed ‘Units’, many of them lengthy and complex. Compliance with the Treasury Green Book standards is claimed and in practice this claim appears to be accepted.

Economic impact in conventional appraisal 21. Transport improvements tend not to have lasting effects on the performance of the transport system itself – journey times, congestion, etc. Rather, the benefits are taken in the form of a wider choice by households and businesses of places to live, work, locate and visit. The original transport improvement is thus transformed into a new pattern of settlement, activity and movement, and this in turn drives further physical development. Although this increases transport demand (and so reduces transport benefits), such changes are a path to the economic benefits listed earlier (para 17). The SACTRA report concluded that “.. in general, the value of direct transport benefits must decline if indirect economic benefits are to grow”.3 22. The rationale for using the value of initial time-savings as the main measure of economic benefit is that, in a perfect market, the ultimate economic benefit will be equal to the initial user benefit, however tortuous the path between. Thus time savings, a by-product of scheme design, seem to offer a quick and convenient means of estimating economic impacts. For most of its existence DfT has focused on reducing congestion (particularly on roads). Because time- savings directly measure reduced congestion, there is an obvious attraction in using the same metric for economic benefit4. This simplification has been the foundation of DfT practice for over 40 years5 and is the main principle embodied in WebTAG. 23. In recent years there has been an increasing interest in indirect and longer-term economic and social effects arising from imperfect markets. The added competitiveness that comes from concentration of activity (agglomeration) is one such effect, and the differential impact of transport on housing prices and choices (social polarisation) is another. SACTRA pointed out that effects of transport change on such processes could be either positive or negative, and might be on a significant scale (though it offered no means of estimating their size). Eddington’s emphasis on agglomeration as an economic force has led to a renewed interest such wider and longer-term effects, and WebTAG now offers units on adjusting the conventional time-savings results to take this into account. Critique of conventional appraisal 24. There is an emerging consensus of experts in the field that DfT’s current methods are no longer a safe guide to transport choices to support economic priorities, for two reasons: i. Increasing concerns about the validity in detail of the conventional process, even its own terms as a representation of effects within a perfect market; and ii. Increasing disquiet about treating the larger and longer-term processes in imperfect markets merely as adjustments to the conventional, perfect market assumption. 25. The focus of existing methods on time-savings allows a conceptually simple prioritisation process to be consistently applied to a wide range of scales and types of scheme. However, the penalty is that wider and longer-term impacts are either ignored or treated only as adjustments. This may have been acceptable when reduction of congestion was the dominant policy objective, but will not do now that economic recovery and climate change have precedence. 26. Eddington’s remarks about the benefits of transport investment appear to have been based on applying the conventional system, but achieving the economic aims he recommends requires a wider approach. It is arguable that over-investment in roads and under-investment in public transport has resulted from the dependence of conventional appraisal methods on time- savings, and that this has undermined the economic and social well-being of cities in the UK in significant ways – particularly when compared with many similar continental cities 6. 27. Annex 1 deals with the background to these concerns in more detail.

Alternative methods of prioritising transport investment

Need for fundamental overhaul 28. Given the present pressures on limited resources, and the importance attached by decision- makers to achieving positive economic impacts, the serious concerns raised here about the inadequacy and potential bias of conventional appraisal matter a good deal. Ideally transport appraisal should include the wider economic and social consequences that are relevant to economic competitiveness. It was noted as long ago as 1997, in connection with conventional transport appraisal that “The extraordinary consequence is that the largest and most important effects of transport play little or no part in the appraisal of transport projects”7. 29. While Land-Use/Transport Integration (LUTI) models offer ways of exploring some of these consequences, they bring with them increased complexity and uncertainty. Credible precision about value for money is unlikely to be the output of a transport model any time soon8. 30. Given that little in the way of major new commitments is likely to be feasible for some time, the time is ripe to carry out a more fundamental review of appraisal than DfT has so far attempted. We do not pursue this issue further here as there are other concerns which are more urgent (though not more important).

Balance between small and large scale, revenue and capital financing 31. The emphasis on time-savings tends to work in favour of large schemes, particularly roads, which are typically financed by capital borrowing. Annex 2 sets out the background to perverse incentives from the financing system that tend to reinforce this bias: i. Local, small scale ‘smarter transport’ interventions are often financed (inappropriately) from capital, and so are first to go as capital budgets are cut – whether or not this makes sense in terms of effectiveness; ii. Capital funding for major schemes continues to be sought even if the original rationale for a project has weakened, because once the scheme is abandoned, staff and other revenue costs can no longer be charged against it, and must compete for limited revenue money. 32. A recent study from the University of West of England9 suggests that, even using the existing appraisal system, large projects and projects in categories where most has been spent in the past do less well than small local schemes of the ‘smarter choices’ kind. Interim methods 33. The means of exploring wider and longer term impacts are complex and poorly developed, so a short-term expedient is needed pending development of better alternatives. Elements of this could include: i. employing an interim pass/fail filter, using the criteria put forward by the Government in July and relating to existing NATA tests10; ii. reworking existing appraisals to reduce the influence on CBRs of distant, uncertain and short time-savings by shortening appraisal periods, raising discount rates and discounting very short time-savings; iii. using transport model outputs to estimate 'indirect' economic impacts instead of relying on conversion of 'direct' time-saving The approaches currently employed in 'wider economic impact' reporting on regeneration areas could be more widely applied; iv. constructing a common 'points' system to place CBR alongside other NATA factors rather than it being the single dominant factor. This would accord better with Green Book advice than present methods which neglect non-monetary impacts. 34. Such actions would be better than nothing, but only a short-term fix. For the future a more integrated and strategic approach could include the following: i. The wider impacts of larger scale policies and projects (such as road pricing, a national High Speed Rail network or extensive provision of rail-based local transport beyond London) should be informed by LUTI modelling; ii. Planning concepts and processes should foster a more integrated relationship with other aspects of economic and spatial policy-making, to realise the potential for mutual reinforcement (‘win/win’) between agglomeration, quality of life, reduced transport demands, and reduced vulnerability to fossil fuel supply and price. iii. Devolution of more responsibility for such plans to a more local level, at which the relationships between transport and other factors is more meaningful; iv. Retention of central government responsibility for strategic national decision- making as cannot effectively be undertaken at a lower level – such as the balance between regions.

Other implications

Wider consequences of transport investment 35. Transport problems arise as much outside the transport system as from within it, and the effects of transport measures are felt far beyond the transport system itself. Long-term UK data show that increased trip lengths (implying changing locational choices) account for most of the observed growth of personal travel11. A more diffuse pattern of locational choice by families and businesses, leading to increasing trip lengths for all purposes, is thus the major strategic cause of growing transport demand, and of related increases in car-dependency. 36. In the long term, land-use and transport have a symbiotic relationship, expressed through long- term, indirect processes. This point has been summarised by Peter Hall12 as follows: “… at least since the first , two hundred years ago – the growth of cities had been shaped by the development of their transport facilities. But these in turn were dependent on the evolution of transport technologies. For each successive development of the technology, there was a corresponding kind of city. However, the relationship was more complex than that: it was a mutual one. The transport system shaped the growth of the city, but on the other hand the previous growth of the city shaped and in particular constrained the transport alternatives that were available. So the pattern of activities and land uses in the city, and the transport system, existed in some kind of symbiotic relationship.” 37. Peter Hall identified four major episodes of divergence between transport technologies and urban form over the last 200 years. The current crisis arises because agglomeration advantages in a knowledge economy depend on offering both an attractive quality of life and concentration of activity, while high current levels of car-dependency undermine both. In this connection we note that continental cities with integrated modern transport systems have significantly better productivity than their UK equivalents (relative to their national context)13. London, with its extensive underground and suburban rail systems, is the exception that demonstrates the point.

Implications of abolition of RSS 38. The experience of national and regional plans (like RSSs) that attempt to commit to targets and measures that are too specific has not been happy, and transport has been particularly prone to producing this kind of ‘end-point’ plan. Unexpected events can render such plans redundant, and to the extent that their continued existence inhibits a flexible response to new problems and opportunities, even damaging. Any replacement within the localisation agenda needs to employ a style of planning that offers a clear sense of direction, but at the same time is more robust and more flexible14. 39. Transport planning in the UK comes from a tradition that plots a path towards a desired (and stable) end, and is therefore vulnerable to disruption by unexpected changes, such as those experienced with increasing frequency in recent years. Planning processes for all purposes and at all levels need increasingly to manage uncertainty rather than seek to eliminate it. The longer-term and more strategic the purpose, the more important it becomes to test alternative economic and social scenarios and responses to them. Such an approach might also help bridge the serious and persistent gap between strategic transport and spatial planning in the UK15.

References

1 DfT White Paper (2004), ‘Managing our roads’ 2 Standing Advisory Committee on Trunk Road Assessment (SACTRA) (1999) ‘Transport & the Economy’ 3 SACTRA (1999), ibid, para 23 4 and of course some time-savings may remain uncoverted, and of value as such 5 since it was used in the case for the Victoria Line in the mid-1960s 6 M Parkinson (2006) ‘The State of UK Cities’ Report to ODPM 7 A Wenban-Smith (1997), submission to SACTRA (ibid), quoted at para 10.10 8 A Wenban-Smith and T van Vuren (2009) ‘Using transport models in spatial planning: issues from a review of the London Land-use/Transport Interaction model’, European Transport Conference, Amsterdam 9 Phil Goodwin (2010) ‘ Improving value for money in the context of transport expenditure cuts: feasibility study 10 see Keith Buchan (Viewpoint, LTT 550, 23 July 2010). 11 Department for Transport (2008), ‘Transport Statistics GB’. Analysis shows 70% of increase in motorised personal surface travel is due to longer trips (A Wenban-Smith, Committee on Climate Change workshop, 2009) http://downloads.theccc.org.uk/CCC_land_use_transport_report.pdf 12 Hall, P (1994) ‘Squaring the circle: can we resolve the Clarkian paradox?’ Planning and Design 21 579-594 13 M Parkinson (2006) ibid 14 J Robinson (1986), ‘Paradoxes in planning’, Long Range Planning Journal, Vol 19, No 6, pp21-24: a pertinent discussion by a former Shell UK executive 15 Department for Transport (2004), ‘The integration of regional transport strategies with spatial planning policies’, report by MVA (especially Chapter 6)

Annex 1: critique of current appraisal methods A1.1. A vigorous discussion has been going on over the last year or so about current appraisal processes. Starting with issues raised at national and European conferences and seminars, this has continued in recent months in the technical press16, in an e-mail group of experts (practitioners and academics). While there is no single viewpoint, it is clear that there is widespread disquiet about the ‘fitness for purpose’ of an appraisal system dominated by time- savings. This Annex summarises the main strands under three headings: modelling time- savings; valuing time-savings; and converting time-savings to economic benefits.

Estimating time-savings by modelling A1.2. Criticisms of the models which are used to estimate time-savings included: i. The convention in standard transport models of representing dynamic processes as a series of equilibrium states may produce a systemic bias in favour of large schemes that support the continuation of past trends (particularly therefore roads); ii. Techniques that allow full dynamic modelling tend to be rejected because of unfamiliarity and because appraisal rules require comparisons between (artificial) equilibrium states; iii. Complex, diffuse, non-equilibrium processes (involving transport but extending well beyond it) may be responsible in the longer-term for larger consequences than the transport choice processes that are conventionally modelled. Adjustments for imperfect markets may not capture these effects; iv. LUTI models which can explore some of these wider processes in a dynamic manner are complex and difficult to calibrate or verify. They may help examine strategic alternatives, but do not produce the kinds of results that can be used to appraise schemes.

Valuing time-savings A1.3. Having arrived at an estimate of initial time-savings, what is their value (both at the start and over time)? Difficulties here included: i. The validity of some or all of the following: a. the valuation of business time-savings at wage costs, justified because this a market rate. However, time spent travelling may be productive (eg as a rail passenger), and it is not clear whether the market would really value very short time-savings at the standard hourly rate; b. the valuation of all time-savings at the same rate, regardless of how short they are (business and leisure). A study of leisure time showed no value for savings less that 5 minutes; c. the appraisal period is currently 60 years, while transport projections rarely look ahead more that 15. This means that the (untestable) assumptions made about the rest of the appraisal period are likely to have a major influence on the scheme benefits: modelled time-savings are of dubious validity over these time-scales; d. the discount rate is currently only 3-4%, which was intended to add to the influence of longer-term environmental impacts, but has the perverse effect of increasing the influence of long-distant time-savings; e. the unknown proportion of time-savings converted to economic benefit over the appraisal period (or remaining as time-savings). ii. Indicating the possible scale of these causes for concern, there are cases where an independent estimate of economic impacts has been made (because a Regeneration Area is involved), where independently identifiable economic benefits have been only ~10% of the value of time-savings over essentially the same area.

Conversion of time-savings to economic benefits A1.4. The lossless conversion of time-savings depends on the assumption of a perfect market, which all are agreed does not exist. The present approach is to adjust for imperfection, but this may not be satisfactory if imperfect market effects (eg agglomeration) are of high policy importance: i. the uncertainties of modelling time-savings even 10 years ahead does not inspire confidence in their conversion to economic value over much longer periods ii. in the longer-run time-savings are transient – benefits are taken in the form of increased access, and it is the value of these that should be the focus of attention iii. even if perfect convertibility is accepted, the distribution of economic benefits between significant groups such as employers, employees, rentiers and travellers is important to decision-makers and requires a broader approach iv. the real economic value of time-savings may be further compromised by their measurement relative to a base case - 'time-savings' may merely be lower time-losses than would otherwise occur. These may not self-evidently be of equal value in the eyes of the public or decision-makers.

Annex 2: Capital and revenue in local authorities

The revenue / capital distinction A2.1. Local authority revenue expenditure means the day-to-day running costs of the transport planning function (e.g. staff wages and other operating costs incurred by a local authority). Revenue spending is financed via a combination of Government grants, non-domestic rates, receipts from sales, fees and charges (eg car parking and planning application fees), housing revenues and Council tax receipts. A2.2. Capital expenditure results in a fixed asset, such as investment in new or extended infrastructure. At present, central Government pays local transport capital to local authorities in two blocks (Integrated Transport Block and Highways Maintenance Block). These are paid by two means: • Capital Grant, paid to authorities quarterly by DfT; and • Supported Borrowing, where allocations published by DfT are added to the notional debt for the authority and use by DCLG to distribute Formula Grant. A2.3. Capital can also be funded from a wider range of other sources (eg revenue, borrowing, other grants from central government, grants and contributions from other organisations such as the National Lottery and private developers through §106 planning agreements, or proceeds from the sale of land, buildings or other fixed assets).

Balance between capital and revenue A2.4. The line between revenue and capital expenditure these has become somewhat blurred in recent years. Historically, it has been easier to receive money for spending on transport in the form of capital grants, and local authorities have tended to prefer this form of support. This is primarily because it is easier to account for, and removes some of the uncertainties that occur because the Formula Grant is unhypothecated and ‘damping’ is used to limit fluctuations. A2.5. However, a consequence is that there has been an increase in the use of capital funding for purposes that ordinarily would be funded through revenue. This is particularly the case with measures to support ‘smarter travel’, such as the use of capital grants to fund posts for travel plan co-ordinators. This has the perverse effect that as capital budgets are cut, such posts tend to be first to go, whether or not this makes sense in terms of the direction or effectiveness of transport policy. A2.6. The converse is that local authorities can charge preparation and land acquisition costs for major schemes against prospective capital finance (including transport modelling, scheme design and appraisal which would otherwise be defined as revenue). This creates another perverse incentive: to carry on seeking capital funding even if the original rationale for a project has weakened, because once the scheme is abandoned, staff and other revenue costs can no longer be charged against it, and must compete for limited revenue money.

Future prospects A2.7. The relative ease with which capital funds may be secured, and the general preference for this approach to funding within local authorities will no doubt change as the financial constraints aimed at reducing the budget deficit become increasingly onerous. However, at the same time, it may also be the case that any new or innovative funding arrangements (for example from the private sector via Local Enterprise Partnerships) for spending on transport is likely to be continue to support capital expenditure rather than revenue. A2.8. The current economic circumstances do provide a means by which a shift could, and perhaps should, be made from capital spending on large infrastructure schemes to revenue-funded spending on more modest measures aimed at changing people’s travel behaviour. It will still be the case that some new infrastructure should continue to be developed through capital expenditure, with contributions (usually maintenance-related, but also in infrastructure from §106 contributions) from revenue funds. A2.9. However, the issue remains that the balance between capital and revenue expenditure will be determined separately by each local authority, and inconsistencies may subsequently arise. Certainly, in terms of encouraging walking, cycling and the use of public transport one of the biggest problems is the lack of adequate funding for maintenance. If maintenance is properly funded there might be little left for any other activity – capital or revenue. A2.10. Overall, there appears to be a case for moving the present balance of funding further in favour of revenue spending. This not only would appear to be more relevant to the type of investments that local authorities will be making in transport going forward, but also would encourage a move towards a more prudent and cost effective approach transport measures that are relevant to local conditions and support economic growth. This will require action to counter the vagaries of the current system for calculating and allocating funding streams.

16 See Local Transport Today, Issues 552, 550, 549, 547, etc (thread from http://www.transportxtra.com/magazines/local_transport_today/news/?id=23860&StartRow=1)

September 2010

Memorandum from the Light Rail Transit Association (LRTA) (TE 38)

The Light Rail Transit Association (LRTA) was established in 1937 by a group of people concerned about the proposed closures of tramways in London. The Association has grown over the intervening 62 years into an international body with around 4 000 members around the world, half outside the United Kingdom. Although the LRTA’s members come from all walks of life, they share a common concern with the development of good quality public transport through the use of light rail and tramways. Many are professionals working in the transport industries. The Association’s monthly magazine, “Tramways & Urban Transit” is widely regarded as essential reading around the world by those concerned with the development, building, operation and use of light rail and tramway systems.

The Association’s objectives are to educate people about light rail and modern tramways and to advocate the adoption of such systems as core components of modern integrated transport systems.

The Association is of the opinion that investment in high quality urban public transport based on tramways and light rail lines continues to be of the greatest importance for the economic development of our cities and city regions even in these times of financial stringency.

The Association would make the following responses to the specific questions raised by the Select Committee.

Have the UK's economic conditions materially changed since the Eddington Transport Study and, if so, does this affect the relationship between transport spending and UK economic growth? Any changes in economic conditions do not alter the importance of investment in transport to economic recovery and growth. The Eddington Study emphasised the importance of good urban transport systems in promoting economic growth of and inward investment in cities, but placed too much reliance on the ability of bus-based networks to achieve this. While not denying the importance of the bus as a major component of urban transport networks, research and experience in many cities overseas shows that a core tram or light rail system is far more effective in achieving modal shift away from the private car and generally improving the urban environment. [1]

What type of transport spending should be prioritised, in the context of an overall spending reduction, in order best to support regional and national economic growth? A balance needs to be kept between spending on national, regional and local transport developments. The improvement of local transport systems would best be advanced by giving cities or city regions greater autonomy in the planning, development and financing of transport schemes.

How should the balance between revenue and capital expenditure be altered? As far as urban transport is concerned, this again would be best left to local decision making, though it is clear from previous economic downturns that cuts in capital expenditure are likely to inhibit the recovery process. Indeed, members of the Chartered Institute of Logistics and Transport, (CILT), believe that transport spending that supports economic growth or reduces congestion should be the key priority in the Government’s Comprehensive Spending Review. 75% of participating members identified 'supporting economic growth' as one of their top priorities where Government spending should be protected.

Are the current methods for assessing proposed transport schemes satisfactory? While there have been recent improvements in the formulae used by the Department for Transport in assessing schemes, it is still widely felt in the industry that there is a considerable bias against tram and light rail schemes. This was highlighted in the National Audit Office Report [2] and more recently in the Inquiry by the All-Party Parliamentary Light Rail Group [3].

How will schemes be planned in the absence of regional bodies and following the revocation and abolition of regional spatial strategies? The erstwhile regional authorities covered large areas and were probably not best suited to the planning of urban transport systems. This would be better done on a city region basis. A mechanism for this already exists in the Integrated Transport Authorities and the setting up of such bodies in city regions where they do not yet exist should be encouraged, alongside the coalition government’s plans for increasing emphasis on local decision-making.

References

1. Carmen Hass-Klau, Graham Crampton and Rabia Benjari The effect of and light rail on the economic success of 15 cities in France, Germany, UK and Canada are studied and detailed lessons drawn covering developments since the late 1970s. Environmental & Transport Planning, Brighton, England, 2004. ISBN 0 9519620 9 4

2. National Audit Office Improving public transport in England through light rail. 2004.

3. All-Party Parliamentary Light Rail Light rail & the city regions inquiry. PTEG, 2010.

September 2010

Memorandum from Southampton City Council (TE 39)

This is Southampton City Council’s response to the Transport Committee’s call for evidence to support their inquiry into Transport and the Economy.

The main points of our response are as follows:

• There is a strong link between the economy and an efficient transport system. This was evidenced by Sir Rod Eddington in his work entitled “transport's role in sustaining the UK's productivity and competitiveness.”

• This link is particularly strong in Southampton where its role as the UK’s principle national gateway for a range of import and export trades dominates the local economy. Road and rail links to the midlands and further north are vitally important to sustaining such trade. Total journey time and journey time reliability are critical to businesses in this regard.

• There is evidence from port activity levels that import and export trades are recovering. However, historic underinvestment in transport in the Solent area means the transport network will struggle to provide quick and reliable journeys without some investment in essential infrastructure and existing assets.

• Through Transport for South Hampshire (TfSH), the local planning and highway authorities in partnership with transport agencies in the area coordinate their strategies and develop initiatives to best meet the transport challenges we face. Many of these we can address through local investment in smarter choices, public transport and intelligent transport solutions.

• Whilst investment in infrastructure is seen as a last resort in our strategies, the fact remains that there are weak points within the transport system that threaten future growth potential. Targeted investment in these locations will produce significant cost benefit and help stimulate recovery by lessening barriers to trade.

• Funding should be prioritised towards areas of the UK transport network that support national economic development as well as proposals that have good cost benefit ratios and deliver a reduced carbon footprint. Have the UK’s economic conditions materially changed since the Eddington Transport Study (2006) and, if so, does this affect the relationship between transport spending and UK economic growth?

There is no doubt that the economic climate has changed significantly since the publication of the Eddington Report. Within the context of Southampton these changes have had some negative impacts on aspects of the local and regional economy. However, the link between transport and the economy remains important and will be critical in bringing about a speedy recovery.

The Port of Southampton has seen a decline in container movements and vehicle imports/exports but it is expected that the Port will see a return to growth for all traffic once the UK emerges from the recession. The Port of Southampton’s projections for container movements are shown in Fig 1. The impact of the recession is clearly shown with a dip in container traffic occurring after 2008. The graph shows that the downward trend was expected to continue until 2010, although the Association of British Ports (ABP) have since reported that decrease was not as severe as expected. ABP are now projecting that they will double container movements from 1500 TEU to 3000 TEU by 2022.

Fig 1 - Forecast of Southampton Container Demand (Source: ABP)

The recession has had no effect on the cruise industry which has continued to experience uninterrupted growth. The number of cruise calls increased together with passenger movements which are now in the region of one million per annum. This represents 80% of the UK market. With premier terminal facilities and its ideal strategic location, Southampton has strengthened its status as the cruise capital of Northern Europe. Based on past years growth rates trade could double in less than 5 years. The biggest threat to this rapid growth is the capacity of the local transport system to support the growth. This is now an urgent issue requiring investment. What type of transport spending should be prioritised, in the context of an overall spending reduction, in order best to support regional and national economic growth?

The following priorities should be applied:

• In the short to medium term only the best value for money scheme should be implemented. Typically this is likely to mean that measures that reduce and manage transport challenges without significant investment should be prioritised.

• Local and national road schemes previously in regional funding programmes or Highways Agency programmes should only proceed where they can demonstrate good benefits to costs and that alternative transport strategies have been exhausted.

• Local transport allocations should be maintained and enhanced with greater funding flexibility.

• National prestige projects such as high speed rail are expensive and have generally poor benefit to cost ratios. They should be delayed for schemes that deliver higher value and impact in the short term.

• Investment should be prioritised in localities where there is evidence of established transport partnerships working together to deliver coherent and complimentary transport and land use strategies. Large urban areas, PTAs and joint committees covering large populations such as Transport for South Hampshire should be prioritised.

Transport spending should be prioritised towards low cost often small schemes that are shown to yield the greatest benefits. Our LTP3 Strategy and Implementation Plan will seek to focus on Smarter Choices, Bus Strategy, Intelligent Transport Systems and Demand Management. A key example of this approach will be the development of ITSO compatible Smart Cards for use on the region’s public transport network. It is believed that a National lead on Smart Cards with funding support will be of significant value for all Local Authorities. In the context of cities, a collection of complementary small schemes delivering a defined strategy is of greater value by far than one large highway scheme delivering relatively localised benefit. This was a key finding of the Sir Rod Eddington report and is a key reason why Local Transport Plan allocations should be maintained.

Local authorities will need to look at using their transport networks more efficiently. Whilst Southampton City Council will aim to maximise funding from available sources we will also ‘sweat the assets’ in order to accommodate the City’s projected housing and employment growth. Given that available funding for large infrastructure projects will be extremely limited for the foreseeable future, what money is spent in this manner will need to be carefully targeted. Priority should, therefore, be given to investment in new infrastructure which can directly impact on supporting national economic growth.

Infrastructure investment in local or national road schemes needs to be rigorously challenged. Typically the BCRs for such schemes are low and yet they have dominated regional investment programmes for the lasts decade often to the detriment of cheaper and higher impact schemes. There are occasions when such investment is needed when it impacts upon the economic success of local or wider economies and where alternative more affordable transport strategies have been exhausted or are unlikely to meet the local transport challenges. In some cases investment in new capacity is needed. A key example would be the rail gauge enhancement project which will facilitate increased container movement by rail. This was of significant benefit to the Port of Southampton, offering improved rail links with other parts of the country and consequently increasing the attractiveness of the Port for its customers. Investment should target national economic development in this manner, diverting funding to where key economic drivers are located.

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

Revenue based solutions to transport challenges can be difficult to fund because many sources of funding are capital related. Initiatives like the “smarter travel cities”, smartcards and the running of intelligent transport services which actively manage our transport networks depend on such funding. Typically they are also shown to deliver high value for money.

Identifying alternative revenue sources depends on the economic buoyancy of an area. For example high land values yield greater potential for developer contributions. Similarly parking surpluses are more likely to occur where there is high demand and low supply for parking. Southampton has low land value and an oversupply of parking which dampens the ability to use parking surpluses to implement a transport strategy. This issue could be alleviated if there were greater flexibility in LTP allocations.

Are the current methods for assessing proposed transport schemes satisfactory?

The current appraisal system is flawed in many areas. This is the topic of much professional debate on which several prominent academics have voiced opinion. There is a general agreement that there is room for improvement with particular emphasis on the use of “value of time” for different transport users and the fact that road schemes are positively discriminated against in the way it deals with fuel duty revenue to the treasury.

The process for assessing schemes is also of equal or arguably greater importance. Local authorities, particularly the small ones find it difficult to resource the stages and studies necessary to submit major scheme bids. Neither do they always have the appropriate skills and expertise. Where there are sufficient resources, the bid for funding is made at financial risk to the authority. The chance of funding is also very small as the potential pot available is very small. A simpler way of prioritising schemes at an earlier stage in the development phase is needed. This might also include increasing the level for major schemes from to £10 to £15 Million.

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

Funding proposals via Local Economic Partnerships may see transport planning become focused on local areas demonstrating similar economic and transport challenges.

Transport for South Hampshire (TfSH) was formed in partnership with Hampshire County Council and Portsmouth City Council to develop sub- regional transport strategy and is widely held as an example of good practice. TfSH has recently published its joint LTP3 strategy for consultation (the three authorities will produce separate Implementation Plans) and the continued sub-regional approach should form a strong basis for targeting available funding sources and delivering strategic outcomes.

The absence of the regional authority does not in this case make a significant difference providing alternative funding sources are available or that LTP funding is increased to cater for the loss of the regional funding allocation funding stream. The authorities believe that through TfSH we can spend LTP funding in a way which achieves local and strategic aims.

We thank you for the opportunity to submit evidence to this inquiry and look forward to hearing the findings of the Transport Committee. Please note that this is currently an officer level response only. We will notify you when it has been formally approved.

September 2010 Memorandum from FlyingMatters (TE 40)

1. FlyingMatters welcomes the Transport Committee’s Inquiry into Transport and the Economy and is pleased to submit these comments for consideration.

2. FlyingMatters is a broad coalition of organisations which support sustainable growth in air transport in the UK. Our membership includes trade unions, business organisations and tourism organisations, as well as airports, airlines, aerospace manufacturers and air traffic control.

3. The Committee’s inquiry into transport and the economy is timely and appropriate – particularly in the context of public spending priorities at a time when the Government’s priority is deficit reduction.

4. However, with the exception of a small number of lifeline services in the Highlands and Islands, aviation receives no public subsidy and pays for all it’s own infrastructure and therefore largely falls outside the discussion about strategic transport spending priorities.

5. We believe that there are some critical questions around aviation policy in the UK which we think would benefit greatly from in depth examination by the Committee and which build on the Committee’s previous inquiry into the future of aviation policy and your current work on transport and the economy and which merit specific stand alone inquiries.

6. The first of these is an examination of whether the UK’s international gateways and connections are adequately aligned with current and future sources of direct foreign investment and international trade opportunities.

7. In addition, the Prime Minister recently made a speech emphasising the economic importance of tourism to the UK. Any examination of our preparedness to take advantage of any growth in foreign direct investment would not be complete if it did not also look at our capacity to take advantage of similar trends in international visitors.

8. In this context it is possible to have a meaningful and productive examination of our aviation infrastructure and services, both from a regional development point of view as well as a national perspective.

9. If the UK has an economic and strategic need, for frequent, reasonably priced links to, for example, China or India, should government use policy levers to support and encourage their development?

10. Understanding what levers and signals would work and produce the services needed would require an examination of how the aviation market in the UK works, both domestically and internationally. The hub and spoke model and its value seems to be very poorly understood by many policy makers. We are frequently asked what difference it would really make to the UK if we lost our hub status and the majority of passengers travelled via European hubs.

11. Questions about how to maintain our hub status can only really be answered in the context of the UK’s strategic transport needs allied with an understanding of the consequences of its loss. In the absence of a lead from central government on policy in this area, the Committee has an opportunity to do a sort of ‘back to basics’ examination which would provide valuable space for policy makers to look objectively at the issue.

12. In a highly competitive market, routes are not sustainable if they are not competitively priced. There is an opportunity to examine whether and to what extent UK domestic taxation of aviation is affecting our ability to compete as a destination for investment and for visitors.

13. The impact of tax and competitive pricing is felt particularly sharply at regional airports. The highly integrated relationship between the location of airport and airline services and regional development is intuitively understood. Scotland, for example, within the scope of the Calman Commission is looking at varying the application of the rate of APD in order to reinforce the attractiveness of Scotland as a destination. It is possible that Wales will also begin to look at this option.

14. There is an opportunity for the Committee to conduct a systematic exploration of the relationship between air links and regional development so that we can fully take account of the catalytic impact aviation has. There may also be lessons to be learned from the experience of deprived European regions and their experience of the impact of new air links.

15. We would also argue that there is scope for an examination of the social impact of access to affordable flying. The rise of the low cost sector and the highly competitive nature of the industry have progressively forced prices downward over the last 30 years. We believe that the growth in access to air travel has changed society for the better in innumerable ways, however others contest this and argue that restrictions (whether through limiting infrastructure or the use of price signals through taxation) would be beneficial.

16. Lastly, the environment. We would argue that environmental impact, the measures and targets set by government and by the industry to reduce that impact should be considered in an integrated and balanced way within the scope of the other issues mentioned in this submission.

September 2010

Memorandum from the RAC Foundation (TE 41)

1 Background

1.1 The RAC Foundation is a charity which explores the economic, mobility, safety and environmental issues relating to roads and responsible road users. Independent and authoritative research, carried out for the public benefit, is central to the Foundation’s activities.

1.2 The Foundation welcomes the Committee’s timely inquiry into the subject of Transport and the Economy. This follows up The Eddington Transport Study which was jointly initiated by the Chancellor of the Exchequer and the Secretary of State for Transport. That was a large and thorough exercise involving the commitment of substantial resources over eighteen months by officials from HM Treasury and Department for Transport, as well as outside experts, under the general direction and leadership of Sir Rod. The report was generally well- received. It was formally accepted by the government of the day, as were the parallel reports by Sir Nicholas Stern on Climate Change and Kate Barker on Land Use Planning.

1.3 A large part of the Eddington Study was a review of the existing international evidence, especially on the relationships between transport, productivity, competitiveness and economic growth. Whilst there has been a change of government—and therefore changes in policy—there is little reason to think that much has changed in terms of this underlying evidence over the three and a half years since it was published. Until such time as a new study of a similar scale has been concluded, Eddington is the best we have and good use should be made of it.

1.4 In the RAC Foundation’s view there is more that government could and should do in terms of adopting the recommendations of the Eddington Transport Study in the decisions it takes. We regret that neither the previous government nor the current one has published a National Policy Statement for the surface transport networks: that is an essential part of Eddington’s process of implementing the principles of sound strategic transport planning.

1.5 The Department for Transport has made a start in improving its procedures in response to Eddington, including conducting a major “refresh” of the appraisal techniques, once again involving considerable resources from officials and outside expert advice. There will, of course, be further adjustments as the subject develops and techniques improve.

1.6 It is important to recognize that quantification and monetary valuation, whilst important, is only one part of a rounded appraisal that can usefully be offered to ministers. This was first recognized in the appraisals the DfT developed in response to the Committee on Trunk Road Assessment (the Leitch Committee) in the 1970s, and further developed into the appraisal framework of the New Approach to Appraisal (NATA) in 2000. But the recognition that monetary valuation is only part of the appraisal does not imply that it should be done with any less scientific rigour. In particular, in our view there are risks of contaminating meaningful monetary valuations by attempting to add in items which cannot be plausibly valued, or by “adjusting” monetary valuations to take account of considerations that have not been or cannot be expressed in monetary terms.

1.7 One important weakness that Eddington correctly identified is that, in the past, the disbenefits of unreliability (or unpredictability of journey times) have not been evaluated carefully. This has become an increasingly important matter as our road, rail and air networks have grown less rapidly than the increases in demands upon them. So they have to run closer to their maximum capacities for more of the time: with the consequence that unpredictable hold-ups are bound to occur more frequently. Also, as general standards of living increase and individuals’ expectations of quality of service increase in all walks of life, unreliability of transport services is likely to become even less tolerable: or to put it another way, individuals will be willing to pay increasing amounts to secure improvements in predictability. Similarly, as “just-in-time-delivery” and competitive pressures increase in commerce and industry, unreliability matters more to producers. Appraisal in this area is technically difficult, but attempts are being made.

2. Economic conditions since the Eddington Transport Study and the relationship between transport spending and economic growth

2.1 As we have already noted it is unlikely that the evidence on these relationships has changed much. Three things have however changed: the state of the economy; forecasts of population growth and the fiscal situation.

The state of the economy

2.2 The present economic recession was not anticipated at the time of Eddington. Industrial and personal demand for travel are both very closely linked to the level of economic activity and it is to be expected that the traffic on all modes has not grown as rapidly as expected. For the moment congestion has been relieved. That is why, for instance, railway deficits are higher than expected and road traffic conditions have eased somewhat. “Figure 2.1” (below) from the DfT’s Road Statistics 2009 clearly illustrates the connection between economic activity and road traffic, with traffic moving above or below a linear trend according to the state of the national economy.

2.3 Road traffic has fallen during the recession (especially vans and other goods vehicles). The Figure below from the DfT’s Congestion on inter-urban roads, July 2010 shows how this has translated into more reliable road journeys. But it also shows how, in recent months reliability has started to deteriorate again as the economic recovery has started. If, as we all hope, the economy continues to recover, it is reasonable to expect traffic on road and rail to recover in step. In other words traffic growth will return to the kind of growth anticipated by Eddington, but after a pause of a few years. If so reliability will decline unless road capacity is increased.

Journey time reliability measure on the Strategic Road Network

Source: DfT Congestion on inter-urban roads Monthly provisional estimates: July 2010

2.4 The pattern of renewed road traffic growth after a pause is reflected in the official road traffic forecasts shown in “Figure 3” (below) from The DfT’s Road Transport Forecasts 2009. We believe that document to be thorough, scientific and soundly-based.

2.5 Eddington was working about four years ago, so, arguably, the future now looks similar to the way it did when the Study was being written. It is worth noting that (without road pricing) even with Eddington's “economically justified” programme of road proposals—which is substantially greater than the DfT’s then planned programme—congestion will be worse than at present.

Population numbers and location

2.6 The Office of Population Census and Surveys has, in recent years, increased its estimate of future population growth. Thus, even if the rate of trip-making per head were to stabilize, as some have claimed in respect of car trips, the demands on transport networks (and other public infrastructures) will continue to increase for this reason. Importantly, continued movement of population between regions is predicted, as shown in Table 1:

Table 1: Population growth forecast in the English regions, 2010–2031

% North East 7 North West 10 Yorkshire and Humberside 19 East Midlands 21 West Midlands 12 East 20 London 14 South East 16 South West 20 All England 16

Source: OPCS (Office for National Statistics, 2006)

2.7 It is important to bear in mind that transport schemes serve specific geographical locations and it can be misleading to speak in terms of “the average” road or rail scheme. What matters to the benefits of any one scheme is how many people will use it, and that will depend on the local population. This is, indeed, taken into account in scheme appraisals. Note that Table 1 predicts a population increase of one fifth over two decades in some Regions and these are broadly ones in which levels of road congestion are already high. Thus, even if the rate of total national traffic growth were to reduce, it is likely that there will be significant local growth and therefore a need for more infrastructure to serve it. It is useful to compare our relative provision of key infrastructure to Europe, where many similar nations have invested to a greater extent in their road network (See: International Transport Forum).

Fiscal situation

2.8 Clearly, Eddington was working at a time when the prospects for public expenditure were very different. But that does not change the principles. He was suggesting how to approach the problem of allocating finite public resources to achieve good value for money. The fact that the quantum of public resources is smaller does not change the principles, but it does make it even more important to avoid wasting resource on activities with insufficient return.

3. Transport spending to support regional and national economic growth

3.1 The broad thrust of Eddington’s research findings is that it is hard to find convincing evidence that transport spending is effective at stimulating regional growth—even though this policy has frequently been attempted. On the other hand both regional and national economic growth can be significantly impeded if the transport infrastructure does not provide an adequate level of service; if movement of goods and people is slow, unsafe or unreliable. We agree. It is common experience around the world that growing economies need good (transport) infrastructure to meet their potential.

3.2 The Eddington report noted that the quantity and quality of infrastructure are not adequate and that UK economic growth is increasingly jeopardized by shortages of transport capacity. It predicted that, without action to add road capacity, by 2025 congestion on Great Britain’s road system would grow by about 30%— broadly in line with the projected rise in road traffic—with increases most marked in urban areas, key inter-urban corridors and around ports and airports.

3.3 Essentially, scheme appraisals are attempting to evaluate the benefits to people, industry and commerce of speeding up journeys and reducing accidents, whilst taking proper account of the disadvantages caused by calls on the taxpayer, noise, air pollution and greenhouse gas emissions.

3.4 Whilst any method of assessment can always be improved, we agree with Eddington’s general conclusion that the currently available methods do attempt to measure the right things in relation to regional and national economic growth and do it successfully: they are a good place to start.

3.5 It is important to note that, correctly used, appraisal techniques are “modally agnostic”. The high level objective is not “to reduce traffic” or “to promote public transport”. These may be the outcomes, but the objective is to use the available public funds to make the best overall contribution to personal welfare, or the economy—in short, to provide the best value for public money. Self-evidently, the same methodology and the same unit values should be applied irrespective of the mode or type of scheme under consideration.

3.6 Some of Eddington’s most powerful conclusions are often forgotten. Namely, that “projects” can include better maintenance of existing facilities and more intelligent pricing for their use. The latter can be instrumental in achieving management of the demand, generation of new revenues and higher economic value from the same physical assets.

4. The balance between revenue and capital expenditure

4.1 In principle this balance should emerge as part of rational appraisal. In practice there are long-standing, institutional distortions. In some cases capital has been artificially constrained (or hidden in PFI or PPP mechanisms) in order to meet targets on maximum public capital spending. This can be damaging to overall value for public money.

4.2 We welcome the coalition government’s intention to compare return to capital spending across departments: this can only be right. We hope the government will be equally open to adjusting the balance between capital and revenue spending in search of the best overall return. This implies consistency of revenue spending across departments.

5. Current methods for assessing proposed transport schemes

5.1 We believe the techniques for project appraisal the Department for Transport has, which have evolved over five decades, have good scientific foundation. They can always be improved, but they do give meaningful, quantitative indicators. We, of course, recognize that formal appraisal is only an aid to the decisions ministers have to make. However there has been a history of several past governments making decisions on the allocation of public funds in a way that was inconsistent with the indications on economic returns (notably the Ten Year Transport Plan of 2000). This has contributed to the inadequacies in surface transport infrastructure we face today.

5.2 We are aware that amongst commentators on transport appraisal there is a divergence of views on the treatment of time savings and of carbon. A great deal of effort has gone into these topics over the years: the time values currently in use should not be changed without careful consideration of any new scientific evidence that was unavailable last time the subject was considered. Such a review would take many months.

5.3 The existing appraisals have the considerable advantage of having been done according to a consistent and documented method. We believe the method used to account for carbon is correct in principle. It would certainly be sensible to confirm that the money cost per unit of carbon is set at the latest value officially specified for use across all Whitehall departments for consistency. This may be a higher value than has been used in the past. However, we offer the hypothesis that for most transport projects the benefits from time savings (typically congestion reduction) and safety improvements are so much larger than the carbon benefits or disbenefits, that increasing the value of carbon would make little difference to the overall picture in most cases. It might be possible to test this quite quickly.

5.4 Carbon is important but is one consideration amongst many. The objective of the formal appraisal is to put carbon even-handedly alongside the other factors. The carbon performance of any specific proposal must be properly worked out and not assumed. As with all expansions of capacity there is a balance between the extra carbon emissions caused by that activity and that saved by transfer of passengers or freight from existing, carbon emitting activities. To mention two examples: the work by the DfT in support of substantial investment in new London commuter rail capacity confirmed good value for money but also demonstrated that it would cause a net increase in carbon emissions. Similarly, the HS2 study shows that the carbon benefits from a new high speed line could be positive or negative, but would be “small” either way.

5.5 Some commentators advocate the replacement of the current methods by models that seek to assess the “real” impact of transport investments on land uses and land values. They also advocate distinguishing between immediate impacts and very long term dynamic adjustments. In principle there is some merit in these suggestions. The difficulty is that they are impractical: there are neither the data nor the modeling capabilities to do this on the timescale or within the budgets that are available. The attempt would involve a large and expensive research programme with a high risk that it would yield nothing. What we have is simplistic and crude, but it is operational and tells us something useful. And it can be—and is—applied in a consistent manner across many diverse situations.

5.6 Some object to the commonly-used assumption that the relevant markets are in competitive equilibrium. This is well-recognised in the literature as an important simplifying assumption, which can be especially unsatisfactory in the assessment of labour costs when there is unemployment. There are established ways of attempting to deal with this (for instance through the use of shadow prices). The Eddington study reviewed the implications of imperfect markets and also “wider economic benefits” and suggested ways in which they might be treated—at the cost of increasing complexity.

5.7 Others object that the current methods are “unscientific”. We disagree. They are based on clear, documented assumptions, great care is taken to make them internally consistent and they are referenced to data so far as possible. They are firmly based on a large and long-standing, peer-reviewed literature. They are certainly imperfect, but they are scientific. These critics often have not understood the fundamental philosophy of standard economic appraisal: that one is attempting to assess the value affected individuals themselves place on the changes they would experience. It is not an attempt to impute a value on behalf of some third party, “the economy” or “the government”. The question is the extent to which the sum of all the benefits and disbenefits as experienced by affected individuals is sufficient to offset the costs in valuable resources with alternative uses tied up in the project. Good appraisal keeps issues of “fairness” separate (important though they are), leaving them for political resolution.

6.0 Planning for schemes in the absence of regional bodies and spatial strategies

6.1 The RAC Foundation is concerned about the planning and funding of regional- scale infrastructure after the demise of the RDA’s and believes that careful thought should be given to how the regional nature of many transport infrastructure requirements will be addressed in the future.

September 2010

Memorandum from the Hoseasons Group (TE 42)

Introduction

1.0 The Hoseasons Group is the award‐winning travel company that was established some 70 years ago. Over 1 million people in the UK take holidays through Hoseasons, the leading self catering agency in the UK. It offers holidays in rural cottages, city centre apartments, villas, caravan parks and boats through its brands such as Hoseasons, English Country Cottages, Welcome Cottages and Blakes.

Economic Importance

2.0 Tourism is generally agreed to be the UK’s fifth largest industry. A recent study by Deloitte and Oxford Economics, The Economic Contribution of the Visitor Economy, found that the total direct and indirect contribution of tourism to the UK economy in 2009 was £115bn (8.9% of GDP) and that the tourism sector directly employs over 1.3m people.

2.1 The study went on to state that total tourism spending in the UK economy in 2009 was £90bn, with overnight domestic tourism accounting for £22bn of this amount. This was an increase of £1bn (4%) over the previous year. However, it is notable that the performance of the self‐catering sector of the tourism industry far exceeded the growth rate for the sector with growth of 21% and amounted to a total of some £1.8 billion. There are a number of reasons for this strong performance including the high levels of investment in the sector over recent years, improvements in the quality of self‐catering properties and shifting patterns in consumer expenditure on holidays in the UK.

2.2 What this means is that rural and seaside communities, where the vast majority of self‐ catering businesses are located, gained an additional £375m which helped retain and increase employment in these areas. Using the calculations in the Deloitte and Oxford Economic study, this additional revenue is sufficient to increase employment in these areas by 7,500 full time equivalent positions.

Tourism and Travel

3.0 The most recent UK Tourism Survey shows that around 70% of tourism travel is from urban to rural and seaside destinations. Due to the nature of this travel, private vehicles account for 74% of all tourism trips, with only 21% of trips being undertaken using public transport (4% of which is by air). The figures are very similar for day visitor travel, with 68% of trips being undertaken using private vehicles and only 15% being undertaken using public transport other than aviation.

3.1 Over the last 50 years, tourism‐related travel in the UK has changed markedly. Up until the late 1950s, public transport was the main means by which domestic tourism was undertaken. Since then, the use of private vehicles has steadily dominated to the extent that they now comprise over 70% of all leisure travel. Although this figure has been stable over the last 20 years, the total number of trips during this period has increased by over 60%. This increase in private vehicle use has brought great benefits to the tourism businesses and local economies, particularly in rural and seaside areas that are poorly

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served by buses or trains (while 20% of all tourism trips are to the countryside, only around 2% of these trip are taken using public transport).

3.2 So while Britons undertake around 1 billion tourism‐related trips each year, national transport strategies and local transport plans seldom contain initiatives specifically aimed at facilitating this form of travel. Indeed, closures and maintenance programmes are often specifically targeted to be undertaken during holiday periods and weekends when tourism‐ related travel is at its peak.

3.3 The main reason for this is that the vast majority of journeys undertaken in the UK are related to commuter travel and intercity business travel. By contrast, tourism‐related trips only account for 6% of all journeys undertaken in the UK. Despite this, there is significant evidence to show that it should not be considered a peripheral activity in transport planning.

3.4 “Leisure and other trips” account for 40% of the total distance travelled per person per year in the UK, compared to 29% for commuting and business, 26% for shopping and 4% for the school run. This is because tourism journeys are predominantly long distance journeys whereas the average distance for commuter travel is only 7 miles. This is highlighted by “journey purpose by distance” figures which show that tourism accounts for 70% of all journeys over 50 miles.

3.5 As a result, therefore, although tourism accounts for only 6% of all private vehicle journeys, it accounts for 20% of the total mileage undertaken using private vehicles in the UK.

Coalition Government Statements

4.0 In a speech in June, Jeremy Hunt, the Secretary of State for Culture, Media and Sport said that he wanted to see the proportion of tourism expenditure that UK residents spend in this country increase from the current 36 to 50%. He made clear that this would mean a boost to the UK economy of as much as £7 billion, along with thousands of new job opportunities right across the country.

4.1 Two months later, in a speech on tourism by David Cameron that was welcomed by The Hoseasons Group, he specifically stressed the importance of good transport links to a successful tourist strategy – “we’re supporting the ambition to develop a new network of high speed rail across the country. Because when a train to Brussels is as quick as a train to Bournemouth and it’s quicker to get from London to Paris than it is to get to Blackpool what chance do our great seaside towns have of drawing people from London?”

Transport Policies

5.0 We support the Coalition Government’s view that transport policy is an integral component of its tourism strategy. This strategy must be subject to a joined‐up approach across Whitehall to ensure that all relevant departments make a positive contribution to the development of tourism and that no department can implement policies in isolation that have the effect of harming the industry.

5.1 The Hoseasons Group welcomes the development of a new network of high speed rail but hopes that it becomes a reality and does not remain as an “ambition” as a result of the forthcoming Comprehensive Spending Review.

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5.2 At the same time, it is vital that the current congestion on Britain’s roads, estimated to cost the UK economy as a whole some £7 ‐ 8bn a year, is tackled.

5.3 The reality is that private cars vehicles will continue to be the principal mode of transport for tourism‐related travel.

5.4 Private cars provide visitors with a number of core benefits that will make it difficult to persuade them to switch to using public transport in significant numbers in the near future. These benefits include the ability to transport loads (essential for stays of longer duration) and travel at the destination (transport around the destination is as important for tourists as transport to it).

5.5 In this regard, we note The Highways Agency’s phased introduction of its Managed Motorways scheme which seeks to control traffic flows more effectively through the use of this new technology such as overhead gantries, lane specific signals, and driver information signs. We suggest that this scheme is closely monitored to ensure maximum effectiveness.

5.6 In addition, as a company that seeks to apply good environmental practice in all of the communities in which we operate, The Hoseasons Group supports the Government’s promotion of, green and sustainable investment in the UK road network through its promotion of low carbon and electric vehicles and the implementation of a national network of plug‐in points for electric and hybrid vehicles.

Conclusion

6.0 The Hoseasons Group believes that the domestic tourism industry is on the threshold of an exciting period of growth. However to make the next decade in the words of the Prime Minister “the best ever for tourism in Britain” requires a suite of transport policies that helps the industry exploit the opportunities open to it to the full.

September 2010

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Memorandum from the Transport Planning Society (TPS) (TE 44)

Introduction

1 The Transport Planning Society (TPS) has as its key aim: to facilitate, develop and promote best practice in transport planning and provide a focus for dialogue between all those engaged in it. In pursuing this TPS has regional and national branches, holds regular seminars and meetings, supports the Transport Planning Professional (TPP) qualification, and runs a bursary scheme for young professionals. The elected Board takes responsibility for policy development and planning the society’s events programme.

2 This submission responds to the call for evidence on “Transport and the Economy” by the select Committee on Transport. We note that further evidence is sought after the contents of the Comprehensive Spending Review, due in October, are published. We would wish to do so, since we will then have available the full results of a survey of our members’ views on the current economic situation and its impact on transport planning and investment. We can then assess the CSR in the light of the Society’s views.

3 We have nevertheless been able to use the preliminary results from our survey to respond to the key issues identified by the Committee.

4 Before doing so, we wish to draw attention to some underlying principles in terms of what transport can achieve in relation to national objectives.

Key issues for transport planning and the economy

5 We start from the premise that transport is somewhat different from other policy areas for two important reasons.

6 The first is that transport planning is a key facilitator for other policies rather than an end in itself. Obviously there are certain transport industries (such as aerospace and vehicle manufacture) which have a more direct role in the national economy. Even their eventual purpose is to facilitate social and economic activities in terms of communications or personal travel. This leads to the paradox that in many ways, the less transport the better, providing the other objectives are met.

7 This fact underpins objectives such as “minimising the need to travel” or “reducing transport intensity” and makes the link between transport planning and land use planning explicit and comprehensible. This interaction is widely recognised as key, and indeed would be hard to argue against. However, a co-ordinated approach to land use and transport is not reflected in the current administrative and financial planning for either. Transport assessments in particular are carried out at too late a stage in the process.

8 This is relevant in the current climate and to the Committee’s investigation, because there are major costs involved in this current failure. These are reflected in the ongoing resources used (including increasing imports of oil) as well as the need for infrastructure investment to meet demand and revenue to maintain the transport systems.

9 Transport demand could be influenced by, for example, early transport cost assessments for alternative development sites, or the true costs of closing local facilities. The other means by which it could be moderated, through various forms of restraint, including both price and supply (particularly parking) have been largely absent.

10 Thus, in response to the Committee’s questions, Eddington did not fully take into account the issue of resource costs. Minimising them is critical to the efficiency of any society and its economy. As the world population grows, and economic activity grows with it, there will have to be a greater emphasis on resource productivity rather than labour productivity.

11 The second point of difference is that transport has a very wide range of impacts on third parties (externalities) and these tend to be very powerful. This is well understood in relation to climate change, but in recent years this has led to a slight underplaying of other environmental impacts, such as air pollution and noise.

12 There are a huge range of environmental, social, and economic effects with no consistent approach to including them either in appraisal or in terms of the way transport users pay for travel. There have been various attempts to put money values on some of them. This illustrated by considering a few diverse examples:

ƒ Community severance: is this a “combination factor” or can it be measured separately? Not currently costed. ƒ Landscape: there are various methods for costing which have been used, but can we really put a price on the Cliffs of Dover? ƒ Congestion: since most transport infrastructure is based on saving time, this is commonly valued in appraisal. However, the cost is rarely charged, despite Government’s desire to do so. ƒ Health: in transport, the benefits of cycling have now been costed, and included in scheme appraisal. This has raised the benefit to cost ratio of cycling schemes dramatically. It is interesting that the increasing use of motorised transport, and facilitating that increase, is not counted as a disbenefit.

13 We consider that these issues need to be addressed by transport planners as objectively as possible, but remaining aware of the complex interactions which are the hallmark of transport planning.

14 The next section addresses the Committee’s questions in the light of the initial results from our member survey.

Member survey and the Committee’s questions

Have the UK's economic conditions materially changed since the Eddington Transport Study and, if so, does this affect the relationship between transport spending and UK economic growth?

15 Economic conditions have clearly changed, but there needs to be greater understanding of how this will affect future transport plans. For example, the type of travel demand produced by a consumer and service led economy will differ from that produced by a more “balanced” economy in terms of assembly and manufacturing. This is not just in terms of freight.

16 A second key issue will be the impact on the balance of payments of transport’s demand for oil. The UK stopped being a net exporter of oil in 2005 and no longer conceals the real cost to the economy of such imports.

17 As suggested earlier, the most likely projections for raw materials and population growth (which is stronger than Eddington envisaged) indicate a move to resource productivity rather than labour productivity. Recycling is the most obvious example.

18 In terms of transport spending, this suggests a greater emphasis on maintaining, and managing the assets we have rather than embarking on what Eddington called “grands projets”. This is reflected in our member survey, where only 18% identified high speed rail as important, and major trunk road schemes were even lower at 9%. One exception to this was that only 10% thought grants for electric cars were a priority.

What type of transport spending should be prioritised, in the context of an overall spending reduction, in order best to support regional and national economic growth?

19 While not “grands projets”, local schemes which create a step change in transport, for example through urban , may need to be pursued. However, these need to reflect genuine local needs, for example in the context of new development and regeneration, but also arising from travel planning initiatives.

20 In this context, initial analysis of our survey shows the following top priorities:

ƒ travel behaviour change (61.2%) ƒ road maintenance (56.5%) ƒ non-high speed rail capacity (52.6%) ƒ walking and cycling (55%)

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

21 Although this was not a specific question in our survey, there is widespread support for greater flexibility between capital and revenue spending. This is particularly important for the transport sector, where revenue spend, for example demand management, can substitute for capital expenditure, for example on new capacity.

22 An area which was included was whether new sources of revenue were needed and which should be used. This was split between national and local sources.

23 Nationally, top priority was given to increasing the level and scope of aviation taxes, scoring an average 3.49 out of a possible maximum of 5. Next came Lorry Road user Charging (3.18), very closely followed by national road pricing (3.16) and a national parking space levy (3.15).

24 Locally, charging developers a transport levy was most favoured (3.72), followed by workplace parking levies (3.30). Interestingly, charging for all parking spaces (including retail) scored almost as well (3.27). Support was weaker for local user pricing (2.83) or local road tolls (2.40).

25 There is strong recognition of the need to find new sources of revenue for transport at the local level.

Are the current methods for assessing proposed transport schemes satisfactory?

26 Our survey showed 41% thought major reform was needed, and 28% that minor reforms were required. Only 2% considered the current methodology satisfactory. An interesting finding was that 21% felt that decisions were made politically and that elaborate appraisal was not needed at all.

27 In terms of the reforms needed, top priority was representing carbon in appraisal (67%) closely followed by Smarter Choices and non-time saving economic costs and benefits (both 65%). Representing the health disbenefits of motorised modes was also identified as a missing element (56%). Individual comments noted the need for links with land use planning and economic benefits, but others called for current methods to be simplified.

28 This reflects the view that a longer term reform is needed, but simpler high level methods, for example checking schemes against health or climate change objectives, should be used. These would be particularly useful when decisions have to be reached quickly in response to economic constraints.

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

29 Given the criticism of regional bodies for producing compromise lists of local schemes rather than thinking strategically, the survey results were not surprising, with only 24% believing that they had improved transport decision making.

30 The most favoured option, but not a clear majority view, was to develop new, devolved arrangements (36%). However, 21% thought that local government should get on with making its own arrangements, and by contrast 19% thought that central government should take the lead in producing regional strategies.

Conclusions

Our overall position is that the best long term approach, in terms of transport and the economy, can be summarised as follows.

31 The development of transport planning skills will be essential to our domestic and international economic performance and must not be compromised by national spending cuts.

32 In terms of transport delivery, one of the most cost effective ways of supporting the economy is to co-ordinate it with land use planning. There needs to be much greater emphasis on reducing the need to travel.

33 Beyond this there is a need to manage demand, both to reduce congestion and achieve social and environmental goals.

34 Managing demand should start by better reflecting the external costs imposed by transport use. While a national road user scheme has been put to one side by the Coalition, it has widespread support in the profession. However, Lorry Road User Charging is in the Coalition agreement and this could be an important source of new revenue, as well as addressing the high level of unmet external and congestion costs. Parking controls and levies could also make a major contribution.

35 Such schemes may appear to increase costs for some individuals and companies, but nationally would encourage efficiency, for example addressing the serious under utilisation of heavy goods vehicles.

36 We thus continue to support the Eddington emphasis on smaller scale schemes and for a “maintain and manage” approach. This means that capital spending on capacity can be avoided or reduced, but much revenue spending will need to be protected.

37 In a time of economic constraint, maintaining the assets we have should have priority over new capacity.

38 In addition, the move towards more sustainable delivery of transport will of itself deliver economic benefits through the decreased consumption of non-renewable resources.

September 2010

Memorandum from London First (TE 45)

1. London First is a business membership group whose aim is to make London the best city in the world in which to do business. We do this by mobilising the experience, expertise and enthusiasm of the private sector to develop practical solutions to the challenges London faces and to lobby government for the investment that London needs in its infrastructure. London First delivers its activities with the support of around 250 of the capital’s major businesses in key sectors such as finance, professional services, property, creative industries, hospitality and retail. Our members represent around a quarter of London’s GDP.

2. We welcome the chance to address some of the questions posed by the inquiry. Our submission is based on our recent study, Greater Returns - Transport priorities for growth. The full report can be found at www.londonfirst.co.uk/transport

Have the UK's economic conditions materially changed since the Eddington Transport Study and, if so, does this affect the relationship between transport spending and UK economic growth?

3. Britain faces a record fiscal deficit - a material change in conditions since the Eddington Study was published. While this doesn't, in our view, affect the underlying relationship between transport spending and UK economic growth, it does require a fundamental shift in the approach to the appraisal and allocation of transport expenditure.

4. Business believes that as Government starts to balance the books it is vital that its approach is based on supporting sustainable economic growth or, at least, doing as little damage as possible. Infrastructure investment is vital to this growth. The OECD has set out how investment in physical infrastructure increases long-term economic output more than any other kind of physical investment1.

5. There will of course be other objectives for transport policy beyond maximising growth. They include carbon reduction, which will be spurred by consistently pricing carbon across all investment decisions. But the challenge for transport policymakers is to prioritise limited resources and secure the best returns. As Eddington states: “Where resources are limited and there is a need for prioritisation, it is logical to begin with identifying cost effective transport interventions in areas which are expected to yield the greatest contributions to sustainable economic performance in the UK.”2

1 Going for Growth, OECD, 2009. 2 The Eddington Transport Study, HM Treasury, Department for Transport, 2006. Vol 1.

What type of transport spending should be prioritised, in the context of an overall spending reduction, in order best to support regional and national economic growth?

6. London has high levels of productivity: most industry clusters are around a quarter to a third more productive in London when compared to the UK average for that industry3. The economic activity in London's Central Activity Zone supports economic activity across the country. In 2007 London purchased goods and services worth approximately £123bn and sold £130bn to the rest of the country. London contributes more in tax than it receives in public spending by a margin of between £14 billion and £19 billion a year4.

7. While transport investment is vital to economic growth, the returns vary considerably from scheme to scheme. Given the state of public finances, it is unlikely that all schemes with a net positive value will proceed, let alone all those that are seen as socially desirable.

8. A clear framework is needed for judging which transport expenditure is most likely to yield the greatest contribution to sustainable economic growth in the UK. This framework needs consistently to capture a scheme’s wider economic benefits - ‘Wider Impacts’ or WIs - and incorporate them into the scheme’s Benefit Cost Ratio (BCR), such that the economic benefit of all transport spending can be assessed on a like-for-like basis5.

9. Key to this framework will be a proper assessment of agglomeration impacts - the largest components of WIs - which are increases in economic output created by transport improvements in dense urban areas. A dense concentration of economic activity, businesses and workers creates cost reductions, high levels of productivity, knowledge spillover and efficiency gains. Greater returns are generated from transport investment in areas that, all else equal, have a high employment base (in absolute terms), high employment density, more productive workers and more concentrated activity in productive sectors.

10. Although transport investment cannot in itself generate agglomerations, it can facilitate their expansion, by increasing the catchment population and thereby the employment density. Employment density increases more by a given increase in catchment population - through a reduced journey time - if density is already high. The relationship is non-linear.

11. Agglomeration impacts are pronounced in London and its hinterland. Most industry groupings are a quarter to a third more productive in London when compared to the UK average for that industry6. A third of all of London’s

3 Focus on London, GLA, 2009. 4 Supporting UK Growth, London First, November 2010. 5 The Department for Transport (DfT) calculates the impact of transport improvements in terms both of Direct (Welfare) Benefits and Wider Impacts - or wider economic benefits. 6 Focus on London, GLA, 2009. employment occurs in the Central Activities Zone7, and contributes disproportionately to the UK’s GDP. Inner London contributes 14% of the UK’s GDP, and of this Westminster and the City of London alone contribute 4%8.

12. The greater the increase in effective employment density brought about by transport improvements, the greater the increase brought about by the productivity elasticity9, the higher the associated WIs. London’s population is 7.7 million, estimated to rise to 8.89 million by 2031. Parts of Central London are the densest in the UK. Employment in London is highly concentrated compared to other cities. The City of London’s square mile has around 250,000 employees, Canary Wharf around 600,000 employees per square mile.

13. The greater the productivity per worker in an area, the greater the wider economic impact of transport improvements. Major urban areas demonstrate higher per worker productivity. London’s GVA per head is 66 per cent above the UK average - £33,200 in 2007. Inner London had the largest GVA per head10 - £52,857 in 2006, compared with the UK average of £18,94511. London’s economy is driven by business services, with acknowledged expertise in fields such as management consultancy, financial services and the creative industries. London is home to a quarter of UK enterprises in financial services and a third of UK employee jobs in this sector12. Business services is by some distance the largest sector in London with 1.1 million employee jobs13.

14. The more people living in an area - and more jobs in total - the greater the potential brought about by transport improvements for people to move into higher paid jobs. These benefits will be greater in areas of high population density and high employment density. Over the last decade there have been more than 700,000 workers commuting into London every day14. Over 1 billion passengers used the Tube in 2007. Conservative estimates suggest that 1.5 billion journeys will be made per annum by 202015. Two thirds of all rail journeys in the South East are currently to or from London16, while Crossrail will bring a further 1.5 million new commuters within one hour’s journey of the capital17. The benefits of the extra capacity delivered by Crossrail and the completion of the Tube modernisation programme are significant in this context.

7 http://www.london.gov.uk/thelondonplan/caz/central_activities.jsp 8 The Economic Outlook for London, in Economic Outlook, pub. Wiley-Blackwell, April 2010. 9 Of public capital to output. 10 On a workplace basis. 11 Focus on London, GLA, 2009. 12 Ibid. 13 Ibid. 14 Economic evidence base to support the London Plan, the Transport Strategy and the Economic Development Strategy, GLA Economics, May 2010. 15 Holding the Line: The Economic Benefits of Modernising the Tube, London First, 2009. 16 National Rail Trends 2008-2009 Year Book, Office of Rail Regulation, 2009. 17 Crossrail Ltd. Are the current methods for assessing proposed transport schemes satisfactory?

15. Quantifying the impacts of transport investment is complex. Government has a sophisticated and well-regarded methodology for capturing the direct benefits to users - so called ‘welfare benefits’, such as journey time savings18. But it has yet to implement a consistent and comprehensive assessment of the wider economic benefit of many large-scale programmes.

16. DfT does not request that WIs be assessed for schemes costing less that £20 million (recognising the need for proportionality in the appraisal process19). For schemes costing over £20 million, DfT requests that only certain WIs be calculated20. It does not require the assessment of the largest component of WIs - agglomeration impacts - unless a scheme falls within, or close to, those parts of England it designates as Functional Urban Areas. And in practice, WIs are not uniformly included in the assessment of all schemes falling in these areas.

17. DfT does not permit a scheme’s wider economic impacts to be incorporated into its final Benefit Cost Ratio. Without the systematic incorporation of WIs into Benefit Cost Ratios, a comprehensive comparison of transport schemes’ contribution to long-term, sustainable economic growth will be hobbled.

18. In addition, new research is required to understand and quantify the gains from trade generated by transport improvements. We concur with the conclusion of the Eddington Study that "quantifying [their] scale through appraisal is pivotal to informing good transport policy, particularly around ports and airports, and their surface access".21

19. Any policy framework for London's airports should be informed by the capture of gains from trade in any appraisal of additional capacity, without which benefits may be consistently underestimated. London’s international links are among its greatest assets. The capacity to allow economically viable, frequent direct flights to current key business destinations, and to those cities growing in commercial importance, is fundamental to maintaining these links. The trade gains generated by improving and expanding London’s international links should be assessed, to understand whether continued capacity constraints threaten London’s success as a world city and the sustainability of the UK as a fulcrum of the global economy.

September 2010

18 Primarily journey time and cost savings to users, as well as some externalities (on the environment, landscape, accessibility and heritage). 19 Appraisals are expected to match the scope and complexity of the scheme in question. 20 Labour market impacts and output change in markets with imperfect competition. 21 The Eddington Transport Study, HM Treasury, Department for Transport, 2006. Vol 1. TE 46

Memorandum from James Morshead (TE 46)

Opportunities for Automating Logistics, Personal Mobility and Mass Rapid Transit, Based on Personal Rapid Transit (PRT)

Summary The economies of town and cities are dependent on effective local transport. The road-based system is often congested, unpredictable, dangerous, polluting and noisy. Greener modes on separate infrastructure, such as trams and light rail, don’t take people to their destinations, leave gaps between modes, restrict those with mobility difficulties, and lack the flexibility to handle freight logistics, or most passenger trips – 30% modal shift is considered optimistic. Automated Local Transport (ALT) would revolutionise a local economy. A network of light, low cost, fast guideways, separated from road traffic, pedestrians and cycles would link existing transport networks, community hubs, leisure and sporting venues, and businesses and industrial estates. ALT is now feasible, based on combining a number of existing, working ideas. Based on Personal Rapid Transit (PRT), people and goods would travel the guideway network using small, efficient electric vehicles. The infrastructure will be more efficient, less obtrusive and far more flexible than fixed infrastructure modes such as light rail, and greener, safer, more inclusive and accessible, and cheaper to operate than any other powered mode of transport. Vehicles travel directly from origin to destination with no delays, transfers or jams. Based on the architecture of the Internet, traffic would be dynamically routed to optimise capacity and avoid delays. Open standards would enable anyone to innovate, to conceive new services, vehicles and guideway technologies, and to extend the network to their neighbourhood, factory, stadium, airport, hospital, or any other point in the city. Based on factory automation, ALT would carry pallets and light freight, interacting with freight containers at rail heads and ports, enabling goods to be transported nationally and internationally, automatically and with no road use. ALT would become the default connection between other networks, improving all modes’ capacity utilisation. Based on network theory, once a network is established, every new station would represent numerous new potential connections. Additionally, based on emergent autonomous vehicle technology, the vehicles could transfer onto local public roads to complete their journey, taking people and goods all the way to their intended destination as a true final mile solution. Currently, many funding sources for transport research are tied to specific existing modes of transport, making little provision for wholly new modes such as this. We have an opportunity to correct the balance, and ensure UK leadership at the outset of an entire new mode of transport. This report recommends funding and political backing for ALT, and support through organisations such as the Transport KTN.

1 Introduction

1.1. Purpose of the Report 1.1.1. This submission seeks to make the Transport Select Committee aware of the potential of automating local transport, including rapid transit and freight logistics, based on Personal Rapid Transit (PRT), autonomous vehicles and TE 46

other related technologies, and to ask that Automated Local Transport (ALT) be explicitly provided for in research funding and support. 1.1.2. This is an emergent mode of transport, with unlimited potential functions. It will link all other transport networks serving the city with each other, with community hubs, and with business and leisure activity, serving as a final mile solution linking people and businesses to the global transport and logistics system. Automating logistics, personal mobility and mass rapid transit functions in a city will provide greater flexibility, adaptability, efficiency, reliability, consistency and carbon reductions, at lower cost than new installations of existing modes, serving exactly the required functions and locations identified in the Eddington Transport Study (2006).

1.2. Concepts and Definitions 1.2.1. This is an emergent field with few established terms. This report builds on the following terms and concepts: 1.2.2. Podcars – the vehicles; small and light, typically intended to carry up to 4 to 6 passengers, or fewer people with cycles, luggage, pushchairs, etc. Automated, running on a local network of dedicated tracks (“guideways”), entirely separated from other modes of transport. As autonomous vehicle technology develops, podcars will be able to continue off the guideways onto local roads, to complete the final mile. 1.2.3. Path Standard – a possible inclusive accessibility standard to aim for; to ensure mobility for the whole community. A Podcar should be able to accommodate passengers in the same way they would progress along a path; for example, flat floor access for people in wheelchairs or mobility scooters. 1.2.4. PRT (Personal Rapid Transit) – a mode of transport comprising passenger podcars on dedicated guideways, with lower predicted costs and more flexibility than other fixed-infrastructure modes. 1.2.5. GRT (Group Rapid Transit) – some PRT vendors propose adding high- capacity podcars, for group travel, or for routes such as Park & Ride to city centre, or airport to mainline station. 1.2.6. Guideway – the light, low cost, usually elevated track or rail the podcars travel on, separated from roads and cars, pedestrians and cycles, built over roads, rivers and railways, through buildings and across roofs. 1.2.7. Stations – built at nodes, off-line such that other podcars can always pass, frequently indoors, always with flat-floor access for wheelchair users. 1.2.8. Nodes – the junctions at which podcars have a choice of routes to take. 1.2.9. ALT (Automated Local Transport) – this report is introducing the term ALT, as PRT is only one of the potential functions of the system. In ALT, the podcars may be passenger, freight or any other service offered on the system, and as autonomous vehicle technology advances, may extend beyond the guideways to reach any individual premises. 1.2.10. Network Theory – the reason networks take off. As a network grows, its value increases exponentially. Adding a 10th node to a network (telephone, station, social network, etc) only adds 9 potential connections. The 10000th adds 9999; the attraction of joining becomes more compelling. Connecting 2 networks significantly benefits both networks.

2 Personal Rapid Transit (PRT) 2.1.1. Using PRT is like using a lift in a building, but across a network. A podcar waits at each station. Passengers indicate where they wish to go, possibly just by pressing a button if the network is small. The doors open, and the podcar takes them straight to their stop, with no delays, traffic jams, changes or transfers. Podcars are centrally coordinated but generally steering themselves. TE 46

2.1.2. Although first proposed at least 50 years ago, the world’s first 3 true PRT systems are only now being installed: • Heathrow Airport, London: an “ULTra” system, from ULTra PRT Ltd (UK), completed and opening shortly; • Masdar City, United Arab Emirates: a “2getThere” system (Netherlands), under construction; • Suncheon, South Korea: a “Vectus” system (Sweden/S.Korea), proposed for the site of a forthcoming festival. 2.1.3. Several other PRT systems are being developed, from individual inventors right up to NASA.

3 Functionality – What Else Could ALT Do?

3.1. Technology and Timing 3.1.1. ALT has the potential to be far more than PRT. ALT will be a more extensive evolution of PRT, offering mass transit and extensive freight logistics services as well as personal mobility, and seeking to offer the greatest range and balance of services, to serve the whole community and engender the greatest possible modal shift away from roads. 3.1.2. The emerging field of Autonomous Vehicles will enable podcars to proceed on public roads to any address, and back to a network access point. The mode-separated guideways will remain the high-speed arteries of the network. 3.1.3. However, it is important to be able to implement this idea quickly, rather than wait for future innovation, to realise the carbon savings and economic benefits as soon as possible. Such innovation will be easier once a network is operating somewhere, and Eddington specifically warns against “untested technology”.

3.2. Serving the Whole Community 3.2.1. On ALT, a standard podcar, designed to a standard of almost universal accessibility for people with special mobility needs, would be waiting at or near each station. Specialist podcars would be developed, such as for those with more extreme mobility limitations, or high capacity GRT podcars, and would be summoned when required. 3.2.2. Passengers will also be able to travel with cycles, pushchairs, luggage, shopping, or even electric scooters or handcarts. Cycle use is therefore opened up for more journeys, as ALT could take users some of the way. 3.2.3. ALT would support the existing structure of many communities, where compact walkable neighbourhoods are centred on a hub of shops, where the ALT station could be built. Other modes, particularly the car, encourage a more spread out structure and a reduced sense of community.

3.3. System Capacity 3.3.1. Based on 4 passengers per podcar and 2 second headways (a conservative estimate), capacity for a single link is 7200 passengers per hour. With a half second headway, this reaches 54000. 3.3.2. Capacity for a single station berth, given 4 passengers per pod and a 10 second turnaround, is 2800. High capacity locations such as stadiums, airports or railway stations would feature multiple, parallel berths. 3.3.3. Capacity can be increased as required, by installing more parallel berths and extra guideway links, by introducing high-capacity GRT podcars, and by distribution of destinations to stations and car parks away from the stadium. This also eases road congestion near the stadium. TE 46

3.3.4. ALT serves an area, as an integrated network, rather than individual lines. Podcars travel between two points on the network by any route available, avoiding pinch points. 3.3.5. Additional connections are constructed where needed in the network, with far less planning, cost and disruption than LRT. These would be seamlessly incorporated by the system, improving capacity locally. 3.3.6. Stations are always off-line, so podcars can pass.

3.4. Linking Networks 3.4.1. Linking two networks, according to Network Theory, massively improves the value of both networks. Airports and stations are only ever waypoints in a journey, never destinations, so journeys by public transport always involve walking or road travel to and between modes. ALT makes these connections, efficiently conveying passengers between rail, air and any other mode.

3.5. Freight Logistics 3.5.1. The Masdar City PRT system also features a cargo podcar design, but overall this potential has not been well explored. ALT will include JIT logistics for manufacturing, retail logistics, automated storage, and countless services not yet conceived. 3.5.2. ALT will carry pallets between industrial units, factories and rail heads. With automated materials handling, end-to-end carriage of pallets and light freight would be enabled between any 2 ALT-connected sites in the world, connecting the whole local economy to the global logistics system. 3.5.3. Additional services for other logistics, from post and parcels to garments and white goods for retail, would rapidly evolve.

3.6. Internet Analogy 3.6.1. ALT can be imagined in many ways, one of which is as the physical evolution of cyberspace. There are several analogies to make, to illustrate the potential. 3.6.2. An inspiration for the Internet was resilience – if any part of the network was incapacitated, data would be routed around it to its destination. Podcars carry small payloads directly to their destination, dynamically rerouting around obstacles and disruption, and therefore less susceptible to breakdowns or attacks than other modes, especially fixed-route modes. 3.6.3. The Internet’s defining protocol, TCP/IP, defines a four level structure. Any one layer can potentially see innovation and new standards, and still work with the other layers to enable uninterrupted service during upgrades.

3.7. Open Standards, Open Market 3.7.1. In keeping with Internet-style architecture, the guiding standards of ALT must be open, and impartially applied and policed, so any company can develop new services and technologies, networks and podcars, which will then be compatible with each other. In this way, innovation and uptake will happen far faster, more efficiently and more effectively than if any one company were controlling the process. 3.7.2. The Internet, as with any open network, cannot be owned – or closed – by any one body. It is built on open standards, onto which any number of new protocols and services can be built, enabling rapid commercial and technical innovation. 3.7.3. Monopolistic ownership and operation models, sadly a feature of most proposed PRT systems, will not be adequate. Rapid evolution of an incredible variety of services for all aspects of a city’s economy will require impartial open access for entrepreneurship. TE 46

3.8. Passenger Experience 3.8.1. Ticketing may be by RFID cards linked to accounts, similar to Oyster cards. Passengers would be able to specify preferences, and special needs, on their accounts. 3.8.2. Those with impaired mobility can therefore be provided with appropriately equipped podcars, automatically. Visually or hearing impaired users can set their accounts to enable interaction by large type, Braille, voice or other appropriate means. 3.8.3. As a monitored automated system, running almost silently, ALT would be available 24 hours a day, every day, with no timetabling. 3.8.4. In a podcar, in addition to the external sensors for location and obstacles, internal sensors, including microphones and cameras, could detect whether help or attention is needed for example, or a podcar needs cleaning, or diverting to a police station. There would be at least one main emergency button, to alert an operator while taking the podcar to the nearest station.

4 How ALT Enhances Other Modes of Transport

4.1. High-Speed Rail (HSR) 4.1.1. With efficient local distribution of passengers by ALT, there only ever need be one HSR station in any city. 4.1.2. Proposals to add 15 minutes to every trip on HS2 due to a detour to Heathrow Airport, for example, would be unnecessary. A Heathrow network, and a network linking the London railway termini, could be connected with a high-speed guideway constructed over the A4. St Pancras International station (13 miles) could then be less than 15 minutes travel from Heathrow, probably at far lower cost than the extra miles of the HS2 detour.

4.2. Suburban Rail 4.2.1. Eddington identified suburban rail as a pinch point. Once ALT is established in a city, many suburban rail services would be superfluous, freeing up rail capacity for interurban rail services and improving rail reliability on “the approaches to cities”.

4.3. Airports 4.3.1. Integrated ticketing would enable passengers to be taken to the correct station, terminal, hotel or car park without having to specify manually. Car parks can be relocated to nearby motorway junctions, reducing site traffic. Staff movements, airfreight, retail logistics, airline catering supplies and many other services could be provided for. 4.3.2. Enabling a wider geographical spread of warehousing, catering and other facilities could reduce the footprint of an airport by integrating with the local area. This also enhances local communities’ direct economic benefit from being close to an airport. 4.3.3. Remote check-in, even in a passenger’s town of origin, may develop. 4.3.4. By integrating freight, ALT would also enable less urgent baggage movements on short to medium haul routes to be taken off the plane and handled by ALT and rail, automatically, at lower cost to the passenger.

4.4. Road Transport 4.4.1. Many who drive out of necessity rather than choice would no longer have to, leaving the roads clearer for emergency vehicles, specialist transport, and enthusiasts. Roads will not disappear, but with reduced traffic, road building TE 46

can be scaled back, better provision made for cycling, and walkable neighbourhoods can become a standard feature of cities. 4.4.2. ALT enables car parks to be located away from city centres, airports and bottlenecks. Large ALT-connected car parks built next to motorway junctions would make use of already noisy and polluted places, and completely remove this traffic from local roads. 4.4.3. The demise of car ownership has been predicted even without ALT; with ALT, more people could withdraw from car ownership and pay for car use as a service. Rental or shared ownership enables people to pay for car use instead, forget maintenance, tax, MOTs and probably insurance, and use exactly the right vehicle for each trip.

5 Economic Potential of ALT

5.1. Congestion 5.1.1. Eddington reports, “89 per cent of the delay caused by congestion is in urban areas”, and “Eliminating existing congestion on the road network would be worth some £7-8 billion of GDP per annum.” 5.1.2. City-wide ALT would directly reduce congestion, by competing for movements, as long as ALT construction stays ahead of growth. Road congestion would also become less relevant, as ALT is increasingly relied upon.

5.2. Agglomeration and Local Specialisation 5.2.1. According to Eddington: “Agglomeration effects [...] add up to 50 per cent to the benefits of some transport schemes in London". This economic benefit arising from companies in a market locating close to one another, and to common suppliers and expertise, is mutually beneficial with efficient local transport and logistics. 5.2.2. Widespread ALT would improve transport efficiency nationally, but any ALT will improve transport locally, improving the competitiveness of agglomerated industries in the area, boosting manufacturing as a whole, and helping to rebalance the economy. 5.2.3. Restoring local specialisation, particularly if linked to a resurgent manufacturing sector, could help restore the identity and pride of certain industrial towns.

5.3. Freight Logistics 5.3.1. The ONS Blue Book 2009 reports transport and storage directly represent £54.3bn (7%) of UK GVA. 5.3.2. Eddington reports most logistics operations have their major hubs in the West Midlands region, but most traffic to and from them, both upstream and downstream, in the region and long haul, is by road. 5.3.3. ALT service providers could systematically to work through the road transport usage associated with these operations, and provide alternatives. 5.3.4. A similar approach for manufacturing logistics would be similarly beneficial, enabling predictable JIT logistics on reduced inventory, and at lower cost, making UK manufacturing more competitive and helping to re-balance the economy. 5.3.5. It should become the expected standard that retailers and manufacturers are supplied by ALT, from logistics hubs on the network, and in turn from suppliers, rail heads or road freight terminals on the network. TE 46

5.4. Entrepreneurs and Evolution of New Services 5.4.1. Open standards and open access will enable rapid evolution of diverse services. As firms in related fields agglomerate on a common network with customers, suppliers and competitors, so specialist transport for that industry can be easily provided. 5.4.2. Resilience and reliability are built into the system: no problem or dispute could ground the whole system. A level playing field would exist for transport competition. 5.4.3. Central planners cannot possibly anticipate every relevant need or invention. A system with the flexibility to evolve to serve future needs, driven by the entrepreneurship of anyone who wants to get involved, but under democratic planning control, gives the best balance.

5.5. Quality of Land Use 5.5.1. By clarifying the urban-rural divide, urban hinterland and brownfield sites become more valuable, land use becomes more efficient, and marginalised neighbourhoods better connected. Potential urban sprawl land on the edges of a city will become less economically attractive, farmland and wilderness more secure. 5.5.2. As primarily an urban transport and final mile solution, ALT will improve the quality of a city’s economy without needing to expand the city.

5.6. Export Opportunities 5.6.1. Establishing leadership and expertise in an emerging technology such as this will play to the strengths of the UK economy, and could provide impressive export potential in the future.

6 Environmental Potential of ALT

6.1. Electric Power and Carbon Reduction 6.1.1. The network will be fully electric, enabling full use of renewable energy, high energy efficiency and massive carbon reduction. 6.1.2. ALT can help balance demand spikes in the national grid, managed by dynamic electricity pricing. Battery power enables waiting podcars to act as floats, drawing and feeding back charge, while lower priority journeys such as redistribution of empty podcars can be made when more charge is available and hence lower cost.

6.2. Urban Environment 6.2.1. To enable installation in urban settings, the design of guideways must be made elegant and unobtrusive – a challenge. 6.2.2. However, weighed against the potential visual intrusion are reduced noise, dirt and pollution, taking cars and trucks off the road, improved safety and reduced death toll, redefining urban and rural landscapes, creating value for brown field sites, regenerating city centres, enabling cycle paths and walkable neighbourhoods, and halting the detrimental effects of car dependency on urban design.

7 Social Potential of ALT

7.1. Supporting the Natural Structure of Communities 7.1.1. In addition to transport nodes, in any area ALT reaches, connecting to existing community hubs must be prioritised, to serve the maximum number of people and maximise modal shift. TE 46

7.1.2. In urban settings, people already tend to live within walking distance of their local shops. If ALT stations become the gateways to neighbourhoods, opening a station away from the existing hub will create pressure to open shops near the station, and close shops at the existing hubs.

7.2. Social Cohesion 7.2.1. A properly conceived and regulated ALT should help social cohesion by ensuring people mix. It has been shown that people spontaneously share podcars if the destination is displayed. This must be a choice but should be encouraged. 7.2.2. ALT may also serve as a way of breaking down divisions in education, by making it easier for schools of all types to share the facilities of better-equipped schools. 7.2.3. Connecting poorer neighbourhoods to the network will help regeneration, and social inclusion and employment prospects for residents.

7.3. Revitalising City Centres and Neighbourhood Hubs 7.3.1. Out-of-town retail developments have the advantage of accessibility in a car- based economy, which will be lost if ALT becomes widespread. Given this choice, more people will choose to shop, mix and relax locally or in a city centre. 7.3.2. Former warehouse stores would then make good factory units for a resurgent manufacturing sector.

8 How can Government Help

8.1. Political Will 8.1.1. The EDICT report (Evaluation and Demonstration of Innovative City Transport, 2005), from the EU-funded NETMOBIL (NEw Transport system concepts for enhanced and sustainable personal urban MOBILity), concluded PRT (and by extension ALT) would work as soon as there was the political will. Overcoming fears based on being the first system, or of building before stable standards have evolved, will require political will and coordination.

8.2. Funding 8.2.1. If PRT and ALT are left entirely to the market to develop, they are likely to remain a disconnected group of incompatible and exclusive systems for some time. Even as one or two standards emerge, most systems are likely to serve private developments, not communities, and the huge potential benefits for local agglomeration and specialisation, as well as carbon reduction and social cohesion, could be missed. Carefully targeted funding, linked to desired outcomes, could ensure it develops in an inclusive way that can benefit the whole economy. 8.2.2. Eddington states the necessity of “making a comprehensive assessment of the full range of economic, environmental and social impacts of transport policies, including climate change.” This substantial work, along with developing the required engineering standards, studying the societal implications, and others would clearly need to happen before revenue service can begin; so pump-priming funding and investment will be needed. 8.2.3. A dedicated group within the Transport KTN (Knowledge Transfer Network) may be beneficial to this emerging industry.

8.3. Level playing field 8.3.1. As this sector develops, the open nature of the market will come under pressure. Provision must be made to prevent monopolies and oligopolies from TE 46

emerging, at any level, which would stifle the free unrestricted nature of the system.

9 Conclusion Automated Local Transport – ALT – has the potential to transform urban areas. Economic growth and balance, carbon emissions, social inclusion, the built environment, and many other aspects of a city could be dramatically enhanced. Carbon emissions targets may yet be met. UK leadership in an emerging field could be established. To achieve this, the political will must be there to support ALT, and the funding available to progress this idea towards implementation and an eventual tipping point. Look out for the name “PodStream”.

10 Appendix: Responses against Eddington’s 5 Key Recommendations 10.1.1. In 2006, Eddington would not have been aware of the potential of automating local transport. Yet in the Eddington Transport Study (2006), his 5 key recommendations almost perfectly mirror the potential of this approach. 1. To meet the changing needs of the UK economy, Government should focus policy and sustained investment on improving the performance of existing transport networks, in those places that are important for the UK’s economic success. 10.1.2. ALT would form the link between all other networks in the area served, for all purposes except heavy goods. As roads would no longer serve this purpose, car parks could be moved to the outskirts of cities, particularly next to motorway junctions, removing this traffic and pollution from the city. With retail and manufacturing logistics also catered for, road congestion could be dramatically reduced. In addition to the economic benefits, the urban landscape could be brought up to date to provide for fully walkable neighbourhoods in a fully cycle- friendly city. 2. Over the next 20 years, the three strategic economic priorities for transport policy should be: congested and growing city catchments; and the key interurban corridors and the key international gateways that are showing signs of increasing congestion and unreliability. These are the most heavily used and economically significant parts of the network; 10.1.3. By addressing congestion as described, cities will be able to grow economically without sprawling physically. ALT will help redefine the distinctiveness of the urban vs. rural environment, and reinvigorate city centres and neighbourhood hubs by making them competitive with road-dependent sprawl developments. 10.1.4. Congestion of key interurban corridors would be eased, as suburban transport would be less reliant on rail and road. As rail capacity is required less for suburban services, identified by Eddington as a “pinch point”, this capacity is freed up for interurban traffic. This reduces the tendency towards ribbon developments along roads out of cities, which generate congestion by forcing reliance on road transport, then interrupting road users with endless junctions and extended speed restrictions. 10.1.5. International gateways, where high-speed rail, air or sea meet local and national scale modes such as road and rail, are identified as key pinch-points in the system: hence the numerous people-mover systems that already exist. ALT supersedes these to provide an integrated, flexible and intuitive way for people to move between terminals, stations and car parks. Car parks could be more remote and dispersed, to reduce road congestion.

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3. Government should adopt a sophisticated policy mix to meet both economic and environmental goals. Policy should get the prices right (especially congestion pricing on the roads and environmental pricing across all modes) and make best use of existing networks. Reflecting the high returns available from some transport investment, based on full appraisal of environmental and social costs and benefits, the Government, together with the private sector should deliver sustained and targeted infrastructure investment, in those schemes which demonstrate high returns, including smaller schemes tackling pinch points; 10.1.6. Charging based on the economic, social and environmental costs of other modes, could raise significant sums. This could faster realise the equivalent benefits of ALT, including the improved effectiveness of existing modes, by relief of suburban pinch-points and by improved inter-modal links. 4. The policy process needs to be rigorous and systematic: start with the three strategic economic priorities, define the problems, consider the full range of modal options using appraisal techniques that include full environmental and social costs and benefits, and ensure that spending is focused on the best policies; 10.1.7. ALT will be an organic system, easily and cheaply extended and adapted as required, enabling allometric scaling to fulfil economic requirements. A first ALT installation is likely to be an initially freight-only line between a major factory and a supplier, to demonstrate the concepts, gain acceptance and start generating revenue. This would be followed by a passenger service at a pinch point such as an airport, or providing a park and ride scheme for a town centre. Both seed networks would quickly extend to other local neighbourhoods, transport nodes, factories and other facilities. 5. Government needs to ensure the delivery system is ready to meet future challenges, including through reform of sub-national governance arrangements and reforming the planning process for major transport projects by introducing a new Independent Planning Commission to take decisions on projects of strategic importance. 10.1.8. Small networks can develop separately and grow into one another, as with the Internet or the phone network. Additional links can be added at later dates, as capacity is required. Planning and governance must be addressed, but such coordination is operationally far less critical with ALT than with existing modes. More important aspects to be addressed in installing ALT would be ensuring democratic accountability, given the high impact of ALT on a city, and standards for safety and interoperability between networks.

September 2010 TE 47

Memorandum from the Directors of Public Health for the West of England Partnership Area (TE 47)

This evidence submission is on behalf of the four Directors of Public Health for the West of England Partnership (WoEP). The four Directors of Public Health have signed a Memorandum of Understanding with the four Directors of Transport for the WoEP, in order;

“To promote effective joint collaboration to ensure that the transport system for the area now and in the future is designed in such a way that it enhances health, wellbeing and prosperity for all residents, and contributes to reducing health inequalities.”

The four authorities that make up the West of England are; Bath and North East Somerset Bristol North Somerset South Gloucestershire

Issue 1; Have the UK’s economic conditions materially changed since the Eddington Transport Study and, if so, does this affect the relationship between transport spending and UK economic growth?

1.1 The UK economic conditions have changed materially and considerably since the Eddington Transport Study. We would refer the Committee to evidence contained in the publications listed below. We note that the request for evidence asks for original submissions and not for published papers. We believe that the reports from Lloyds, and from UKERC are so fundamental to future transport plans for the UK that it would be irrational for the Select Committee to fail to take account of their contents. These reports point to the unarguable conclusion that unpredictable economic consequences will arise because of resource depletion. These are probable within the current decade, and highly likely by 2030. The implications for how we design, maintain and run a viable transport system are profound. As the foreword to the Lloyds Report says, we face a new paradigm, and this is very different from normal market volatility.

Key Publications

Froggatt A and Lahn G. ‘Sustainable Energy Security; strategic risks and opportunities for business. Lloyds 360 Risk Insight. Chatham House June 2010 www.lloyds.com/News-and-Insight/360-Risk-Insight/Research-and- Reports/Energy-Security/Energy-Security

Sorrell S et al. UK Energy Research Centre. Global Oil Depletion. An assessment for the evidence of a near-term peak in global oil production. August 2009

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Osborn S. Building a positive Future for Bristol after Peak Oil. October 2009. www.bristol.gov.uk/ccm/content/Environment-Planning/sustainability/file-storage- items/peak-oil-report.en

Martenson C. The crash course. www.chrismartenson.com/crashcourse.

UK Industry Peak Oil Taskforce. The oil crunch; securing the UK’s energy future. 2010. http://peakoiltaskforce.net.

Raffle A E. Oil, health and healthcare. BMJ 2010;341:c4596 http://www.bmj.com/content/341/bmj.c4596.full

Issue 2; What type of transport spending should be prioritised, in the context of an overall spending reduction, in order best to support regional and national economic growth?

2.1 The priority is to support regional and national prosperity now and for the future. The use of GDP as a convenient proxy for prosperity must not allow us to lose sight of what really matters for people. Growth in GDP can be achieved in the short term by any means of money changing hands, irrespective of the long-term social value of that exchange. The goal is not economic growth for its own sake, but for the sake of the prosperity and health that it brings.

2.2 Priority needs to be given to transport infrastructure that will enable people to access employment, services and recreation even in the face of economic shocks, energy depletion and environmental degradation. This means that we need to build a transport system which; ƒ Makes best use of existing physical infrastructure ƒ Aims to maximise access to services, rather than aiming for hypermobility as an end in itself ƒ Is efficient in use of fossil fuels both for day to day running, and for building infrastructure and vehicles ƒ Has minimum adverse impacts on health (through crashes, noise, air pollution, suppression of physical activity, and community severance) ƒ Makes maximum use of walking and cycling for short journeys, these are low carbon, need no fossil fuel, and they improve health ƒ Can withstand extreme climatic events ƒ Can be maintained using locally available skills

2.3 In effect this means that mass public transport combined with walking and cycling will become essential for the economic life and social cohesion of the nation once fuel prices and economic insecurity cause private individual car use to become unaffordable for many sections of the population.

2.4 It also means that urban design and planning must be integrated with transport planning, so that there is design for access. It means that information systems relating to travel should be predicated on the primary question of ‘How do I access x, y or z service?’ as opposed to ‘How do I travel by car from location A to location B’. With the former approach this can reveal

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opportunities for services to be accessed with little or no travel, and gives information about walking, cycling and public transport access.

Issue 3; How should the balance between revenue and capital expenditure be altered?

3.1 It will be essential to maintain revenue funding streams for the maintenance and running of existing transport infrastructure. There is recognition from the current Secretary of State for Transport that technological fixes will not be enough to deliver the behaviour changes required. This means there is a need to ensure that there is sufficient staff resource to support and deliver parking management policies, vehicle restraint policies and behaviour change programmes in a positive way. This is revenue intensive in the initial phases. Smarter Choices teams are at risk from local authority staff cuts just at a time when their skill sets are essential.

Issue 4; Are the current methods for assessing proposed transport schemes satisfactory?

4.1 Current methods are unsatisfactory. Setting the life of infrastructure programme to 60 years gives an inappropriate skew to the apparent benefits of major road network expansion projects compared with other investments. There is clear evidence that the highest value for money schemes are small scale traffic management and behavioural interventions. This includes, for example Bike It, and routes for pedestrians and cyclists. The revision of webtag guidance to include ‘fitness’ has revealed how important health benefits are but the formula is still very restrictive in terms of taking full account of health impacts in all schemes assessed. http://www.sustrans.org.uk/assets/files/Bike%20It/Bike%20It%20Review%202 010.pdf http://www.healthyweight4children.org.uk/resource/item.aspx?RID=90422

4.2 There is also a need to incorporate valuation of the carbon costs and benefits. In line with the Government’s “UK Low Carbon Transition Plan” (July 2009), the assessment of proposed developments should value any changes in emissions by integrating the social cost of carbon (the cost of the damage of carbon emitted in the atmosphere) into their cost-benefit analysis through the shadow price and/or non-traded price of carbon (based on the cost of mitigating emissions currently £51 per tonne). This needs to cover the lifetime of the development (ie demolition of any existing building, construction and in operation). This ensures developments account for their climate change impacts. Thus, where a development reduces emissions, this change will increase the benefits of the development, while where a development increases emissions, carbon valuation will increase the costs of the development.

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Issue 5; How will schemes be planned in the absence of regional bodies and following the revocation and abolition of regional spatial strategies?

5.1 The absence of the RSS risks major fragmentation in planning policy. It opens up the risk of ‘stranded investment’ in road schemes that have popular short term appeal and do nothing to build viable solutions for the longer term.

5.2 Most of the debate about the impact of the revocation of regional spatial strategies has been about housing provision and green belt. However, regional spatial strategies covered a wide range of other issues and policies, including transport. They provided the opportunity to integrate land use and transport planning at a sub-national level, addressing cross-boundary issues and inter-urban transport.

5.3 The speed of their abolition means that as yet there are no suitable interim arrangements in place to look at these issues. Local Development Frameworks and core strategies have been produced assuming that Regional Spatial Strategies were part of the statutory development plan. These will now need to be revised to take into account the abolition of the RSS leading to further delay in their final adoption.

5.4 Local Enterprise Partnerships may well be the way to take up this agenda in the future, but it is likely to be a while before they are in place and have the capacity.

5.5 There is concern that there are not the structures in place for local authorities to engage with Network Rail and the Highways Agency who don’t have the capacity to work directly with every individual local authority.

5.6 This could put back the planning of major inter-urban transport schemes such as the electrification of the rail services between London and Bristol, the South West and South Wales and between Bristol and Birmingham. These schemes have economic and sustainability benefits as well transport benefits. To illustrate the difficulties we would draw attention to the contrast between the planning and development of Cross-Rail in London, achievable because of an overarching Greater London planning body, versus the situation that would have transpired if the problems were left with every individual local council to solve.

5.7 Other cross boundary issues include public transport to airports, opening new railway stations and the development of park and ride sites that address urban congestion problems in one authority but are located in a neighbouring authority. The planning of urban extensions and the transport infrastructure to serve them will also be difficult with a fragmented planning system.

5.8 We fear that the lack of the RSS will mean schemes could be prioritised simply due to parochial concerns (and long-held aspirations of highway

TE 47 authorities eg Westbury By-pass) without due consideration of strategic value, carbon, fuel resilience and other substantive health impacts.

5.9 Urban space is valuable, and parking and congestion fees are the logical market mechanism to engineer the best use of this space and to solve congestion. There is now incontrovertible evidence that more road provision actually induces demand rather than ‘easing’ congestion. London has been able to achieve congestion charging and controlled parking in a way that is very difficult for small local authorities. Fragmenting the planning system will weaken our ability to move forward on the essential policies for managing parking and overall private motorised traffic restraint. Ultimately this will damage the economy. Individual developers can play off neighbouring local authorities one against the other by threatening to relocate if workplace parking levies are mooted. Viable park and ride services are difficult to achieve if commuters are provided with city centre parking spaces free of charge by their employer.

5.10 Deregulation of bus services in 1986 has left local authorities with little power to ensure reliable, efficient, affordable bus services for their residents and visitors. London was exempt from this legislative change and has a well used and comprehensive bus service that other cities would like to emulate.

September 2010

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Memorandum from ASLEF

1. The Associated Society of Locomotive Engineers and Firemen (ASLEF) is

the UK’s largest train driver’s union representing approximately 18,000

members in train operating companies and freight companies as well as

London Underground and light rail systems. The union has 130 years

knowledge and experience of the railways.

2. ASLEF welcomes the opportunity to contribute to this Transport Select

Committee Inquiry into Transport and the Economy. Investment in the

UK’s infrastructure, particularly rail, is crucial to reducing the deficit and

stimulating economic growth in the current economic climate.

3. The union also asserts that a key aim of investment in the railways has to

be cultivating a modal shift from air to rail and from car to train in line with

Coalition’s Programme for Government commitment to make the transport

sector greener, more sustainable and reduce carbon dioxide emissions.

An increase in rail capacity is strongly linked to a decrease in car journeys

undertaken with the result that there is less carbon emissions. Decisions

must therefore be determined by what will best deliver these outcomes.

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4. The UK’s economic conditions have certainly deteriorated since Rod

Eddington published his transport report in December 2006 with slow

economic growth and increasing unemployment and inflation levels.

Notwithstanding the outcome of the Chancellor’s 20th October spending

announcement the public finances are likely to be significantly restrained.

ASLEF’s concern is that transport, and particularly rail investment as a

long term infrastructure project will disproportionately suffer from any

proposed cuts.

5. Profits and revenues across UK train operating companies (ToCs) have

remained strong throughout 2010 despite the impact of the recession on

the UK rail industry. This is not surprising given that ToCs received nearly

£1 billion from the government in 2009 as part of the cap and collar

payments that top up revenues at those franchises which fail to meet

turnover targets. ToCs are likely to receive even more in 2010 as the

recession continues to bite. Given the likely increase in fares in January

2011 ASLEF takes the view that such a continued level of subsidy is a

financially unsustainable and must be reduced.

6. ASLEF once again reiterates its belief that rail investment should be

prioritised rather than cut. Independent research commissioned by the CBI

on behalf of the construction industry last year showed that every £1

invested in rail generates £2.20 of economic benefits, more than any other

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sector of the economy with, for instance, banking and finance producing

£1.70 per £1 spent and defence creating £1.30 worth of enhancements for

each £1 expended. Rail is a uniquely placed sector to offer a counter-

recessionary economic stimulus as well as boosting economic and social

mobility.

7. ASLEF wishes to place on record our opposition to any proposed cuts to

the Crossrail scheme or the electrification of the Great Western line and a

section of the rail network in the North West. We believe these schemes

are vital developments for increasing economic growth and social mobility

in the South East, the South West and South Wales.

8. ASLEF disagreed with Eddington’s finding that new rail infrastructure was

unnecessary. Moreover we believe the prevailing economic conditions

make the case for high speed rail greater than ever. The West Coast

Mainline is likely to be at full capacity by 2020 preventing the much need

expansion of rail travel. Network Rail has said “by 2020 we will be turning

away passengers.” The high speed line proposed by Network Rail would

cost £34 billion but lead to £55bn of value. In addition it has the potential

to reduce domestic air travel due to the reduced journey times to the north

of England and Scotland.

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9. The union supported the Eddington analysis of the need to identify and

tackle bottlenecks on the railway and improve signalling. For example, the

C2C line from London to is a vital economic link yet a stretch of the

line around Limehouse is only twin tracked. Four tracking of this section of

line would bring significant capacity benefits but requires significant

investment. Short infill projects, for example, can also give extremely high

value for money. Elsewhere routes exist which are electrified except for a

short stretch often have diesel locomotives running under electric lines. A

small infill would allow electric traction and has the potential to give similar

value for money as a whole line being electrified.

10. The union also believes that more consideration should be given to

disused lines in order to enhance the capacity of the rail network. In the

southern region, for instance, reopening the Lewes Uckfield line could

reduce many of the capacity issues around Gatwick Airport.

11. Rail freight has a vital role to play in the economic recovery, reducing

road congestion and providing low carbon transport options for British

business. ASLEF urges the Government to spend the limited resources it

has in the most sustainable way possible and support the development of

rail freight through network enhancements on key routes, including to

ports, through grants to help reduce road congestion, pollution and

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exposure to road accidents; and through a supportive planning regime for

rail freight terminals that acknowledges their strategic importance.

12. ASLEF believes that the cap and collar system of payments to franchises

must be radically reformed as part of the current franchising review

currently being conducted by the Department for Transport. One of the

supposed purposes of rail privatisation was to increase the efficiency of

services as a result of the financial and commercial risks undertaken by

the winner of the franchise. The idea was that the service had to run well

or the company would lose revenue leading to financial loss. However

these basic rules of the market do not apply to the system as currently

constituted. Franchises who do not meet their revenue targets are eligible

for tax payer subsidy. Typically, if revenue falls below 94% of the target,

the tax payer provides 80% of the shortfall. This means that the public

subsidise failure and the incentive for running a good service simply

disappears.

13. The revenue protection arrangements also have a negative impact on

industrial relations. A consequence is that there is little incentive for a

company to promote positive union dialogue when they can claim lost

revenue from strike action back from the taxpayer. This scenario subverts

the natural order of industrial relations make it entirely and absurdly

possible for a franchise to make a profit as a result of strike action. During

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a strike period, a company can save money through the lower costs of not

running services and lower wages whilst claiming for the loss of ticket

sales. ASLEF would be greatly concerned for there to be a collapse in

industrial relations prior to the Olympics, for example, where the provision

of good services is essential. Surely risk must be on the side of those who

make profit and not the taxpayer.

14. ASLEF does not believe that the current methods for assessing proposed

transport schemes are satisfactory. The appraisal should ensure that all

external costs of the different modes are fully considered which is not the

case currently with NATA, the model used by the DfT. There should also

be a consistent model of appraisal used across Whitehall.

15. Compared to air and road, rail is the most benign form of transport in environmental terms. Investment in rail is not only vital to greening the economy but also to stimulate demand in a range of linked industries from steel to car manufacturing.

16. To conclude ASLEF would again point out that investment in rail can

deliver a counter-recessionary economic stimulus as well as boosting

economic growth and social mobility and should be a key tool in the

Government’s overall deficit reduction strategy.

September 2010

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Memorandum from the North West Rail Campaign (NWRC)

1. Introduction The North West Rail Campaign (NWRC) was established in 2003 to lobby for a greater level of investment in the infrastructure of the North West’s railways.

The priorities of the Campaign are: • Manchester Hub • Rolling Stock • Electrification • Stations

There is also support for the development of a High Speed Rail network in Britain.

2. Transport and the Economy 2.1 Have the UK’s economic conditions materially changed since the Eddington Transport Study and, if so, does this affect the relationship between transport spending and UK economic growth? It is apparent that the UK’s economic conditions have changed significantly since the publication of the Eddington study and that the economy has been in recession, despite the level of transport spending over recent years. However transport had been under-funded for decades and has still not “caught up” to put the UK on the same footing as some of our European neighbours. What is clear though, is that spending on transport infrastructure can help to stimulate and sustain economic growth, particularly through some of the wider economic benefits that have only recently been included in the appraisal process.

2.2 What type of transport spending should be prioritised, in the context of an overall spending reduction, in order best to support regional and national economic growth? We believe that the main priorities for investment should be concentrated on rail as there is a recognised link between rail investment and economic growth through improving access to employment and encouraging agglomeration of businesses. These priorities are: • To continue the ongoing drive for improved maintenance procedures and more efficient working practices to drive down operational costs. This will require an ongoing commitment from the Government to allocate funding to Network Rail in the current Control Period format to allow adequate planning and to benefit from economies of scale for procurement; • To remove bottlenecks, such as the Northern Hub, from the network to allow for optimum use to be made of the infrastructure we already have. • To ensure efficient and adequate deployment and acquisition of rolling stock; TE 49

2.3 How should the balance between revenue and capital expenditure be altered? It is clear that there will be a severe restriction on capital expenditure in coming years however this is likely to be even more so for revenue expenditure as budgets continue to be tight. Few authorities will want to commit to new ongoing expenditure so it seems likely that there will be an increase in contracts to private sector companies to build and manage infrastructure projects.

2.4 Are the current methods for assessing proposed transport schemes satisfactory? The current methods for assessing transport schemes appear to be very long- winded and bureaucratic, and this is even truer for the railways due to additional regulations. There needs to be a smoother process for planning, assessing and delivering transport projects.

2.5 How will schemes be planned in the absence of regional bodies and following the revocation and abolition of regional spatial strategies? We would like to see a national strategy for major transport planning with a clear steer for delivery of projects at a sub-regional level. The Crossrail Bill was a good example of ensuring a major railway project kept moving forward, and allowed for new sources of funding to be identified however this is not suitable or possible for all projects.

The introduction of Local Enterprise Partnership provides a useful vehicle for advising and planning on transport issues but it is likely to involve a greater role for the Department for Transport which may prove to be difficult in the current climate of no additional staff recruitment.

September 2010

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Memorandum from the West of England Authorities

West of England Context

1. The West of England authorities - Bath and North East Somerset, Bristol City, North Somerset and South Gloucestershire Councils - welcome the opportunity to make a submission to the Transport Committee inquiry into transport and the economy.

2. Since the 1990’s the Partnership area Gross Value Added (GVA) growth has outperformed that of the UK, and the Competitiveness Index 2010 places Bristol as the most competitive large English city outside of London. Much of this growth had to rely upon major transport infrastructure improvements made in the 1970’s and 80’s, for example the and the Avon Ring Road. The capacity of this ‘historic’ infrastructure has now been overtaken by the scale of growth in the area, and a response to the growing need for substantial further investment has suffered from the lengthy approval processes. Additional transport investment is a key lever to drive the continued economic success of the West of England, enabling it to play a leading role in the UK’s economic recovery and growth potential.

3. The key goal of the emerging West of England Joint Local Transport Plan (JLTP3) is sustained and high levels of economic growth. The authorities have worked closely with business representatives, alongside a wide range of other stakeholders, in the development of the Plan. In the last few months the Councils and the business community have submitted a proposal to Government to form a Local Enterprise Partnership (LEP).

4. The LEP aims to build upon the strong and successful public/private sector partnership already in place in the West of England, and will focus on creating the optimum conditions for economic growth. Through joint actions, the LEP will support the creation of substantial numbers of new private sector jobs. This will contribute to a strong globally competitive economy which will unlock over £1 billion of private sector investment over the next 5 years.

5. One of the key themes of the LEP is to secure the improvements in transport and other infrastructure required to support economic growth and competitiveness. The LEP will result in an even stronger alignment of spatial transport, infrastructure and economic planning.

Have the UK’s economic conditions materially changed since the Eddington Transport Study and, if so, does this affect the relationship between transport spending and UK economic growth?

6. Economic conditions have seen a dramatic shift since the publication of the Eddington Transport Study. Between 2007 and 2008 the UK economy contracted by 0.1%, followed by a 4.9% fall during 20091. The West of England benefits from a competitive economy that has historically outperformed the UK in

1 Gross Domestic Product (GDP), ONS

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achieving growth2 and that adjusts successfully to changing economic conditions. It is well placed to recover quickly from the economic downturn. Recent economic projections suggest that the West of England economy could grow by 3.4% per annum, compared to a UK average of 3.2% over the next 20 years3.

7. It is important that this growth is not constrained by poor transport infrastructure and services which adversely affect access to labour markets, hamper business productivity and create congestion. As Eddington points out ‘transport networks support the productivity and success of urban areas and their catchments by getting people to work, supporting deep and productive labour markets and allowing businesses within the area to reap the benefits of agglomeration’. The strong relationship between transport investment and economic growth holds good.

8. It is estimated that congestion will cost the West of England economy £600m per year by 2016 through delays to travellers. Although the recession has seen a reduction in traffic and congestion levels in the Area over the last 2 years, there is some evidence of a recent return to growth in traffic to some key centres. The recent reduced congestion levels must be viewed against the longer term trend of increasing traffic levels and longer journey times.

9. Good internal and external connectivity are key characteristics of a successful and competitive city region. Eddington emphasised the role of transport investment in sustaining the UK’s productivity and competitiveness against the challenges that lie ahead.

10. Studies in the West of England have shown that there are clear links between transport supply and economic outcomes. Statistically significant links have been found between connectivity (both to labour markets and to other businesses) and the pattern of employment found in different parts of the Partnership area.4

11. This illustrates that improving connectivity through new and improved transport infrastructure delivers employment growth and improved productivity. Cities are drivers of the economy, and it is in city regions such as the West of England that returns on transport investment are greatest.

What type of transport spending should be prioritised, in the context of an overall spending reduction, in order best to support regional and national economic growth?

12. At a time when resources are scarce Eddington’s conclusion that Government should ‘prioritise action on those parts of the system where networks are critical in supporting economic growth’ appears particularly relevant. In this regard the statement in the Government’s Spending Review Framework (June 2010) that ‘the Government will…protect as far as possible the spending that generates high economic returns’ is welcome.

2 GVA per head 1995-2007, ONS 3 Oxford Economics, June 2010 4 Wider economic assessment of transport schemes in the West of England Partnership area, KPMG, August 2010.

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13. Investment in City regions such as the West of England will generate high returns and help the Area deliver the planned 95,000 new jobs over the period to 20305.

14. Whilst it is understandable that in times of reduced funding there is a move away from big infrastructure projects towards more modest low cost schemes, it is important to continue to progress a number of key projects which will help support economic recovery and future growth. The West of England have identified a priority programme of major schemes aimed primarily at delivering a 21st century public transport system for the area which have a strong value for money case. In addition there is a need for new road links, and junction improvements where the local and strategic network meet. These would unlock key employment sites such as the 575 hectares at Avonmouth/Severnside for which Accelerated Development Zone status has been proposed. The authorities remain committed to the delivery of these schemes, potentially over a longer period, and are exploring funding opportunities to supplement any grant provided by Government.

15. To better understand the links between transport infrastructure investment and economic growth, the West of England authorities commissioned KPMG4 to assess how a programme of major transport schemes proposed in the area would support employment growth and increase the area’s productivity.

16. These findings were used to forecast how changes in transport supply through new infrastructure provision (spanning bus-based Rapid Transit, rail, new transport links and area packages) could influence levels of employment. Changes in the productivity of jobs were calculated using the Department for Transport’s (DfT) wider impacts framework capturing agglomeration and business time savings.

17. K ey outcomes of the study are that:

¾ The tested package of ten priority infrastructure schemes, at a cost of £361m, would deliver additional economic output of £637m per year within the Area.6

¾ This GVA impact is comparable to that of half of the construction industry in the Area, and represents an increase equivalent to 2% of West of England economic output.

¾ The schemes produce £1.8 of GVA for every £1 of transport capital investment illustrating the high impact that new infrastructure can deliver in the Area.

¾ The ten priority schemes would directly contribute 9,000 new jobs within the Area. This increase in jobs is equivalent to the number of people employed by the Port of Bristol and Bristol Airport combined.

5 West of England Local Enterprise Partnership. Proposal to Secretaries of State for BIS and CLG. September 2010. 6 Costs at 2006 prices.

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¾ It is estimated that gains in national taxation arising from the schemes could support around 50% of the cost, effectively halving the overall call on the public purse.

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

18. It is clearly capital spending that is needed to deliver the infrastructure, not revenue spending. Councils would prefer that this was funded by capital grant rather than by rate support grant revenue funded through the issue of supported borrowing approvals. The grant route is simpler and more direct. The Revenue RSG route is opaque and indirect.

19. That being said, in the case of the West of England without access to significant new sources of revenue funding it will not be possible to take forward the Area’s ambitions for a fit for purpose public transport network that seeks to address current major deficiencies.

Are the current methods for assessing proposed transport schemes satisfactory?

20. The current major schemes approval process provides a logical sequence which seeks to ensure that schemes are delivered to time and budget. However, experience in the West of England indicates it takes 8 -10 years to take schemes from inception to completion. This is not acceptable. More authority and responsibility should be given to local promoters to develop and deliver well- specified schemes, working to a clear and pre-defined set of national criteria, operating within an agreed budget and with effective risk management provision.

21. Some improvement in existing national approval processes have been achieved through a West of England Multi-Area Agreement pilot. This developed a more collaborative approach with DfT (eg early engagement, agreement to calendar of key dates, shared position on technical requirements etc). Such improvements were successfully applied to the development of the North Fringe to Hengrove Package major transport scheme. This moved the scheme from inception to bid for Programme Entry in a year. If a national approval process were to be retained more can be achieved. It is worth remembering that delay adds to cost (through inflationary impacts, less efficient processes etc) and the swifter passage of schemes through the approval system would deliver local economic results earlier.

22. National appraisal processes have become increasingly focused on ever more technically complex transport modelling. This has added considerably to the cost of bringing forward major schemes in the early stages of development. It is questionable whether this increasing technical requirement (and accompanying demand for the collection of more transport data) has added value proportionate to its cost. Similarly any proposal to supplement or rewrite large parts of DfT guidance should greatly simplify processes and reduce costs based on devolving more responsibility to the local level.

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23. There has been previous discussion about the development of a ‘lighter touch’ appraisal for lower cost schemes. If national appraisal is retained this approach should continue to be developed, as should other more innovative and scheme specific approaches. One example is decoupling where certain elements of a scheme are brought forward in advance those for which developer funding is awaited. This is being used to progress the Weston Package major scheme. In an environment where funding is constrained this approach needs to be extended to allow schemes such as transport packages to be delivered more flexibly (eg less complex elements implemented earlier) or over a longer timescale. Similarly given the preparatory cost of bringing schemes through the major schemes approvals process is typically £4-5m7, the previous major scheme limit of £5m is too low. As a minimum a different process should be established for schemes of up to £10m.

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

24. Traditionally the prioritisation of transport infrastructure in the UK has been heavily centralised. This city region collaborates and integrates spatial, economic, transport and infrastructure planning and is well able to assess options for investment, prioritise and specify schemes effectively. A more local approach would substantially reduce the cost and time in developing and realising major transport investment. Given the lead times for major infrastructure schemes, long term programming is crucial, even if in the current financial climate the availability of funds pushes the programme further forward.

25. One means of achieving this level of certainty would be by allocating capital funding to the LEP for the authorities to allocate in line with local priorities. This would complement the Government’s current policy of devolving decisions to a more local level, and would potentially accelerate delivery through improved promotion, planning and local engagement, and hence the scheme’s effectiveness and impact on economic prosperity.

26. The Regional Growth Fund provides a potential opportunity to align investment in transport infrastructure with other measures to support growth and enterprise, and for a flexible approach reflecting local context and need. However, the £1 billion allocation for 2011/12 – 12/13 appears to be well short of the sums likely to be required to support economic recovery and growth ambitions. The recently announced Local Sustainable Transport Fund may also provide opportunities.

27. Drawing on the West of England as an example suggests that the abolition of the Regional Spatial Strategy is unlikely to weaken the strategic case for transport infrastructure investment and the effectiveness of the investment made in the future. The Area’s major schemes continue to have strong links to growth in homes and jobs as proposed in emerging Core Strategies, are underpinned by a sound technical case through strategic and more focused transport studies, and are central to the emerging third Joint Local transport Plan.

7 West of England Multi-Area Agreement, August 2009

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September 2010

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Memorandum from Oxfordshire County Council

Have the UK’s economic conditions materially changed since the Eddington Transport Study and, if so, does this affect the relationship between transport spending and UK economic growth? Yes – in the general sense that the economy has experienced a recession and, more specifically for transport, with the subsequent squeeze on public sector funding which is leading to significant and direct reductions in the funding available for transport schemes, particularly capital funding. Owing to the need to protect highway assets and not create problems for the future, the funding that is available is being prioritised for highway maintenance, leaving little if anything for new schemes in the short term. Because of this, transport investment needs to be much more closely matched to delivering growth. Securing long term sustainable economic development requires sustained, long term public investment – not least to stimulate private sector investment. To take Transport as an example, investing in effective transport links is absolutely vital in enabling recovery from recession and post-recession growth, not something that should be considered as only being affordable as a result of recovery. The development of a Local Enterprise Partnership for Oxfordshire, which has now been submitted as a bid, includes working with adjoining local authorities and, where they exist, Local Enterprise Partnerships, to promote and secure delivery of strategic enabling infrastructure. In particular it will champion investment in: i) East-West Rail, as a key piece of enabling infrastructure for economic and housing growth; ii) Improvements in the capacity of Oxford Station as part of a comprehensive improvement strategy for the Great Western Main Line; iii) Measures to address bottlenecks on the A34 corridor. iv) Improvements to the transport network around the Abingdon / Didcot area to support the development of the world leading Science Vale UK proposals.

What type of transport spending should be prioritised, in the context of an overall spending reduction, in order best to support regional and national economic growth? Priority should be considered where: • spending unlocks matched or partnership funding, especially from the private sector; • there is an opportunity to develop sustainable, low carbon solutions for the long term – rail projects for example

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• schemes or measures meet regional / national as well as local objectives – the Access to Oxford project, in terms of the benefits it would realise on the A34 and parallel rail corridors, is a good example of this • strategic links to growth areas can be funded and delivered – particularly where this enables better connections between housing and employment – in particular the Science Vale UK area where infrastructure improvements are essential to its delivery. Oxfordshire is the most rural county in the South East. This may be heretical thinking to a civil service organised in silos but transport issues in Oxfordshire could be partly alleviated by the presence of a comprehensive high speed Broadband network across the county. People could work and communicate more effectively without the need to travel as much. We suggest that thought should be given to regarding Broadband provision as including an element of transport within it.

How should the balance between revenue and capital expenditure be altered? With significantly reduced levels of capital, greater levels of revenue funding are needed to enable sufficient emphasis to be placed on Behaviour Change and Travel Planning initiatives, as a complement to development of key infrastructure and an aide to carbon reduction. More systematically involving and engaging with businesses and other key Stakeholders in this area will enable an overall approach to transport investment combining infrastructure, services, and travel behaviour to be ‘owned ‘ by all parties. On a more general point, while the economic conditions may have changed, effective transport planning still requires relatively long lead times that we should be planning now for post-recession and schemes that support growth. In addition the loss of capital funds for planned structural highway maintenance will lead to a deterioration of our asset and place additional pressure on reduced revenue funds. A poorer quality of highway will no doubt have repercussions in terms of economic growth and attractiveness for investment.

Are the current methods for assessing proposed transport schemes satisfactory? Historically there has been too great an emphasis placed on the ‘narrow’ transport benefits of schemes – particularly reductions in journey time savings (which have also tended to favour highway based solutions). There is a need to ensure that the broad benefits of any transport scheme are captured – not just in terms of delivering economic growth and bringing in private investment, but also in meeting other (e.g. environmental / carbon, health) benefits. Whilst this is a notoriously difficult area to build a cost / benefit model it is essential to ensure that the limited resources go to the projects that deliver the greatest overall benefit.

How will schemes be planned in the absence of regional bodies and following the revocation and abolition of regional spatial strategies? We believe that assessment of schemes should take place somewhere between city/county and country. Although planning has been, and continues to be, effective at

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Without some form of sub-national assessment the system would have to revert to the situation pre-regional bodies where DfT had to assess and compare schemes from widely varying situations. Clearly the situation with a large public transport scheme in a large metropolitan city in northern England is very different from a rural bypass in a shire county. Assessment of the relative benefits is difficult but regional knowledge helps to clarify the situation.

September 2010

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Memorandum from the PCS Union

Introduction

1. The level of cuts being contemplated to DfT’s capital budget and running costs will have a profound impact on the UK's long-term economic growth.

2. Whilst the Government has determined that it will make these cuts there is no reason why the Transport Committee has to agree that they are necessary or desirable in the Transport sector. It could conclude that these cuts cannot be made without seriously harming the economy.

3. Therefore we would hope that the committee will address the fundamental issue of whether there should be budget reductions in the first place; if there does, whether they have to be as deep as 25% (possibly 33%).

4. The Prime Minister has indicated that the cuts will be permanent; that is once the structural deficit has been cleared spending will not rise back towards current real levels.

5. A permanent real cut in DfT capital expenditure will impact on the priorities for investment identified by the Eddington Transport Study, will retard “greening” transport and hence will lower long term growth. Again we hope the committee will address whether a permanent cut is desirable and to quantify it’s effect on UK long term growth.

6. Changes in economic growth and government spending impact on different groups within society in different ways. Therefore we hope that the Select Committee will examine the differential economic effects of the proposed changes in Transport spending. It is claimed that the cuts will be fair and that the reductions in spending are “progressive austerity”. If that is the case then DfT should be put to strict proof to demonstrate the fairness, or other wise, on all groups within society (not only in terms of social class, ethnic groups etc but also geographically) of the proposed reductions in expenditure.

7. Lastly the Government is planning to greatly reduce civil service numbers in DfT. In our view, this attack on the department’s human capital will also impact on transport’s contribution to UK's long-term economic growth.

Priorities For Investment

8. The priorities for investment identified by the Eddington Transport Study concerned reducing congestion in urban areas, on key inter-urban corridors and at key international gateways.

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9. Whilst these priorities remain important, in our opinion the major task of the department is to fundamentally change our transport systems; to move them from being run on fossil fuels to ones running on sustainable, clean energy; for public transport to be really accessible to all the public, not only in terms of coverage and capacity but in terms of price (public transport must be cheap enough for all to use). If these things are done then it will boost the UK's long- term economic growth.

Changing Our Transport Systems

10. Climate change, if unchecked, will have a devastating effect on our environment and hence economy. Moreover the capital expenditure involved in moving away from fuel based systems will boost the economy in itself.

11. Also by changing our transport systems as described above we would ensure against a Peak Oil crisis.

12. If oil reserves/exploration of those reserves do not keep pace with demand then consequentially petrol and diesel prices will rise in real terms year after year. Many commentators believe that these increases will be very sharp and that there will be fuel shortages. Such things will have a shattering effect on fuel based transport systems and the economy.

13. Unfortunately this Government, and the previous one, seem to believe that the transport systems of today hold good for the future. We profoundly disagree with that view.

More deaths caused by transport-related air pollution than by crashes

14. The move away from fossil fuels based transport also will have dramatic health benefits. Such benefits positively impact on the economy (reduced health costs; more workers available for work).

15. In March 2010 the House of Commons Environmental Audit Committee produced a report on Air quality which stated in the summary:

“Poor air quality reduces the life expectancy of everyone in the UK by an average of seven to eight months and up to 50,000 people a year may die prematurely because of it. Air pollution also causes significant damage to ecosystems. Despite these facts being known air quality is not seen as a priority across government and the UK is failing to meet a range of domestic and European targets.

“The quantified costs of poor air quality that are used to develop policy are out-dated. They do not take account of all the known health effects, treatment costs, and environmental damage, nor do they take account of fines that could be imposed by the EU for failing to meet air quality targets. Many Government departments do not seem fully to understand how their policies affect air quality, the impact poor air quality has, and its cost to the economy. TE 52

Awareness of the issue needs to be raised at all levels of government, and policies need to take greater account of air quality impacts.

“Awareness needs to be raised and behaviour needs to change if air quality targets are to be met. Transport causes the most exposure to harmful air pollutants, and air quality targets will not be met without a significant shift in transport policy. Local authorities need to do more to tackle poor air quality, and they must be given information on how to develop local air quality strategies.

“The cost-benefit analysis is clear: what is needed is the political will to make this a priority and to commit the resources to address it now so that we can reap the benefits of improved health.”

16. Page 5 of the report says:

“Industry and road transport are the main sources of air pollution, though domestic combustion and agriculture are also to blame. Industry is a major source of emissions of NOX (46%) and PM10 (36%). Road transport contributes to significant emissions of NO2 (30%) and PM10 (18%). Emissions and exposure vary greatly depending on location. Although polluting, the majority of large combustion plants are located away from major urban centres. Road transport contributes far more to the public’s exposure to pollutants and is responsible for up to 70% of air pollution in urban areas.”

17. In one of the recommendations (at page 18 of the report) the Environmental Audit Committee said:

“Transport policy must change dramatically if the UK is to meet future targets and reduce exposure to air pollution. Much of this agenda is already being driven by efforts to tackle climate change (like modal shift and smarter travel choices) although some conflicts exist. In addition to improving existing policies, the Government must explain the role played by brake, tyre and road wear in generating particulate matter and research the impact of road surface particulate matter on air quality.”

Noise pollution

18. The Executive Summary of the Defra paper, An Economic Valuation of Noise Pollution, dated 2008 says:

“Across Europe, increasingly, attention is turning to noise pollution and the detrimental impacts it has been suggested to have on the population. The rapidly growing literature surrounding noise pollution highlight a wide range of costs including loss of amenity, adverse health impacts, slower learning rates in children, irritation and effects on local ecology. In response to these considerations there has been a significant movement across the EU towards systematically managing noise with the first stage being the creation of detailed noise maps and the development of localised action plans.

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“Based on the existing evidence, initial estimates of the cost of noise pollution suggest that it is currently imposing a cost in excess of £7 billion per annum1. This estimate is made up of between £3 - £5 billion in annoyance costs, adverse health cost of around £2 - £3 billion and productivity losses of another £2 billion. Therefore, even where best practice is being observed this means monetised impacts could be around half their true value.”

19. The move away from fossil fuels based transport would greatly reduce noise pollution (electric cars, for example, are virtually noiseless) and help the economy by greatly reducing the costs estimated above.

Cost of Public Transport

20. DfT admits that between 1980 and 2009, bus and coach fares increased by 54 per cent and rail fares increased by 50 per cent respectively in real terms. Such increases impact on competitiveness and growth.

21. The departmental is carrying out a fundamental review of its expenditure. This will look at, amongst other things, the existence and size of the Bus Service Operators Grant and concessionary travel.

22. It seems to us that the consultation on train franchises will lead to the Train Operating Companies being allowed to raise fares in return for less subsidy.

23. Even before the election it was acknowledged that the public would pay more for train travel. Indeed it is official DfT policy that a greater proportion of railway costs be recouped through train fares; in other words through higher train fares.

24. A Guardian article dated 22 February 2010 said:

“The funding balance between passenger and taxpayer is a particularly important issue for rail travellers, because the farepayer is expected to pay for 75% of the industry's cost by 2014 – the equivalent of £9bn per year.”

25. When asked by the union if they had equality-proofed this proposal, to check the effects of increasing rail fares will have on the poor, ethnic minorities etc, DfT admitted that they had not. Such an assessment would have concluded that the poor and ethnic minorities (both categories over lap) would be adversely effected.

26. The overall effect of the above and other measures will be, in our opinion, further and faster real increases in the price of public transport. Such rises will tend to “price” passengers off, make car travel (all least in advance of Peak Oil effects) cheaper in real terms.

27. This means that certain sections of the population will literally be less mobile. This will impact on the UK economy.

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Fair Cuts?

28. The TUC and Unison have commissioned a unique study which “attempts to set out the value of the benefits of services, using a new model of the distribution of public spending across households in the UK”. The report also uses this analysis to estimate the losses to households as a result of the Government’s proposed cuts in public spending by 2012-13, as well as discussing the impact of the fiscal consolidation measures as a whole (that is, including the impact of changes to taxes and benefits)”. Please see: http://www.tuc.org.uk/extras/wherethemoneygoes.pdf

29. In the summary of that report (page 9) it states the coming “cuts will also be regressive, with the poorest tenth of households losing income and services equivalent to 20.3% of their household income, compared to just 1.5% for the richest tenth of households”. It seems to us that DfT should provide this sort of analysis as to the effect of the proposed cuts. The department is legally bound to produce equality impact assessments of its polices but our experience is that these tend to be inadequate, if they are done at all.

30. As said above DfT should be put to strict proof to demonstrate the fairness, or other wise, on all groups within society (not only in terms of social class, ethnic groups etc but also geographically) of the proposed reductions in expenditure.

Human Capital

31. Current plans suggest that up to a third of staff in the central department will be shed and possibly a similar percentage in the other parts of the department as well.

32. It is almost fashionable to denigrate civil servants yet without skilled staff DfT cannot deliver its plans.

33. Many organisations have learnt to their cost that shedding experienced staff means that they lose capacity to deal with future changes.

34. An interesting case study is that of the Highways Agency (HA). In the mid 1990s the department exited many experienced engineers and administrative staff in keeping with cuts in the road programme. They then found, when the road programme was revived, that they did not have sufficient in house capacity and had to buy in much more expensive consultants (the legacy of which is that HA still has hundreds of consultants on the books). Moreover they had to recruit staff to make up for the cuts made. This was well documented in the NAO report on estimating and monitoring the costs of building roads in England in March 2007 (HC321 Session 2006-07).

35. Ministers cannot now, foretell, what the future holds. To cut DfT’s planning and administrative capacity must mean that the department will be less able to handle future policy changes. This lack of capacity will have a real, if subtle, TE 52

effect on UK's long-term economic growth. We believe therefore TRANSOM should inquire into this loss of human capacity.

September 2010

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Memorandum from the Town and Country Planning Association

1.0 About the TCPA 1.1 The Town and Country Planning Association (TCPA) is an independent charity working to improve the art and science of town and country planning. Representing the views of our membership organisations and individuals from local authorities, planning academics and practitioners under the policy guidance of the Policy Council, the TCPA puts social justice and the environment at the heart of policy debate and inspires government, industry and campaigners to take a fresh perspective on major issues, including planning policy, housing, regeneration and climate change. Our objectives are to: • Secure a decent, well designed home for everyone, in a human-scale environment combining the best features of town and country • Empower people and communities to influence decisions that affect them • Improve the planning system in accordance with the principles of sustainable development

1.2 The TCPA welcomes the Transport Select Committee’s inquiry into ‘transport and the economy’. Given our expertise in planning our evidence to the Committee is specifically focussed on the inquiry question: How will schemes be planned in the absence of regional bodies and following the revocation and abolition of regional spatial strategies?

2.0 Summary of TCPA Submission 2.1 The TCPA’s principle for a sustainable and successful provision for transport as set out in the TCPA Policy Statement for Accessible and Sustainable Transport is the need to respond to the needs and aspirations of communities, as well as to the future impacts of regeneration and growth. Even more urgent action is needed, in the context of forthcoming significant reforms, if the vision for creating sustainable communities is to become a reality. The TCPA calls for retaining the strategic approach to transport provision, requiring: • integration of local and national transport networks; • co-ordination between government departments’ corporate strategies to form coherent policies; and • transport provision to be a primary consideration, but subservient to factors such as homes and retail, in planning or re-planning communities.

2.2 The TCPA’s submission examines the question ‘How will schemes be planned in the absence of regional bodies and following the revocation and abolition of regional spatial strategies?’ by drawing on two of the recently published briefing papers - National Planning Framework and ‘The bigger picture and the longer view: really useful strategic planning’. In summary, in the context of radical reforms, the TCPA requests clarification over the status of National Policy Statements and new UK infrastructure plans. The TCPA believes that a revised planning system must offer a strong system which can deal with strategic transport issues which are too big in scale or timeframe to be resolved within one local planning authority area. Democratic strategic planning is not top-down imposition, but about integrating local plans into coherent frameworks. Effective strategic planning can reduce costs to both public and private sectors, secures efficiency savings, and protects the environment. It can: • provide certainty and generate confidence for private investors; • set clear priorities for public expenditure; • make best use of resources; and

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• align public and private investment, and national and local spending plans.

3.0 TCPA policy work on the Coalition Government’s planning reform agenda 3.1 The TCPA has been actively engaged in examining the proposals set out in the Conservative Party Policy Paper, ‘Open Source Planning’1 which laid the foundations for the new Government’s planning reform package. Drawing on feedback from over 100 participants in five cross-sector roundtable debates the TCPA produced ‘The Future of Planning Report’2 which presents a series of solution-focused recommendations.

3.2 This month (September 2010) the TCPA published a series of 'Making Planning Work' briefing papers which set out in more detail the core principles for consideration and TCPA recommendations for the Government's planning reform agenda. • Responsible democratic localism http://www.tcpa.org.uk/data/files/final_mpw_bp1.pdf • National Planning Framework http://www.tcpa.org.uk/data/files/final_mpw_bp2.pdf • The bigger picture and the longer view: really useful strategic planning http://www.tcpa.org.uk/data/files/final_mpw_bp3.pdf • Incentives for growth http://www.tcpa.org.uk/data/files/final_mpw_bp4.pdf

4.0 The case for a national planning framework and strategic planning To examine the question ‘How will schemes be planned in the absence of regional bodies and following the revocation and abolition of regional spatial strategies?’ the TCPA draws on two of the recently published briefing papers, firstly the National Planning Framework and secondly ‘The bigger picture and the longer view: really useful strategic planning’

4.1 Impact of the loss of the current framework 4.1.1 First and foremost, the TCPA draws the Committee’s attention to a comparison of the current system for integrated planning, transport and economic development to the proposed future system (see Figure 1). The current Regional Transport Strategy is integrated into the Regional Spatial Strategy, and as enacted in the Local Democracy, Economic Development and Construction Act 2009, further integrated with the Regional Economic Strategy into an integrated Regional Strategy (RS). The now revoked Policy Statement on Regional Strategy stated that in terms of transport, the RS policies and priorities should integrate “Transport needs and services in delivering sustainable economic development, regeneration, investment, housing growth and climate change mitigation”3. Key transport investments (in rail for example) were designed to support spatial objectives, such as the need to support areas of regeneration need or major city centres, and environmental objectives, such as the need to reduced car travel. The RTS has a critical role in advising on the allocation of regional Community Infrastructure Funds, as well as its critical role in providing the strategic policy framework for LDFs and local transport plans.

1 ‘Open Source Planning’ (February 2010), Conservative Policy Green Paper No. 14 2 TCPA (2010) The Future of Planning Report – distilling the roundtable debates. TCPA, London http://www.tcpa.org.uk/data/files/tcpa_futureplanning_report.pdf 3 CLG (2010) Policy Statement on Regional Strategy, Para. 3.6

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4.1.2 In essence, the significant impact from the revocation of the RSS is this complete loss of a strategic identification of needs and priorities, in particular transport infrastructure of a strategic nature which extends beyond administrative local authority boundaries. The TCPA is concerned and believes that any effective and sustainable future planning for major transport infrastructure such as the intra-regional transport schemes as well as proposals for High Speed 2 and other strategic networks may be compromised by this strategic deficit. This point is particularly pertinent in the context of moves to rebalance the economy and the important role of transport in making this happen, ie enabling the co-ordinated planning and delivery of transport infrastructure such as ports, airports and rail to support growth and regeneration in the north.

FIGURE 1. Existing and future processes for integrated planning for transport in England

4.1.3 The TCPA’s evidence to the Transport Committee’s inquiry into the ports NPS4 earlier in 2010 highlighted the need for potential applications for port developments to be ‘region-proof’ by assessing them against alignment or ‘fit’ with regional and local transport strategies. Together with potential applications for other types of forthcoming nationally-significant transport projects, this would ensure that a coherent and much needed co-ordinated approach is taken to transport infrastructure planning. The Committee’s conclusions and recommendations clearly agreed with the role of regional strategic planning in

4 TCPA submission to the Transport Committee inquiry into the Ports NPS http://www.tcpa.org.uk/resources.php?action=resource&id=716

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providing a clear policy framework for integrated decisions in line with sustainable development5.

4.2 National planning framework 4.2.1 The TCPA strongly believes in the need for a national planning framework. A cross-party commission, serviced by the Association, made the case for such a policy in a 2006 report, Connecting England6, which was widely acclaimed across the political spectrum. In a subsequent report, Connecting Local Economies7, published in February 2010 we reviewed the opportunities for major transport decisions. We welcome the Coalition Government’s commitment to a ‘national planning framework’ covering all forms of development and setting out national economic, environmental and social priorities.

4.2.2 A national planning framework to re-balance the economy: A new national framework would be an important mechanism for fulfilling the Government’s commitment to re-balance the economy, well articulated by the Prime Minister and other ministers. It would: • guide national infrastructure investment, setting out the indicative timing, broad location, and scale of key infrastructure projects; • examine national (spatial) inequalities, by laying the foundations for a better economic balance between London, the Greater South East (the ‘golden arc of prosperity’ from Hampshire, across the Thames Valley to East Anglia), and the rest of the country, from the far South West to the North East; • address the challenges arising from population change in different parts of the country and provide strategic guidance on housing needs and demands; and • inform investment and spending across government – the national framework should aim to deliver coherence and hence provide added value to the myriad of individual and corporate decisions and actions across government and the wider public and private sectors.

4.2.3 While we recognise the importance of London and the Greater South East to the national economy, it is necessary to address how London’s growth relates to areas beyond its administrative boundary – in terms of housing, economic development and transport, for instance, as well as the future of the green belt – alongside issues such as climate change and wider environmental matters. The abolition of regional organisations outside the capital will mean that the London Mayor, his administration and agencies – such as Transport for London (TfL) – will have no regional scale bodies to interact with. This underpins the case for a national framework; it would fill a vacuum, and it would provide a vital link between London’s plans and areas surrounding the capital, as well as the rest of the country.

4.2.4 A national planning framework and transport: There is a clear need for a national overarching strategy to guide transport investment and to complement individual National Policy Statements (NPS) on specific areas – ports, airports, ‘national networks’ (rail and road) – which as yet do not necessarily ‘join-up’. Given that transport has a very strong relationship with land use and the

5 Transport Committee Fifth Report. The proposal for a National Policy Statement for Ports (2010), Section 4 6 TCPA (2006) Connecting England. A Framework for Regional Development. Final Report of the TCPA- Appointed Hetherington Commission on the Future Development Needs and Priorities of England. TCPA, London http://www.tcpa.org.uk/pages/connecting-england-connecting-england-76.html 7 TCPA (2010) Connecting Local Economies – the transport implications. TCPA, London http://www.tcpa.org.uk/data/files/connecting_local_economies_final.pdf

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environment, any transport strategy cannot rationally be divorced from a national framework. Key investments (in rail, for example) should be designed to reinforce national objectives (such as supporting underperforming areas and major city centres), as well as to deliver environmental objectives (such as balancing car travel with public transport usage).

4.2.5 There is clearly a need to address areas of considerable deprivation (often sitting cheek by jowl with areas of great wealth) within each region. Connecting Local Economies argued that ‘connectivity’ – within and between regions and sub-regions – was one key step to realising the potential of the country as a whole.

4.2.6 Planning reform must embark on a comprehensive national framework which can deal with a wide range of social, economic and environmental infrastructure issues. Such a framework should have a clear legal status in the overall plan-making system. There must be an integrated and consistent approach across the NPS series, informing a joined-up national infrastructure framework to enable confident and sustainable local, sub-regional and national decision-making. The TCPA specifically supports a rounded NPS embracing rail, roads, ports and airports.

4.3 Effective strategic planning and the potential role of Local Enterprise Partnerships (LEPs) 4.3.1 A revised planning system, truly fit for purpose, must offer a strong mechanism for planning large areas where strategic issues are too big in scale or timeframe to be resolved within a single local planning authority area. Transport and spatial planning based on functional economic areas reflect these strategic issues, and both have begun to be addressed coherently by the last Government through the integrated Regional Strategy.

4.3.2 In terms of effectiveness, there are two major lessons to be learnt from previous systems of strategic planning. The first is that voluntary collaboration between local authorities can be fragile and can disintegrate following a change of political leadership. Authorities can, for a very long period of time, use the appearance of co-operating as a cover for doing very little – or they might only co-operate selectively on some matters. Such fragility is especially common where the need for collaborative working is at its most intense – in and around tightly bounded urban areas where expansion pressures bearing upon the neighbouring countryside are strong. Here, the new concept of a ‘duty to co- operate’ offers great potential. If this were imposed upon the large areas where collaborative planning strategies are needed, co-operation, once embarked on, would need to be monitored. Mechanisms for mediation between partners would also have to be made available if necessary.

4.3.3 The second major lesson to be drawn from previous systems of strategic planning is that large-area planning strategies, involving proper consultation and tested through public examination, would need to be embedded in the statutory development plan. This has been a demonstrably effective tool to encourage implementation of strategic plans. The role of the Secretary of State would be limited to intervening only if the large-area plans were discordant with the national spatial plan; if the processes involved in plan-making were dilatory or illegal; or if there were a very great outpouring of public dissatisfaction.

4.3.4 In attempting to help with the design of collaborative arrangements for really useful strategic planning in places where it is needed, the TCPA has considered the potential of the new Local Enterprise Partnerships (LEPs) proposed by the

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Coalition Government. On the basis of what has been announced so far, it is not clear that LEPs will be putative strategic plan-making organisations with wide ranging functions for transport, housing and planning. The TCPA remains to be convinced that they will address the tests of functionality, accountability and effectiveness necessary for strategic planning. However, we can be certain that, while LEPs might cover all of England (as all places need some cohesive economic development programme), given the right political direction they could be particularly important participants in strategic planning in the chosen large areas.

4.3.5 At the very least, LEPs might be authoritative advisers on aspects of linking economic development and infrastructure investments, including transport, as business interests will represent half of their composition. LEPs must also be – as some RDAs were – important executive agents in helping to deliver large- area strategies. The TCPA aims to contribute more to the debate about LEPs and their form and function in the forthcoming White Paper. If the potential of the new LEPs to undertake really useful strategic planning is to be realised: • the resource base for LEPs should include the land and property assets of the RDAs and other government agencies in the area that have not been placed with local authorities; • LEPs should be transparent and accountable in their governance and in their work in order to avoid a disconnection from the statutory development plan and to avoid the possibility of corruption; and • wasteful use of public resources in competition between LEPs must be avoided.

5.0 Conclusion: the need for a long term solution 5.1 There is a clear need for a national overarching strategy to guide transport investment and to complement individual NPS on specific areas – ports, airports, ‘national networks’ (rail and road) – which as yet do not necessarily ‘join-up’. Given that transport has a very strong relationship with land use and the environment, any transport strategy cannot rationally be divorced from a national framework. Key investments (in rail, for example) should be designed to reinforce national objectives (such as supporting underperforming areas and major city centres), as well as to deliver environmental objectives (such as balancing car travel with public transport usage). The TCPA calls for greater clarity over the status of the proposed national infrastructure plans, in terms of policy and governance relationship within the illustration of Figure 1 above.

5.2 The removal of forums and mechanisms for dealing with controversial cross border issues such as transport infrastructure does not remove the underlying pressures which drive these challenges. The proposed new measures to replace the function of regional agencies and the RSS require careful examination and require more detail to understand how they will meet strategic infrastructure challenges. As a society we need, both in the medium to long term, to put in place flexible and democratic strategic planning.

September 2010

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Memorandum from the English Regional Development Agencies

1. Executive Summary 1.1 This evidence highlights that whilst the recession has had a major impact on business activity and employment the principles set out in the Eddington Transport Study remain valid, namely that: • Business competitiveness and subsequent employment is directly linked to transport availability, with individual industry sectors having different requirements from the network; • Cities and urban areas are the main economic drivers, the strategic links between them support business connectivity and the international gateways are important for securing wider global competitiveness; • Transport investment should therefore continue to be focused on growing and congested urban areas, inter-urban corridors, international gateways and their surface access links. It is also important that the short term investment constraints and policy vacuums do not delay and limit opportunities to support stability and facilitate growth in the short term and set the foundations for the medium and longer term. 1.2 The future approach to prioritising transport investment should: • Support short term quick win solutions to current transport constraints and challenges; • Focus on well developed projects which open up economic opportunities, promote low carbon initiatives and align with other public and private sector investment to maximise opportunities; • Ensure that swift progress is made in assessing and announcing priorities following the Spending Review; • Ensure that development funding is available for preparatory work for longer term strategic infrastructure such as high speed rail and the strategic freight rail network; • Create the conditions for encouraging private sector investment, ensuring that the Regional Infrastructure Fund mechanism is taken forward and maximised by successor bodies; and • Support use of Regional Growth Funding for promoting the early delivery of enabling transport infrastructure. 1.3 A flexible approach to the balance between capital and revenue should be introduced to encourage Local Authorities to take a creative approach and enable tailored solutions to specific local and sub national challenges and needs. 1.4 It is important that early decisions are made on new transport appraisal processes which reduce the timescales and cost, and introduce consistency and alignment both across road and rail projects and with other types of infrastructure. 1.5 A forward looking policy framework is required which recognises the transport implications of both the economy and the environment, and will provide the high level, long term (30 year) strategy to enable the delivery of a strategic and integrated transport network which sets the context for both modal and local decision-making and delivery. TE 54

1.6 Mechanisms and structures need to be established in a timely and expedient manner for prioritising, co-ordinating and monitoring transport planning and delivery in alignment with other employment, housing, education, health etc investment across LEP/Local Authority boundaries.

2. Introduction 2.1 This evidence is being submitted by Advantage West Midlands on behalf of the nine English Regional Development Agencies (RDAs). Between 1999 and 2010 our role has been to create the conditions to stimulate economic opportunity, and regeneration, and support business competitiveness. This has been done in the context of improving economic performance and narrowing the gap in growth rates between areas across England. 2.2 The RDAs identified that transport is an important enabler for successful and sustainable economic growth. In order to better understand the implications of transport availability on the economy and opening up economic opportunity, the RDAs have reviewed the linkages between economic geography, business usage, and dependency on transport provision to inform the development of national, regional and local strategy and identify mechanisms for prioritising transport investment. In addition, we have reviewed funding approaches to explore options for developing new and innovative funding mechanisms. 2.3 This submission responds to the questions outlined in the call for evidence and is founded on the work undertaken by the RDAs since 1999.

3. Question 1: Have the UK’s economic conditions materially changed since the Eddington Transport Study and, if so, does this affect the relationship between transport spending and UK economic growth? 3.1 The recession has impacted on the economies of all of the English Regions with a resulting fall in business activity and increase in unemployment. The UK’s unemployment rate has increased from 5.3% to 7.88% between Quarter 2 (Q2) 2008 and Q2 2010. The implications of the economic downturn vary by region influenced by the predominant industry sectors, for example the unemployment rate in the West Midlands rose by 4.2 percentage points at the peak of recession, compared to 1.8 points in the South East. Notably the Midlands regions, the North East and Yorkshire and the Humber saw much steeper contractions in business activity during the recession than the southern regions. 3.2 However, recent economic figures indicate that recovery is underway with the UK’s GDP growing by 1.2% between Q1 and Q2 2010; manufacturing output rising by 1.6%; and construction output increasing by 8.5%. There were also improvements in the labour market with the working age employment rate rising by 0.3 percentage points; unemployment falling by 0.2 points; and 10,000 more job vacancies. 3.3 Despite these recent improvements in the economy there is still a considerable distance to go before reaching pre-recession levels. Both the and business surveys have indicated concerns about the strength and pace of improvements in the economy. 3.4 The linkages between transport, business competitiveness and economic growth have been reconfirmed in recent research with local businesses. They continue to identify accessibility, reliability and cost of transport as a priority for supporting their competitiveness and growth opportunities, confirming that accessibility and connectivity TE 54

to markets, suppliers, business partners and labour supply continues to directly impact on business efficiency and productivity. 3.5 An analysis of population, employment and GVA by industry sectors and centres of economic activity highlights that there is a tendency for clustering of industry sectors in city regions or geographic areas. However, some regions including the South West, South East and East of England have complex polycentric geographies of smaller, but economically linked, centres in less densely populated areas that drive local economies. 3.6 Our research has also highlighted that the reliance of industry sectors on transport varies significantly and that the relationship between improved connectivity and increased productivity also varies widely by sector. The supply chain linkages and business to business relationships of different industry sectors vary; manufacturing industries are reliant on access to skilled labour forces, suppliers and markets and logistics sectors are reliant on good freight access to UK and global destinations. Other sectors such as financial and business services, marketing, media and retail are dependent on access to local labour markets, require easy access to national and global partners hence they have a higher dependence on air connectivity and generate greater productivity growth as a result of the agglomeration impacts that location in urban centres offer. 3.7 Manufacturing continues to make an important contribution to regional GVA, particularly in West Midlands (16.1%), East Midlands (18.4%), North West (16.8%), Yorkshire and the Humber (16.8%) and North East (17.3%). Finance, insurance and business services, marketing, media alongside high tech business make an important contribution to GVA across the country and particularly in London (48.2%), East of England (30.7%), South East (35%) and South West (29.2%). 3.8 This research confirms that the Eddington principles are still relevant as local urban centres and cities are the main economic drivers, the strategic links between them support business connectivity and the international gateways are important for securing wider global competitiveness. The use of these networks across the country will be influenced by local industry sector demands. It is therefore important that the short term investment constraints and policy vacuums prior to the development of new strategies does not delay and limit opportunities to support stability and facilitate growth relative to local and regional sectoral requirements in the short term and set the foundations for the medium and longer term. 3.9 Our evidence highlights that whilst the recession has had a major impact on business activity and employment the principles set out in the Eddington Transport Study remain valid, namely that: • Business competitiveness and subsequent employment is directly linked to transport availability, with individual industry sectors having different requirements from the network; • Cities and urban areas are the main economic drivers, the strategic links between them support business connectivity and the international gateways are important for securing wider global competitiveness; • Transport investment should therefore continue to be focused on growing and congested urban areas, inter-urban corridors, international gateways and their surface access links. It is therefore important that the short term investment constraints and policy vacuums do not delay and limit opportunities to support stability and facilitate TE 54

growth in support of respective industry sectoral requirements in the short term and set the foundations for the medium and longer term.

4. Question 2: What type of transport spending should be prioritised, in the context of an overall spending reduction, in order best to support regional and national economic growth? 4.1 Transport infrastructure investment is key to: opening up access to jobs; supporting regeneration; and economic growth. There is a growing recognition that ‘added value’ can be gained by taking a more holistic, planned and phased approach to investment ensuring it aligns and is co-ordinated with other public and private sector investment in economic, business, regeneration, housing and skills. Also, that transport investment is considered alongside other infrastructure including energy, broadband, water and waste in a way that supports national and local sustainable economic prosperity. 4.2 The RDAs have played an important role in co-ordinating the alignment of transport investment with other public and private sector investment in economic and employment initiatives to maximise impacts. The positive impacts of this approach can be seen across the England. For example the West Midlands, Impact Investment Locations (IILs) were identified to support commonly agreed objectives. The process highlighted the inter-dependence of funding streams in maximising the economic and social outputs; which when supported by a robust monitoring process which included a review of the performance of delivery organisations, enabled the delivery of a range of projects to be brought forward. The IIL at in City Centre supports the regeneration of the city centre, including major new transport infrastructure to provide links to new office and retail space, the expanded university and higher education facility, new housing which cumulatively will support the creation of approximately 26,250 new office jobs, 7,800 new retail jobs, 3,700 leisure jobs and 6000 new homes through a combination of public and private funding. 4.3 This approach is, however, dependent on ensuring the funding from the respective public and private sector funding streams come forward at the appropriate time. Currently the Cranbrook new settlement, East of Exeter which comprises a new community of 3,500 low carbon houses, Science Park, skypark, intermodal freight terminal and CHP plant collectively supporting 2,200 jobs is compromised by the delay in providing the previously agreed RFA transport contribution to the M5 J29/J30. 4.4 Therefore it is important to prioritise spending which aligns with, and is inter-dependent on other public and private sector funding programmes, opens up economic and employment opportunities and supports low carbon initiatives, in addition to addressing short term transport capacity challenges. This will require the appropriate structures and processes to be put in place. It is also important that swift progress in made in assessing and announcing priorities following the Spending Review. 4.5 Alongside of this, as the majority of transport projects take between 3 and 10 years, and major and nationally significant projects up to 20 years or more to plan and deliver, it is important to ensure funding is made available to cover the preparatory work for medium and longer term investment projects such as the high speed rail network. 4.6 The RDAs have proactively worked to identify and develop funding approaches to facilitate the delivery of key enabling infrastructure. This has been achieved through developing the right conditions to support and attract private investment. Regional TE 54

Infrastructure Funds (RIF) were created to support the private sector through the recession; they provided upfront funding for enabling access infrastructure to development sites subject to the repayment of funds once private sector returns commence, thus creating a recyclable funding mechanism for the longer term delivery of infrastructure. For example the £9.57m West Midlands RIF contribution to a transport interchange in enables private sector developers to create 1,678 sq m of new retail development, 278 sq m of refurbished space, supporting up to 99 new jobs. It also opens the opportunity to release development plots for a further 13,605 sq m of space and 574 jobs. It is important that this initiative is retained and taken forward by successor bodies to ensure the public/private sector relationship becomes embodied into future policy and returns on funds can be used for enabling future projects. 4.7 Accelerated Development Zones and Community Infrastructure Levy also offer mechanisms for funding enabling infrastructure, the role of these needs to developed to ensure they support and create the right conditions to attract private sector investment locally and promote collaborative private/public sector funding. In addition, every opportunity for maximising the potential of EU funding options should be explored. 4.8 The Regional Growth Fund provides a short term funding mechanism outside of current transport funding streams that support and encourage private/public sector investment initiatives. Every opportunity should be taken to ensure this new approach enables the delivery of well developed projects which open up new business and employment opportunities which would otherwise be delayed through funding constraints. 4.9 The future approach to prioritising transport investment should: • Support short term transport capacity solutions to current transport constraints and challenges; • Focus on well developed projects which open up economic opportunities, promote low carbon initiatives and align with other public and private sector investment to maximise opportunities; • Ensure that swift progress in made is assessing and announcing priorities following the Spending Review; • Ensure that development funding is available for preparatory work for long term strategic infrastructure such as high speed rail and the strategic freight rail network; • Create the conditions for encouraging private sector investment, ensuring that Regional Infrastructure Fund mechanism is taken forward and maximised by successor bodies; and • Support use of Regional Growth Funding for promoting the early delivery of enabling transport infrastructure.

5 Question 3: How should the balance between revenue and capital expenditure be altered? 5.1 Current transport funding processes focus on capital projects, whilst this is important it makes investing in a range of revenue projects that can make a greater impact on securing long term behavioural change and maximising the capacity of the existing assets and networks very challenging for Local Authorities. The review of Local Transport Funding should consider opportunities to provide Local Authorities with more flexibility to use their allocated resources for delivering revenue projects and encourage TE 54

a more creative approach to identifying tailored solutions to specific local and sub national transport challenges. 5.2 A flexible approach to the balance between capital and revenue should be introduced to encourage Local Authorities to take a creative approach and enable tailored solutions to specific local and sub national needs.

6 Question 4: Are the current methods for assessing proposed transport schemes satisfactory? 6.1 A number of flaws have been identified in the current transport appraisal processes: • The timescales and process for assessing transport schemes is lengthy, resource intensive and costly e.g. the Bristol BRT scheme required £5m in preparation costs for a £47m scheme; • They are more favourable to road projects as opposed to public transport projects; • The appraisal processes for local transport and rail projects differ; and • The assessment process focuses on transport benefits in terms of journey time savings and does not recognise the wider economic, social and business benefits that can be derived from the scheme; 6.2 As part of the evolving development of the national infrastructure priorities being developed by Infrastructure UK, consideration should be given to aligning the assessment processes for other infrastructure. 6.3 It is important that these issues are addressed in the revision of appraisal processes, and new processes are introduced quickly to minimise uncertainty, cost and time delays. 6.4 It is important that early decisions are made on new transport appraisal processes which reduce the timescales and cost, and introduce consistency and alignment both across road and rail projects and with other types of infrastructure.

7 Question 5: How will schemes be planned in the absence of regional bodies and following revocation and abolition of regional spatial strategies? 7.1 A coherent national approach is essential for setting the framework for spatial, economic, transport and infrastructure planning and investment. The RDAs have reiterated that there is a need to develop a forward looking policy framework, which will provide the high level, long term (30 year) strategy to enable the delivery of strategic and integrated transport network which sets the context for modal and local decision-making and delivery. This framework should cover both short term planning, investment and delivery in addition to enabling robust foundations for longer term national strategic/significant infrastructure to be planned and delivered. The framework should: • Recognise the requirements of industry sectors and take account of economic geography, including future population and job growth with a focus on opportunities for future GVA growth; • Support shorter term economic opportunity and provide the foundations for longer term strategic infrastructure including a high speed rail network and international gateway (both air and port) capacity and supporting surface access measures; • Support an integrated and holistic approach; • Enable infrastructure to be identified and delivered in alignment with national and local objectives and goals; and TE 54

• Promote low carbon options which fully embrace new technologies such as electric vehicles and changes to working practices to support behavioural change 7.2 The framework should be informed by the National Infrastructure Plan and inform both National Policy Statements for Ports, National Networks and Aviation, and local transport planning and funding plans. 7.3 At local level it was originally proposed that Local Enterprise Partnerships (LEPs) would take on responsibility for local transport and infrastructure, planning and housing, enterprise and the transition to a low carbon economy. However, these responsibilities are not currently being sought by every LEP and not all areas of the country are included in the bids that were recently submitted to Ministers to form LEPs. 7.4 In addition many transport interventions are larger scale projects whose geographic impact is wider than the boundaries of the LEP. Businesses alongside other organisations have also repeatedly highlighted the need for prioritisation and monitoring of transport to be co-ordinated across boundaries and considered from a wider strategic approach including the alignment of transport projects with economic, regeneration and housing private and public sector investment activity. 7.5 This highlights two specific challenges presented by the proposed structures: firstly, not every area of the country is included in a LEP and therefore they cannot be used to implement national policy; and secondly, many transport projects are directly linked to other employment, housing, education, health etc investment programmes and therefore need to be prioritised, co-ordinated and monitored through a cross LEP/cross Local Authority, wider strategic approach. 7.6 Changes to planning processes introduce an element of uncertainty which could lead to inactivity in the short to medium term whilst the roles and responsibilities of the LEPs are being developed. It is essential that proposals are developed expediently, identify priorities which promote and focus on the delivery of projects. It is important that the changes to regional planning processes, alongside the constraints on funding does not undermine the expedient delivery of key projects required to support and maximise the opportunities of the current recovery. Also, that much needed planning and preparatory work for major and significant projects are not delayed as a result of the changes to national and local planning systems. 7.7 A forward looking policy framework is required which recognises the transport implications of both the economy and the environment, and will provide the high level, long term (30 year) strategy to enable the delivery of a strategic and integrated transport network which sets the context for both modal and local decision-making and delivery. 7.8 Mechanisms and structures need to be established in a timely and expedient manner for prioritising, co-ordinating and monitoring transport planning and delivery in alignment with other employment, housing, education, health etc investment across LEP/Local Authority boundaries.

September 2010

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Memorandum from Halton Borough Council

Summary and Recommendations S.1 This submission from Halton Borough Council puts forward views on the links between transport and the economy; assessment criteria and techniques for prioritising spending; and priorities for spending going forward in the context of forthcoming cut‐backs. In this submission we make reference to the Mersey Gateway [Bridge] project, which relates to the construction of a new river crossing and associated regeneration proposals to illustrate our wider views and real experience in this area. S.2 Mersey Gateway is an integrated transport project that will provide the vital infrastructure that is required to deliver sustainable economic growth in Halton and the north‐west of England. It will relieve a source of serious congestion in the regional road network by providing a new, high‐standard crossing of the river Mersey and by modifying the existing Silver Jubilee Bridge to deliver and facilitate local sustainable transport policy. The Project has been developed over many years and now forms an essential component of local and regional social and economic regeneration programmes S.3 During the course of our work on Mersey Gateway we have prepared extensive and robust analysis of the economic impact of the project. The methodology applied is wholly consistent with current Department for Transport policy as determined in their Webtag guidance. Although the results have shown consistently over a number of years that the project would result in a high economic return we have been conscious throughout that the scope of the evaluation undertaken is relatively narrow. S.4 The current specified methodology is largely a welfare‐based approach, focused on road user cost and benefit. Although the results provide a reliable baseline forecast of economic value the evaluation is not centred on the real economic outcomes this type of scheme is designed to unlock. The prevailing agenda is now moving to assess the potential catalytic impact of transport schemes in driving and facilitating employment growth through improving the workings of the labour market, and in providing increased accessibility to jobs in areas of high worklessness, combined with driving desirable changes in land use and spatial planning. In addition to relieving congestion, large strategic transport improvements like Mersey Gateway are aimed at achieving particular outcomes in social and economic regeneration. S.5 We would suggest that the following changes are made to assessment criteria and techniques in order to capture the full economic potential of improvements to transport infrastructure: • A key criteria for assessing and prioritising schemes should include the estimated impact on the real economy, measured in terms of GDP (driven by employment and productivity growth); • The ability of transport schemes to drive and facilitate desirable land use changes is properly recognised;

TE 55 • Schemes that address accessibility issues within areas of high worklessness and deprivation should be given due weight and given priority over alternative strategies where investment is proposed in areas of higher productivity prompting concern over the sustainability of growth; and • Consistency of approach across related sectors such as transport, regeneration and housing, such that schemes can be compared, planned together, and assessed properly when delivered in combination. S.6 In terms of priorities for spend going forward, we argue that capital spend should be targeted at releasing bottlenecks where the potential benefits spread well beyond the immediate vicinity of the scheme itself. Such an approach is consistent with making best use of the current capacity of the transport system whilst recognising that pressure points need to be relieved to restore effective service and resilience network wide. S.7 Transport projects which target specific economic objectives embracing interventions that encompass economic, housing and social regeneration programmes should be given priority over more isolated schemes where objectives are restricted to delivering improvements in welfare to existing transport users. A national ‘one‐size‐fits‐all’ approach to project assessment is not consistent with this, as it means that spend does not match with local economic requirements and inevitably leads to productivity gaps within and between regions. It is recognised that extending and targeting appraisal in this way will require an assessment of the level of confidence in the delivery of wider economic benefits, particularly where the benefits claimed from transport investment also depend on the success of complementary regeneration interventions that may be outside the control of the promoting agent. It is likely that this uncertainty over deliverability has been a factor in the Department of Transport being sceptical over the delivery prospects for wider economic benefits. However, the fact that benefits across a wider scope of outcomes are intrinsically more uncertain should not lead to these critical outcomes being excluded from the appraisal. S.8 Finally, projects that ultimately pay for themselves should be prioritised. However, it is more important than ever that a balance is struck between the affordability of projects and the economic objectives that underpin the project.

1. Introduction 1.1 In this submission we draw upon our work on the Mersey Gateway project to put forward generic views on how transport schemes can influence economic activity and how transport and other related spend should be prioritised based upon the real economic impact of such schemes. 1.2 Mersey Gateway is an integrated transport project that will provide the vital infrastructure that is required to deliver sustainable economic growth in Halton and the north‐west of England. It will relieve a source of serious congestion in the regional road network by providing a new, high‐standard crossing of the river Mersey and by modifying the existing Silver Jubilee Bridge to deliver and facilitate local sustainable transport policies. 1.3 The Project has been developed over many years and now forms an essential component of local and regional social and economic regeneration programmes. The Project is widely supported by businesses and public authorities across the region and is seen as a priority for investment. 1.4 Overall, the present value net economic impact of the Mersey Gateway on GDP is estimated to be £373 million in 2009 prices. To comply with the current appraisal policy the economic TE 55 impact is largely based upon existing DfT transport appraisal guidance which is dominated by the welfare benefits to users of the scheme. To a great extent a qualitative assessment of the scheme’s incremental impact on actual economic growth is excluded from the formal benefit to cost relationship that is used by the Department for Transport as the indication of the scheme’s value for money. Although applying this partial assessment of economic value still places Mersey Gateway in the “High” category of economic return, used by the Department to rank projects, the benefits are understated and some other projects may be disadvantaged by restricting the analysis in such a manner. As part of the Borough Council's case in favour of the Mersey Gateway we also provided a wider economic assessment, which is broader in scope than the Webtag guidance.

2. Have the UK's economic conditions materially changed since the Eddington Transport Study and, if so, does this affect the relationship between transport spending and UK economic growth? 2.1 It is clear that economic conditions have changed since the publication of the Eddington Transport Study, with the fundamental implication for shorter term public spending being a shift in agenda from ‘How do we spend the proceeds of growth to maximise welfare?’ to ‘How do we prioritise spending in a way that best supports economic growth?’. 2.2 However, we believe that the broad relationship between transport spending and UK economic growth that existed before the publication of the Eddington Transport Study still remains now. Indeed, Eddington formally identified that the transport spending can drive economic growth as well as deliver welfare, but his recommendations have yet to be fully embraced by authorised DfT methodology and enshrined in Webtag guidance. Current DfT appraisal methodology is still rooted in measuring welfare benefits to users with wider benefits being often seen as ‘below the line’ in any formal BCR agreement with the Department. 2.3 In this submission we conclude that the agenda has moved beyond Eddington’s yet to be implemented recommendations. The impact of schemes on productivity, growth and therefore real GDP has to be the way forward in prioritising not only transport schemes, but also schemes across related sectors such as regeneration and housing. 2.4 Mersey Gateway is a classic example of an economically‐driven scheme, whose objectives directly target issues that currently limit the degree of economic growth in the area. 2.5 Halton and the wider area, in particular Merseyside, suffer from a number of significant socio‐economic challenges. Between 1998 and 2008, the total number of jobs in Halton decreased by over 5% to around 52,000, whilst employment growth for the North West as a whole was almost 8% and nationally it was 10%. Halton and the wider area suffer from relatively high levels of deprivation and worklessness. In short, the area did not benefit from the period of sustained national economic growth from 1995‐2007, and has suffered more than most since the start of the recession. 2.6 One of the key reasons for these long‐standing issues is the relatively poor levels of accessibility within the area and between the area and the wider region and rest of the UK. The existing Silver Jubilee Bridge lacks the required capacity and reliability to cope with the levels of traffic wishing to cross the river at Runcorn and Widnes, which has major knock‐on impacts on the surrounding road network, and which contributes to the lack of accessibility. All of which is holding back economic growth in the area. Over the relatively short term it is anticipated that the Silver Jubilee Bridge will require further interventions ‐ and cost ‐ to maintain even current service levels. TE 55 2.7 In welfare terms the new bridge would help to address all of these issues by relieving congestion and improving journey times across a wide geographic area. But we believe that the key benefit of this would be to enhance the productivity of the region and improve accessibility to jobs, thereby driving economic growth, resulting in improved prosperity and quality of life for individuals and families. 2.8 The existing DfT appraisal methodology captures a proportion of these benefits through time savings to business users – which feed straight through into productivity benefits for the economy, and through agglomeration benefits. 2.9 In the case of Mersey Gateway a very high proportion of user benefits are to business users, which is a consequence of tolling. However, for many schemes a high proportion of benefits are effectively welfare benefits to existing commuting and leisure users through journey time savings. The relative value of time across trip purpose and income groups determine the relative economic user benefit but is not clear to what extent such savings feed through to real economic activity, particularly where improvements result in induced demand impacting adversely on the journey times of all road users. The existing methodology effectively treats £1 of welfare benefit as being the same as £1 of real economic activity. 2.10 Overall, it is our view that existing DfT appraisal methodology is unduly conservative. It does not adequately capture the types of real economic benefits that this type of scheme is designed to unlock, and the largely welfare based approach to transport fails to address the current desire to prioritise projects that maximise economic return from constrained resources. Specifically, it does not recognise the potential impact of transport schemes in driving and facilitating employment growth through improving the working of the labour market, and in providing increased accessibility to jobs in areas of high worklessness.

3. How could assessment criteria be improved to better reflect the real economic benefits of such schemes? 3.1 In order to address the restrictions of existing transport appraisal criteria and techniques and make them more closely aligned with the prevailing political and economic agenda, we would suggest that the following substantive changes are made: a. The key criteria for assessing and prioritising schemes is the estimated impact on the real economy, measured in terms of GDP (driven by employment and productivity growth); b. The ability of transport schemes to drive and facilitate land use changes are properly recognised; c. Schemes that address accessibility issues within areas of high worklessness and deprivation are given due weight; and d. Consistency of approach across related sectors such as transport, regeneration and housing, such that schemes in these sectors can be prioritised against each other, planned together, and can be assessed as a full package when delivered in combination. 3.2 The approach we advocate is broadly in line with that set out in the recently published Network Rail paper “Prioritising investment to support our economy”1. 3.3 By focusing scheme assessment on the real economic impacts of schemes we would see a shift in emphasis towards schemes which benefit links between businesses, and which

1 Network Rail, September 2010 http://www.networkrailmediacentre.co.uk/Resource‐Library/Prioritising‐investment‐to‐support‐our‐economy‐ ee4.aspx (link correct at 15th September 2010)

TE 55 expand the available pool of labour for business across a wide range of areas including those that currently have poor accessibility to jobs and services, and away from schemes which only make marginal improvements to journeys between already well‐connected places. 3.4 The idea that transport schemes and land use changes are somehow independent of each other is proven to be incorrect by countless practical examples. The relationship between the two needs to be formally recognised within scheme assessment. The case for investing in Mersey Gateway has addressed these wider issues but often the professional judgements are made on qualitative grounds in the absence of an authorised methodology to quantify the likely increase in project economic return. One of the best practical examples of understating the wider desirable impact of a transport improvement is perhaps the extent to which development on the Isle of Dogs has been facilitated and accelerated by the Jubilee Line Extension since 1999, and the real net UK economic benefits that this has delivered. 3.5 Mersey Gateway forms part of a Borough‐wide investment programme leading to improved transport outputs and major regeneration through releasing land and improving accessibility/connectivity, yet current appraisal guidance only recognises the potential impact of land use changes on demand for schemes, and not the extent to which a new scheme can facilitate and drive land use changes leading to real net economic impacts.

4. What type of expenditure should we prioritise? 4.1 Despite the substantial impact of the current economic climate, the long term trend remains one of ever‐increasing demand which places increasing strain on transport networks, with inevitable knock‐on consequences for economic activity which relies upon an efficient, well‐connected transport system. 4.2 It is our view that capital spend should be targeted at releasing bottlenecks which not only improve conditions for trips that use the new infrastructure, but which also relieve pressure on the surrounding network and which substantially improve network reliability and resilience. 4.3 Projects should receive priority where objectives support focused economic strategies which explicitly take into account appropriate local economic circumstances, addressing issues such as worklessness, poor business‐to‐business connectivity and poorly functioning labour markets. A national ‘one‐size‐fits‐all’ approach to project assessment is not consistent with this, as it means that spend does not match with local economic requirements and inevitably leads to productivity gaps within and between regions widening, rather than narrowing, as local issues are not addressed. 4.4 Finally, projects that ultimately pay for themselves should be prioritised. In this context capital projects need to include whole life appraisal and demonstrate whole life funding to ensure that revenue consequences are addressed. However in today’s constrained circumstances it is more important than ever that a balance is struck between the affordability of projects and the economic objectives that underpin the project. 4.5 The Mersey Gateway project is an example of such a scheme where the objectives are explicitly aligned with local and regional issues, and where the balance between affordability and the economic objectives of the project have been explicitly dealt with in the development of the scheme. The objectives of the scheme address local economic issues such as relieving congestion on the existing Silver Jubilee Bridge, improving accessibility to jobs in areas of high worklessness, improving public transport links across the Mersey and improving network resilience throughout the area, and specifically on the TE 55 strategic road network. These objectives are set against the need for the scheme to be affordable and to pay for itself so far as possible through the application of user tolls. Thus, where a higher toll may improve the affordability of the scheme the approach that the Borough Council has taken aims to avoid this being at the expense of delivering the local and regional economic objectives the scheme is designed to deliver. We have therefore explicitly set an objective of applying affordable toll charges to both the Mersey Gateway Project and the Silver Jubilee Bridge in order to meet affordability constraints whilst protecting the successful delivery of the project objectives.

5. Institutional implications 5.1 Institutional arrangements should reflect the objective of maximising the value of investment made and reducing delivery risk leading to the economic value at a local and regional level, as well as the net national level. This can only happen if governance is permissive of local strategies and assessment criteria are flexible enough to recognise differences in local, regional and national objectives. 5.2 Mersey Gateway demonstrates the value of collaboration across public and private interests at a regional level, which was achieved by establishing a promoting stakeholder group across public and private sector agents. Not only does this ensure that the scheme is shaped in a way which aligns with the economic interests of businesses, it also maximises the potential of leveraging funding from those that benefit, although in most cases the public sector will bear the majority of the risk. 5.3 If transport, regeneration and housing projects are going to be more closely compared, planned and prioritised, it would also make sense for the new Local Enterprise Partnerships ‐ 7 ‐

to have a greater degree of flexibility in trading across such budgets to meet local economic requirements than is the case at present.

September 2010 TE 56

Memorandum from Dr David Metz

1. This submission starts by considering the Committee’s question: ‘Are the current methods for assessing proposed transport schemes satisfactory?’ I argue that current methods are no longer fit for purpose and suggest a better approach which would result in different expenditure priorities.

Methods for investment appraisal

2. The conventional approach to appraising investment in schemes to improve the transport system focuses on the expected saving in travel time, which accounts for of the order of 90% of conventional monetarised benefits. Such time savings are supposed to be valuable to employers since more productive work is possible from employees, and to individuals since they are free to pursue other desirable activities. The monetarised benefits are set against the costs of a scheme in the cost-benefit analysis which plays a central role in the Department for Transport’s (DfT) appraisal methodology, as employed also in the Eddington Report.

3. The DfT’s National Travel Survey (NTS) allows personal daily travel behaviour to be tracked since the early 1970s, as shown in the Figure (page 2). Over this period, the average number of trips has remained about 1000 per person per year. Average travel time has also held steady and is currently about 370 hours per person per year, or an hour a day. It is evident that the large investment in transport infrastructure - £100bn over the past twenty years at current prices - has not resulted in time savings. Rather, the benefit has been taken, in the long run, in the form of increased access, as seen by the greater distance travelled, from 4500 miles per person per year in 1972-73 to 7000 miles currently1 (there has been a small downturn in distance travelled in the last two years, probably due to the recession). This has come about largely through private investment in more and better cars and public investment in more and better roads, permitting higher average speeds of travel and hence greater distances traversed in the same amount of time. Travel time savings are transient, and not a sound basis for estimating the benefits of investment in long-lived infrastructure.

4. The average distance travelled has not increased since about 1995, despite the economic growth of the following decade. Moreover, car use per capita has stabilized at about 6600 vkm pa since 2002. Travel and economic growth have thus become uncoupled, after two centuries during which they increased in parallel. It seems unlikely that the average distance travelled will increase in the future, which lessens the requirement for further investment in transport infrastructure2.

1 The NTS excludes international travel by air. 2 See D. Metz, ‘Saturation of demand for daily travel’, Transport Reviews, 30(5), 659-674, 2010. TE 56

800

700

600

500

distance miles x 10-1 400 trips x 10-1 time hours

300

200

100

- 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

5. The long run benefits of investment in the transport system are access benefits which arise from bringing people and locations nearer in time, permitting more choice of destinations. In recent years, conventional transport appraisal has recognised ‘Wider Impacts’, which are economic benefits arising over and above travel time savings benefits. Agglomeration benefits are one class of such benefits, reflecting the accessibility of firms and workers to each other. Agglomeration benefits are therefore access benefits which are appropriate to consider in appraising proposed schemes. In contrast, time saving benefits to travellers are inappropriate since, not only are they transient, but they neglect the key features of access benefits which are specificity to locations and having consequences beyond the travellers who are supposed to save time.

6. To illustrate the argument, consider London’s Docklands, once the centre of the capital’s commercial life. The coming of containers displaced the port activity down river and the historic docks were abandoned. Construction of the first phase of the Docklands Light Railway in 1985-87, at a modest cost of £77m, put Docklands on the map, demonstrating ready access to the City (currently 10 min from Bank to Canary Wharf). This prompted huge private investment in a new financial quarter, regenerating the area and relieving space pressures and high rents in the City. The Jubilee Line Extension increased public transport capacity, as did extensions to the DLR, with the result that the highest paid group of workers in Britain make minimal use of the car to travel to work (there are only 3000 parking places for 90,000 workers at Canary Wharf).

7. Public investment in transport in the Docklands was necessary to support private sector investment in commercial and residential property and public space. The transport investment can be seen as catalytic, making an essential contribution to the economic growth and urban regeneration outcomes. It would be pointless to TE 56

attempt to compute the benefits of investment in the Jubilee Line Extension by estimating the savings of travel time to those who use this line.

8. The recent renovation of the section of the connecting Docklands to Dalston Junction, a low income district in East London, provides a further example of the role of transport investment in urban regeneration. The 23min journey to the financial centre has prompted a £160m private sector investment in residential and commercial property as part of the Dalston Junction redevelopment. The monetary value of time saved by travellers misses the point that the benefits of the transport investment depend on consequential private investment and as such are substantially specific to particular locations and accrue in part to land owners, property developers and the occupiers of new properties.

9. The case for any particular transport investment cannot therefore be considered in isolation from the likely consequences for access, land use and private sector investment. Conventional appraisal methodology, as endorsed by the Department for Transport, largely disregards such ‘secondary’ consequences, focussing instead on transient travel time savings. Such ‘silo thinking’ is convenient but mistaken. It leads to the funding of schemes justified by small time savings (a few minutes) experienced by large numbers of road users. However, such schemes are unlikely to make a demonstrable contribution to economic growth. A number of transport analysts have recognised the limitations of conventional appraisal methodology and are discussing how the wider consequences of new schemes might best be included; at present, the feasibility of alternative approaches remains unclear.

10. To assess the case for proposed transport investment financed from public funds, one approach worth considering is to adopt the methodology employed by other Departments, which is to assess the relative cost-effectiveness of different means of achieving a particular policy objective. Although the Treasury’s Green Book on Appraisal and Evaluation in Central Government recommends cost-benefit analysis in preference to cost-effectiveness analysis, in practice it seems only the DfT that routinely attempts cost-benefit analysis for the generality of its schemes. Central Government programmes of investment in health and education facilities, in social housing, prisons, defence establishments, etc, are appraised in terms of the cost effectiveness in achieving desired outcomes. I consider next some of the main desired outcomes of transport investment relevant to the wider economy (there are others, such as improved safety, which could be analysed in a similar way).

Objectives of transport investment

11. One important objective of transport investment is to support economic growth directly. Here the need is to identify schemes having a strong likelihood that they will contribute to economic growth by catalysing substantial private sector investment in commercial and residential property. Ideally, the public sector investment should be conditional on private sector commitment. There is likely to be greatest confidence that this can be achieved where the main benefit is expected at a particular geographic location. TE 56

12. A second objective of transport investment is to improve the operation of the transport system, thereby indirectly assisting economic growth. A common type of scheme in this context is the widening of a trunk road where the motivation is to reduce congestion. However, in practice, the benefits of such investment are taken in the long run in the form of increased access, as road users take advantage of the higher speeds from reduced congestion to travel further, the additional vehicle-kilometres adding to traffic – known as ‘induced traffic’ - so that the amount of congestion and the resulting time delays are not much affected (although the location of congestion is likely to change). This is the origin of the maxim that we can’t build our way out of congestion.

13. Road pricing is advocated as a means of reducing congestion (not discussed here, given the small likelihood of adoption in the near future). The rationale of road pricing is to deter those road users who attach relatively low value to travelling at times of peak usage. There are, however, other means of achieving this outcome. When asked in surveys, road users say that the main problem with congestion is the uncertainty of journey time and that their main means for minimising such uncertainty is to vary the starting time to avoid peak traffic. Decisions on when to start out are largely based on past experience of traffic conditions. Real time traffic information linked to GPS navigation systems is increasingly becoming available to facilitate such decisions, with predictive algorithms being introduced that will further assist the road user. Given that the main perceived problem with road traffic congestion is the uncertainty of arrival time, advice on probable journey time, based on good predictions of traffic conditions, is a relatively low cost, uncontroversial means of meeting the objective of improving the operation of the road network3.

14. A third objective is to cope with the projected growth of the population, from the current 62m to about 70m by 2030. As noted earlier, per capita daily travel has held steady since 1995 at about 1000 journeys and 7000 miles per person per year. Heavy goods vehicle traffic has also not grown over the past decade. There has, however, been growth in light goods vehicle traffic, for reasons which are not well understood (but may be connected with the growth of the service sector of the economy), hence future growth is uncertain.

15. Accordingly, the main known factor determining future growth of traffic is population increase. However, as regards investment in the transport system to respond to such demographic change, much depends on where the additional people will live and work. If additional homes are build on green field sites, on the edge of existing settlements, then the residents will want car-based mobility and there will be a need for further road capacity. On the other hand, if the additional homes come into being within existing urban areas - on brown field sites or through more intensive use of existing properties - where the opportunities for additional road capacity are very limited, then investment in public transport is the more attractive response.

3 See http://www.limitstotravel.org.uk/documents/Metz_PN_draft_22-10-09.pdf TE 56

16. The population of London has increased by about a million over the past twenty years, during which time the proportion of journeys by car has declined (50% in 1993, 41% in 2008) while the proportion of journeys by public transport has risen (24% and 33% respectively). This decline goes against the historic trend for car use to rise with increasing incomes. The population of London is forecast to grow by a further 1.25m by 2031, involving an additional 750,000 jobs, mainly in the inner boroughs, and accordingly car use is projected to decline further to 37%. Considerable investment in public transport in London is planned, both to cope with population growth and to relieving overcrowding, subject to finance being available4.

17. A fourth objective for investment is to reduce carbon emissions from the transport sector. This involves the support of electric and hybrid vehicle technologies and their deployment, support for electric charging infrastructure, and support for the decarbonisation of the electricity supply system to power electric road and rail vehicles (although the latter is usually not seen as being for the Department for Transport). A helpful way of assessing the relative attractiveness of technologies to reduce carbon emissions is to estimate Marginal Abatements Costs, which are the cost per tonne of carbon dioxide saved by the candidate technologies5. This is evidently a measure of cost-effectiveness.

18. These four objectives for transport investment are distinct. There is no appraisal methodology which allows projects meeting such different objectives to be compared one with another, nor with projects with multiple objectives (such as High Speed Rail) There needs therefore to be high level judgements about the relative importance of these objectives, taking account of the attractiveness of the schemes ready for investment, with financial resources allocated accordingly.

19. Given the present climate of financial stringency, and given the relatively mature transport infrastructure that exists, high levels of new investment in the transport system are probably not the biggest priority at present. Nevertheless, it is important to plan for both population growth and carbon reduction over the medium term, as well as to maintain and better utilise the existing road and rail networks.

Conclusions

20. Travel time savings are not a sound basis for appraising the value of a proposed transport investment. Time savings are transient. In the long run, the benefits are taken as enhanced access.

21. Per capita daily travel has been stable in Britain since 1995 and is not likely to increase in the future. Travel demand and economic growth have become uncoupled. Future travel growth will be due to population increase, although the

4 Mayor’s Transport Strategy http://www.london.gov.uk/publication/mayors-transport-strategy Institutional arrangements outside London are less favourable for the strategic planning of transport investment in the light of expected demographic change and economic growth. 5 The Committee on Climate Change uses this approach, see http://www.theccc.org.uk/other_docs/Tech%20paper%20supply%20side%20FINAL.pdf TE 56

form this will take will depend on whether the additional inhabitants are housed on green- or brown-field housing developments. The experience of London demonstrates that dynamic growth is compatible with declining per capita car use.

22. Transport investments will contribute to economic growth when they catalyse private sector investment at particular locations. Transport schemes that are publicly funded in the hope of stimulating economic regeneration, but which are nor conditional on private investment in commercial property, risk yielding poor value for money compared with other possible uses of the funds.

23. The best means to deal with road congestion is to deploy technologies that supply reasonably good estimates of predicted trip times to road users in advance of their journeys, to help them avoid unanticipated delays.

24. The best way of appraising the value of potential investments is to assess likely cost effectiveness in meeting policy objectives.

Dr David Metz, visiting professor, Centre for Transport Studies, University College London; formerly Chief Scientist, Department for Transport.

September 2010

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Memorandum from East of England Space for Ideas Forum of business leaders

The East of England Space for Ideas Forum is a group of business leaders from across the East of England. The businesses represented are from a wide range of sectors. The group is committed to working together to address critical issues facing both businesses and our communities and to ensure the continued contribution of the East of England to UK Plc.

Our key objective is to ensure that the East of England (comprising Bedfordshire, Cambridgeshire, Essex, Hertfordshire, Norfolk and Suffolk) continues to be an economic powerhouse. Our economy is worth £110 billion a year and we contribute £6 billion net to UK plc - we believe there are significant opportunities to grow this further. Future economic development activity must recognise and capitalise on the opportunities and challenges here in the East. It is vital appropriate resources and investment are in place to drive future activity for the benefit of UK Plc.

We welcome the opportunity to comment on two of the questions posed as part of the inquiry into Transport and the Economy. We recognise the need to tackle the deficit and deliver value for money, however, investment in transport infrastructure remains a critical national priority in improving the business environment, attracting international investment and enabling access to markets and skilled employees. The latest Global Competitiveness Report 2010-11 published by the World Economic Forum, demonstrates that that the UK is already lagging many EU competitor economies with regards to the quality of our transport infrastructure1. International benchmarking of the East of England economy, similarly reveals that the performance in terms of accessibility to markets is poor when compared to those places directly competing with the region for international investment2.

In the East of England investment in transport is a significant constraint and is currently costing the UK economy in the region of £1 billion per annum in lost productivity. This is forecast to double by 2021. Without further investment our ability to ‘do business’ effectively now and in the future is seriously impaired. As the OECD said in a report last year that investment in infrastructure increases long-term economic output more than any other kind of physical investment3. For these reasons, we strongly support the recent call from the CBI that despite the need for austerity measures, a return to significant infrastructure investment should be achieved as soon as possible.

What type of transport spending should be prioritised, in the context of an overall spending reduction, in order best to support regional and national economic growth?

Congestion on the East of England’s roads is a significant barrier to business productivity. Overcoming congestion and overcrowding on the East of England’s transport networks would provide benefits to the UK economy of at least £2 billion per annum by 20214. Furthermore in some parts of the region, transport congestion will cost up to £900 per worker per annum by 2021 unless action is taken.

In order to preserve and enhance the contribution the East of England makes to UK Plc, its international gateway role, including surface access connections to the rest of the UK, must be prioritised for investment. Our major airports and ports need better rail and road access to serve wide areas beyond the East of England. For example, the links westwards from Felixstowe and Harwich along the A14 and Felixstowe to Nuneaton rail corridor, and the A12 and corridor, are of national significance and urgently need to be addressed. The share of UK

1 Karl Schwab, (2010) the Global Competitiveness Report 2010-2011, World Economic Forum 2 Insight East (2009) International Insight – How the East of England Economy Compares. See http://insighteast.org.uk/WebDocuments/Public/approved/user_9/International%20Insight.pdf 3 Going for Growth, OECD, 2009 4 Transport Economic Evidence Study, East of England Development Agency, September 2008

TE 57 containerised traffic passing though the East of England’s ports will rise to over 54 per cent5 with the implementation of approved expansion proposals so investment in surface access transport to support this growth will be vital to businesses throughout the country.

Another significant area which would help alleviate pressure on the region’s transport infrastructure is reliable, affordable next generation broadband (minimum of 20 Mb/Sec). This is a must for our businesses and needs a far broader footprint in the East of England than will be delivered by present commitments from private sector providers. Such investments can reduce the need to travel, lower the demand for movements on our transport networks, and hence reduce the economic costs of congestion.

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

Given the critical importance of investment in infrastructure for businesses, we are concerned as to the mechanisms, capacity and capability to take forward strategic transport planning to enable economic growth and maintain the competitiveness of the East of England and the UK. The regional funding advice process allowed the stakeholders in the East of England, including the private sector, the opportunity to shape strategic transport investment priorities to address current constraints on the network effecting business productivity, and also improve the long-term competitiveness of the region. Alongside this, the regional development agency has played a critical role to date in providing transport economics expertise, market-leading economic evidence to identify transport priorities, as providing leadership to bring key partners together and prepare compelling business cases for national and EU investment in our transport infrastructure.

Local enterprise partnerships are a possible vehicle for this role in the future, but they will need to be able to adopt along-term strategic view on cross-boundary issues to benefit their area, and to support delivery of key strategic interventions that are essential to wider UK plc, such as enhanced provision for cross-country rail freight. However, at present we are concerned that:

• approved LEPs may not cover the entirety of the East of England, or lack the scale to address strategic transport issues (such as key inter-urban corridors) • LEPs based on functional economic geographies will need potentially to have traction on multiple transport plans that will continue to be based on administrative boundaries • the functions, powers and resources available to LEPs remain uncertain and their precise role in setting or influencing transport priorities has not been clearly articulated • business engagement in developing individual LEP proposals to date has been variable.

I would be happy to provide further evidence orally on any of these issues.

September 2010

5 East of England Regional Freight Strategy (table 4.2), Steer Davies Gleave for East of England Regional Assembly, 2009

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Memorandum from the Association of Greater Manchester Authorities and Greater Manchester Intergrated Transport Authority

Have the UK’s economic conditions materially changed since the Eddington Transport Study and if so, does this affect the relationship between transport spending and UK economic growth?

The position of the UK economy has of course shifted significantly since the Eddington Study reported in 2006, through the recession of the latter years of the past decade and into the forthcoming period, which will be dominated by the national imperative to address the fiscal deficit. However, the core findings of Eddington - namely that effective connectivity is essential to driving long- term, sustainable economic growth whilst supporting environmental goals and, most critically, that investment must be prioritised to maximise this impact - remain more critical than ever.

In essence, Eddington posed the question: ‘How can our investments be targeted to support economic growth?’ He concluded that targeted transport investment holds the potential to increase business efficiency and underpin productive clusters (or “agglomerations”) of economic activity by expanding labour market catchment areas, enlarging markets, and facilitating business- to-business interaction.

In doing so, he recommended that investment should be focussed on improving transport performance “in those places that are important for the UK’s economic success” and defined “three strategic economic priorities for transport policy”: • Congested and growing city catchments; • Key interurban corridors; and • Key international gateways.

Eddington also noted that transport is not the sole ingredient of economic growth: he identified skills and inward-investment incentives as examples of other key factors, and critically pointed to the need for effective alignment across all transport and non-transport activities to maximise their impact on national productivity.

It is important to note that Eddington is far from alone in having reached these conclusions, which have been reinforced and developed through a series of studies by a range of public sector and independent bodies in recent years. The relationship between transport and the economy identified by all of this work is now central to the economic debate that is framed by the 2010 Spending Review, which asks a primary question of all public sector spending activity: Does the activity provide substantial economic value? Alongside this, the Government has also been clear in its intention to drive low carbon economic growth.

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It is, therefore, now more critical than ever for the findings of Eddington and others to be fully played through in appraisal and prioritisation processes to ensure that the substantial economic value sought by Government is achieved on a consistent basis.

Greater Manchester has built upon the work of Eddington and others in recent years to establish a clear system of prioritisation for transport investment, which fits very closely with national economic and environmental policy priorities by prioritising a package of investment that will maximise impact on productivity and reduced worklessness, whilst also ensuring net reductions in carbon impact.

The remainder of this response seeks to summarise the approaches being developed and implemented in Greater Manchester to inform the lines of enquiry put forward by the Committee.

What type of transport spending should be prioritised in the context of an overall spending reduction, in order best to support regional and national economic growth?

The type of transport spending that best supports economic growth will vary according to the varying economic circumstances across the UK. However, the work in Greater Manchester has shown that more critical is the need to clearly and consistently prioritise the nature of the economic returns that are being sought from spending programmes. We strongly suggest that the traditional welfare based approach to transport appraisal should be supported by a separate assessment of the impact on the “real economy” to determine major investment priorities, if economic returns are to be maximised. This is discussed further below in answer to the Committee’s line of inquiry that specifically relates to appraisal systems.

This would mirror the approach that was adopted by the Greater Manchester authorities in May 2009, when agreement was reached on a clearly prioritised £1.5 bn transport spending programme to be delivered through the Greater Manchester Transport Fund (GMTF). The GMTF programme reflects a local prioritisation exercise that focused principally on economic impacts, with a range of potential transport interventions having been modelled to understand their potential impact on output – measured in terms of Gross Value Added (GVA) – through changes in employment and productivity.

The programme was prioritised to maximise the medium term impact on the size of Greater Manchester’s GVA for the available funding. A prioritisation metric was established by comparing the GVA impact of each potential intervention to its net cost (with costs assessed on a whole life basis), resulting in a ‘scheme efficiency’ metric, expressed in terms of the GVA impact per pound deployed.

In addition, the investment programme was designed to to deliver a net reduction in total carbon emissions at the programme level, and to secure a TE 58

better than average improvement in accessibility to employment to address persistent problems of worklessness in the most deprived 25% of wards.

The resulting ranked programme is multi-modal, including light rail, road, bus interventions, park and ride and a heavy rail stations programme, reflecting the need to avoid prescriptive solutions to different economic challenges and circumstances. The programme is also different to that which would have resulted from the traditional welfare based approach to appraisal that is used by DfT, which would have prioritised schemes with a significantly reduced overall economic impact.

Importantly, the evidence gathered was powerful enough to give the ten Greater Manchester authorities the confidence to allocate a very substantial element of local funding to the programme, which constitutes more than half of the whole life costs of the £1.5bn programme. Greater Manchester is now taking this methodology into other programmes as part of its LEP and Combined Authority. The aim is a level playing field approach to appraisal that will allow the relative impacts of closely related interventions such as regeneration and housing to be understood so that Greater Manchester is able to identify the combined spatial programmes that deliver the best possible impact overall.

Greater Manchester’s experience demonstrates the need for a revised approach to appraisal – as signalled by Eddington and many other in recent years – that more accurately reflects the real economic impact of investment, as this submission discusses further below.

In addition, the Greater Manchester focus on worklessness is critical not only to strengthen labour market productivity - a key ingredient of long term success - but also as a key part of a strong strategy for re-balancing fiscal spend, as the more that we are able to get people into work, the more the nation saves. An integrated approach to spend and public service reform would enable such savings, made in other Government programmes, to be used to support investment in services such as transport.

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

Again, we would strongly suggest that the answer to this line of inquiry lies not in a prescriptive balance between revenue and capital expenditure. Rather, the most critical factor will be to establish systems of prioritisation that can most effectively address the twin objectives of net productivity and job creation, which will be essential in driving new levels of growth and assisting in addressing the fiscal deficit through enhanced returns to the Exchequer.

The Greater Manchester authorities are now seeking to build upon the GMTF prioritisation approach discussed above to review the optimum range of capital and revenue spending activities that will support increased GVA through the four-year period that will be shaped by the Spending Review TE 58

(2011/2 to 2014/5). The process will determine the final spending priorities for the forthcoming third Greater Manchester Local Transport Plan.

Central to this approach is the need for greater flexibility and devolution across revenue and capital budgets to allow the maximum scope to direct resources to those activities that will have maximum impact on GVA.

In particular, we need to ensure that all subsidies that support bus provision in Greater Manchester are being used efficiently as possible. Recent work undertaken by GMPTE, developed through an analytical approach similar to that set out here, suggests that this is not the case at present. This work has identified significantly greater scope to utilise subsidies to better support bus network coverage and, potentially, pricing levels to lower the barriers to entry into the labour market that they currently pose in some of the most deprived areas of Greater Manchester.

This potential could be achieved by devolving decision-making on how all public subsidy (currently managed in part locally and in part nationally) – is brought together and clearly focussed on supporting wider local interventions aimed at reducing the costs of deprivation and increasing productivity through employment.

Are the current methods for assessing proposed transport schemes satisfactory?

As suggested above, the approach which values welfare benefits by summating individual travel time savings, on the basis that this is what people are prepared to pay for the scheme, does not capture the potential offered by schemes for increasing employment and productivity. As such, the current appraisal framework fails to represent the real economic outcomes of increased productivity, reduced benefit dependency and enhanced returns to the Exchequer that can be achieved through effectively aligned packages of investment.

It is not suggested that the GVA-added approach outlined should supplant the traditional NATA methods but that they should sit alongside a separate measure of economic benefit over and above that received by exiting users, and as a prioritisation tool, the value of which is heightened in the current fiscal context. An effective GVA-added approach, based on that adopted for GMTF, needs to capture how investments can change the size, location and type of economic activity. The approach also allows decision-makers to consider how an investment attracts unemployed people into the workforce.

From the business perspective, transport investment schemes can expand accessible labour markets and reach to other businesses, thereby growing markets and increasing efficiency. This can influence how businesses operate and where they locate, supporting clustering and specialisation of business activity and resulting in job creation and economic growth. Transport improvements can also reduce direct costs, for example from fuel and staff time, which lead to increased efficiency and economic output. Using TE 58 information on where businesses choose to locate and the kind of business they do, the key relationships between transport changes and economic changes can be effectively modelled. This in turn, can be used to accurately project changes in the competitiveness of different areas and the business response to transport investment through relocation, growth and sectoral change.

Similarly, better access to job opportunities can improve individuals’ employment search prospects, help attract people into work and reduce unemployment. This both increases economic output and eases the long term welfare burden of worklessness – a critical challenge in delivering the Government’s objectives in major conurbations such as Greater Manchester. Evidence on the spatial relationship between unemployment and access to job opportunities can be used to capture the impacts of an investment on the pattern of worklessness.

As noted previously, this approach also offers the scope for a level playing field for closely related sectors, such as regeneration and housing in particular, which also work to more effectively align the demand and supply sides of employment markets to drive productivity and reduce unemployment. Ultimately, the approach also provides the opportunity to how all such investments affect the supply side of the economy and make the UK a more attractive location for business, thereby integrating systems of prioritisation both nationally and locally effectively towards shared growth objectives. This offers the scope for optimal resource deployment both within transport and beyond to maximise growth objectives.

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

The GMTF agreement provides a clear demonstration within Greater Manchester of the scope for effective planning at the sub-regional level. As discussed above, we would argue that this revised approach to prioritisation can and should be equally applied across all parallel areas of expenditure aimed at economic growth, so as to identify the optimal blend of expenditure across housing, regeneration, transport and other public sector areas to drive job creation and net productivity.

Moreover, there is clear evidence from work such as the ground-breaking Manchester Independent Economic Review (MIER) that the sub-regions like Greater Manchester act as a ‘functioning economic area’ in their own right. As such, they provide the optimum spatial scale within which to take effective decisions on trading-off across expenditure areas to maximise local and national economic outcomes.

The Greater Manchester authorities have established a clear platform to deliver a sub-regional model that will enable this. Following 20 years of voluntary co-operation through the Association of Greater Manchester Authorities (AGMA), the Greater Manchester authorities are now awaiting a TE 58

Ministerial decision to establish the Greater Manchester Combined Authority, which will become the accountable focus across Greater Manchester for integrating economic development, regeneration, planning, housing and transport policies.

This governance system includes a new approach to the way in which transport systems are managed in Greater Manchester, based around a new “Transport for Greater Manchester” (TfGM) which will provide an enhanced focus on coordinating transport and economic regeneration objectives to effectively prioritise and deliver initiatives that best support economic objectives as determined by the approaches summarised in this paper.

Alongside this, the Government has been clear that the proposed Local Enterprise Partnerships (LEPs) will be a key vehicle for sub-regional economic planning, and this is consistent with our approach. The Greater Manchester authorities see a LEP as a natural addition to these governance arrangements to build on the unique public – private partnership that is already in place.

A Greater Manchester LEP will represent a further opportunity for Greater Manchester’s businesses, local authorities and our key partners to build upon 20 years of voluntary collaboration to achieve a step change in our ability to secure private sector led economic growth, whilst ensuring our residents are able to benefit from and actively contribute to this growth.

Together the Combined Authority and the LEP will enable the private sector to play an even more active leadership role in securing economic growth and allow for the effective alignment of decision making and delivery in key areas such as economic development, regeneration, planning, transport, housing, inward investment, business support, marketing and tourism, and employment and skills. Our proposals include the potential to pilot a ‘single pot’ of funding for economic development, transport and housing, around which decisions on prioritisation could be taken through the broad approach discussed in this paper.

This will also allow for innovative funding solutions, such as Greater Manchester’s recently agreed JESSICA-funded Evergreen funding initiative, which is designed to unlock partnership funding for economic growth initiatives in a manner, to be most effectively aligned with the Government’s proposals for Regional Growth funding and tax increment financing against future business rates.

The revised Greater Manchester governance arrangements are also well- placed to respond to the removal of regional strategies from the planning framework. In August 2009, the Greater Manchester authorities agreed a sub- regional economic strategy (the Greater Manchester Strategy). This is now being expressed in spatial terms through work that will culminate in a Greater Manchester Spatial Framework in early 2011, to be published alongside the forthcoming Greater Manchester Local Transport Plan. Collectively, this will TE 58

provide an economic, spatial and infrastructure framework for future planning at the sub-regional level.

Finally, it should be noted that all local authorities in the North West of England have recognised the importance of retaining appropriate collaborative relationships for joint-working on those strategic matters that would not be fully addressed through any individual LEP. There are already strong working relationships in place between the Greater Manchester authorities and our neighbouring authorities both within the North West, as well as South and West Yorkshire.

In addition, we have a good track record of collaborative working on specific strategic projects. A good example here is the development of the case for the Northern Rail Hub, which offers real economic potential for a wide area and which has been promoted through the local authority-led North West Rail Campaign. Recent collaborative working between a number of major cities to promote the role of High Speed Rail in growing their productivity is a further strong example.

Examples such as this demonstrate that local authority bodies have the capability to work effectively to represent shared infrastructure priorities in the absence of formal regional bodies.

September 2010

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Memorandum from the East of England Development Agency

Summary of Key points

• This document provides technical evidence from the East of England Development Agency (EEDA) to inform the Transport Select Committee inquiry entitled ‘Transport and the Economy’.

• This document seeks to provide evidenced answers to the five questions set by the Select Committee, drawing on evidence developed by EEDA and its partners in the East of England over the last four years.

• The evidence presented in this document points to the following key conclusions:

1. There has been a change in the UK’s economic conditions since the publication of the Eddington Report (2006), with a continued growth in Gross Value Added, Gross Domestic Product and employment over the period to 2008, followed by a more recent decline.

2. Transport spending has been impacted by the decline in economic growth from 2008 to 2010, firstly through a reduction in consumer and business spending on transport and, more recently, through a reduction in planned Government spending on transport.

3. The evidence presented in our submission demonstrates that the four key priorities for transport spending should now be: o Targeted road improvements and better use of the road network; o Improvements to the rail network to enhance capacity, speed and frequency of services; o Reducing the demand for road based travel through demand management, travel planning and local schemes; and o Increased implementation of ‘non-transport’ measures that have a transport benefit.

4. It is important that there are some freedoms and flexibilities in the balance of capital / revenue funding provided to transport authorities. This will allow them to better match transport funding to their own specific circumstances and to better address their local economic challenges.

5. Whilst ‘satisfactory’, the current system of transport appraisal does have some faults which could be improved by: o Incorporating the valuation of a wider range of benefits traditionally outside transport appraisal, such as health benefits; o Reducing the weight attached to the aggregated value of individual’s small time-savings that may not be perceptible or used productively; o Reducing the level of appraisal required for smaller schemes, reducing the need for resource intensive model-based assessments.

6. With the abolition of regional bodies and processes, significant challenges remain around sub-national transport decision-making, business involvement, and ensuring that transport spending is targeted at projects that contribute to sustainable economic growth but minimise environmental, and other, negative impacts.

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1. Introduction

1.1 The East of England Development Agency’s (EEDA) mission is to improve the economy of the East of England. Whilst EEDA’s economic development responsibilities and functions will soon be transferred to other bodies, including the proposed Local Enterprise Partnerships, EEDA’s Transport Team has developed a comprehensive technical evidence base regarding the impact of transport on economic growth that is appropriate to share with the Transport Select Committee for the purposes of this specific inquiry.

1.2 EEDA has provided evidenced answers below to the specific questions set by the Transport Select Committee, using case studies of projects that EEDA has been directly involved with in the East of England over the last five years to illustrate key points.

2. Changes in economic conditions and its impact on transport spending

2.1 The Select Committee has set the following question: ‘Have the UK’s economic conditions materially changed since the Eddington Transport Study and, if so, does this affect the relationship between transport spending and UK economic growth?’

2.2 Since the publication of the Eddington Report in December 2006, there have been some significant changes in the UK’s economic conditions. Key indicators for assessing these changing economic conditions are:

• Gross Domestic Product (GDP) - the total monetary value of all goods and services produced domestically by a country; • Gross Value Added (GVA) – the value added represented by that part of production which is the actual contribution of an enterprise to the economy. Value added is calculated by deducting total value of input from the total value of output during a reference period; • Employment – The percentage of working age population (16-64) in employment.

2.3 Table 1 identifies how these indicators have changed from the pre-Eddington period to today (2004 to 2010).

Table 1: UK economic indicators before / since publication of Eddington Report (2006)

Indicator 2004 2005 2006 2007 2008 2009 2010 GVA (£m) 1 1,070,951 1,116,648 1,181,141 1,245,735 1,295,663 1,255,724 - GVA Index* 100 104 110 116 121 117 - GDP (£m) 2 1,202,956 1,254,058 1,328,363 1,404,845 1,445,580 1,392,705 - GDP Index* 100 104 110 117 120 116 - Employment3 72.9 72.9 72.8 72.7 72.7 70.9 70.4 * GVA and GDP indices calculated using 2004 as base year

1 2004-2006 Statistics from: Office of National Statistics, Table NUTS1.1Headline1 Workplace based Gross Value Added2,3 (GVA) at current basic prices by region, page 17, Regional, sub-regional and local gross value added 2009, 9 December 2009 2008-2009 Statistics from: Office of national statistics, Table A2National accounts aggregates page 29, Quarterly national accounts 1st quarter 2010 Date: 12 July 2010 2 Office for National Statistics, Employment Statistics Time Series http://www.statistics.gov.uk/statbase/TSDdownload2.asp 3 Office for National Statistics, Employment Statistics Time Series http://www.statistics.gov.uk/statbase/TSDdownload2.asp

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2.4 The evidence presented in Table 1 indicates that the UK’s GDP, GVA and employment growth trajectories have indeed changed since the publication of Eddington. The growth in the economy that was observed during and following the preparation and publication of the Eddington Report appeared to continue to 2008, however in the last two years (2009 - 2010), there has been a reduction in economic growth, as demonstrated by the measured GVA, GDP and employment rate indicators presented above.

2.5 In order to identify any possible direct or indirect impacts that this had on transport spending, it is necessary to examine trends in key transport indicators over the same time period, as presented in Table 2.

Table 2: Changes in national transport indicators

Indicator units 2004 2005 2006 2007 2008 2009 Road traffic Billion 309.8 310.3 315.3 318.8 316.2 313.2 in Great vehicle km 4 Britain Indexed 100 100 102 103 102 101 Billion 247.4 246.8 250.2 251.1 249.6 249.0 Car traffic vehicle km 4 Indexed 100 100 101 101 101 101 Billion 18.3 18.0 18.1 18.3 17.8 16.4 HGV traffic vehicle km 4 Indexed 100 98 99 100 97 90 Million UK Air passengers 218.1 230.6 237.6 243.2 238.7 221.2 passenger 5 per annum movements Indexed 100 106 109 112 109 101 UK Fuel 6 £ billion 22.79 23.13 23.44 23.59 24.91 24.62 duty receipts Indexed 100 101 103 104 109 108 * Indices calculated using 2004 as base year

2.6 Table 2 shows that whilst transport activity appeared to grow in the middle part of the decade, the most recent two years for which there are full records available (2008 and 2009) have seen a reduction in some transport activity. Most notably, road traffic (and in particular HGV) and air passenger movements, which showed strong growth through the early and mid part of the decade have begun to fall. This suggests there is a correlation between the recent economic slowdown and the reduction in transport activity, and indicates that the relationship between these two variables is still significant.

2.7 It is necessary to define ‘transport spending’ in to order to actually determine the impact of economic changes on ‘transport spending’. We have assumed therefore that ‘transport spending’ can refer to ‘individual’ (ie: household) spending on transport, ‘private sector’ (ie: business, developers etc) spending on transport, and ‘public sector’ spending on transport (most notably infrastructure).

2.8 The trends in Table 2 would suggest that individual (household) spending on transport increased throughout the period 2004-2008. This is supported by

4 Road Traffic and Congestion in Great Britain: Quarter 2 2010, Department For Transport http://www.dft.gov.uk/pgr/statistics/datatablespublications/roadstraffic/traffic/qbtrafficgb/2010/q22010 5 Table 10 3 Terminal Pax 1999 2009, UK Airport Statistics: 2009 – annual, Civil Aviation Authority http://www.caa.co.uk/default.aspx?catid=80&pagetype=88&sglid=3&fld=2009Annual 6 Transport Trends 2009: Section 2: Personal travel by mode, Table Trend 2.8, Department for Transport

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the UK Household Spending Report 20097, which identified an increase in household expenditure on transport from an average of £60.70 per week over the period 2003-2006, to an average of £62.00 per week in the period 2006- 2008.

2.9 However, although this data set is not available for more recent years since 2008, the data in Table 2 suggests that household spending on transport has declined in this later period, demonstrated by reduced vehicle kilometres by car, reduced UK fuel duty receipts and reduced numbers of air passengers. It is intuitive to suggest this is as result of the impacts of worsening economic conditions occurring over the same period.

2.10 In a similar way to households, private sector spending on transport appeared to also increase from 2004 to 2008 and then decline. The level of HGV traffic in Table 2 actually suggests that businesses (at least those in freight and logistics) reduced transport intensity (measured by vehicle kilometres) by 10 percent from 2007 to 2009.

2.11 However, as identified in Table 3, public sector spending on transport has continued to grow throughout the period 2004 to 2009. It is only from 2010 onwards (due to recent Government decisions on spending cuts for which there are no equivalent statistics yet available) that significant reductions in public sector transport are likely to occur.

Table 3: UK Identifiable public expenditure on transport, 2004/05 to 2009/10

2004/05 2005/06 2006/07 2007/08 2008/09 2009/10

outturn outturn outturn outturn outturn plans UK identifiable expenditure 15,650 16,658 19,642 20,141 20,483 22,406 (£ million) Source: HM Treasury8

2.12 In conclusion, there has been a change in the UK’s economic conditions since the publication of the Eddington Report, most notably a reduction in economic growth, and this has reflected on transport spending, firstly through consumer and business spending on transport, and more recently, through a reduction in planned Government spending on transport.

2.13 In our case study area, the East of England differs slightly from the national figures. Table 4 provides information on the experienced GVA growth in the East of England over the period 2004 to 2008. The indexed figure indicates that this growth has been slightly higher to 2008 than the national growth.

Table 4: East of England GVA growth9

Indicator Units 2004 2005 2006 2007 2008 Workplace £m 91,809 95,957 101,816 108,029 111,555 based GVA Index* 100 105 111 118 122 * Indices calculated using 2004 as base year

7 ‘Family Spending Report 2005/06’ and ‘Family Spending Report 2009’, Table A35 in both, Household Expenditure by UK Counties and Government Office Regions, 8 The Country and Regional Analysis (CRA) of expenditure, Table 9.8e Identifiable expenditure on economic affairs (of which: transport) by country and region, 2004-05 to 2009-10, HM Treasury http://www.hm- treasury.gov.uk/pespub_country_regional_analysis.htm 9 Regional Gross Value Added, Office for National Statistics, December 2009.

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2.14 With regards to transport, whilst not all the comparative indicators are available at a regional level, it is interesting to note that the East of England has the lowest percentage of households with no cars and alongside the South East region has the highest percentage of households with two or more cars,10 indicating a potentially higher reliance and therefore spending on private vehicles, compared to other UK regions.

2.15 Furthermore, the East of England has a regional accessibility value (ease of reaching a major economic centre) of 59 minutes. This is considerably higher than the UK average of 44 minutes, indicating a relatively low accessibility score. Recent analysis has also identified that the East of England’s accessibility score is the fourth lowest among global comparator regions that are competing directly for mobile investment. This supports the previously held view that infrastructure can be a key success factor for regional economies.11

2.16 Transport in the East of England is also important to the wider economic performance of UK plc. As a gateway region, there are significant through- movements on key corridors in the region to and from destinations elsewhere in the UK including on the A14 and Felixstowe to Nuneaton rail routes. The performance of routes such as these clearly has wider, national, economic consequences.

2.17 Further information on the economic vitality of ‘transport sector’ firms at a UK and a regional level is presented in Table 5. This information is derived from the Regional Short-Term Indicators project, which was developed to provide a quarterly index measurement of regional economic performance in each sector, including a measurement of the performance of the transport sector.

Table 5: Index of transport sector economic performance

Year Quarter UK East of England 2005 Q4 100 100 Q1 100.5 102.6 Q2 101.5 100.8 2006 Q3 100.7 103.5 Q4 101.5 105.8 Q1 103.0 109.6 Q2 103.2 107.7 2007 Q3 103.1 110.4 Q4 105.1 115.4 Q1 106.7 115.2 Q2 107.0 117.3 2008 Q3 104.7 113.6 Q4 101.3 104.1 Q1 96.9 97.4 2009 Q2 94.9 98.6 Source: Regional Short-Term Indicators project 12

10 Transport Statistics Great Britain 2009, Section 9: Vehicles Department for Transport, http://www.dft.gov.uk/pgr/statistics/datatablespublications/vehicles/ 11 Insight East (2009) International Insight – How the East of England Economy Compares. See http://insighteast.org.uk/WebDocuments/Public/approved/user_9/International%20Insight.pdf 12 Regional Short-Term Indicators (RSTI) pilot, Office for National Statistics / East of England Development Agency, 2009, http://www.statistics.gov.uk/StatBase/Product.asp?vlnk=15353

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2.18 The data from Table 5 suggests that in the UK, the performance of the transport sector (derived from indicators reflecting volume and turnover in the land transport, water transport, air transport and transport support sectors) continued to grow to Quarter 2 of 2008, then declined sharply. The East of England’s Transport Sector gave a stronger performance over this period, and remained stronger than the UK average even as the recession took hold, despite also falling. This possibly reflects the higher percentage of transport industry jobs in the East of England, particularly those connected with ports and freight.

3. Prioritisation of transport spending to support economic growth

3.1 The Select Committee has set the following question: ‘What type of transport spending should be prioritised, in the context of an overall spending reduction, in order best to support regional and national economic growth?’

3.2 The East of England Transport Economic Evidence Study (TEES), published by EEDA in September 2008, provided an evidence-based approach to identifying how and where transport constraints impact on economic growth, and where spending should be prioritised at a sub-national level (in this case the East of England) to maximise economic return from transport growth.

3.3 The TEES used DfT-approved economic appraisal methodology and outputs from the DfT-approved East of England Transport Model (incorporating both road and rail suites) to identify the costs of constraints and relative benefits of different policy scenarios. Although the work was undertaken prior to the downturn, the methodology adopted and key conclusions remain valid.

3.4 The TEES report showed that transport constraints in the East of England are currently costing the UK economy and consumers £1bn per annum. This is forecast to grow to £2.2bn per annum by 2021. Furthermore, the TEES tested a range of alternative transport investment scenarios to identify economic returns on investment. Table 6 identifies the broad benefits that could be accrued from different infrastructure policy scenarios.

Table 6: Economic benefits of the key TEES scenario tests

Scenario One year PV GDP Annual rate of GDP GDP Benefits return on costs (first year benefits (£m 2002) GDP benefits divided by (£m 2002) estimated cost of the package) 1. Draft East of England Plan (comprised of schemes put forward 90 2062 2.39% by local authorities in the RFA) 2. Highway capacity growth (significant expansion and 87 2011 2.68% widening of the highway network) 3. Rail capacity growth (significant expansion of the radial 119 2746 5.12% rail network) Source: East of England Transport Economic Evidence Study13

13 Transport Economic Evidence Study, East of England Development Agency, 2008, table 10.3, p.102

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3.5 TEES identified that the following transport interventions should be prioritised in order to maximise economic growth:

• Targeted road improvements – Funding for road development should be concentrated on relieving ‘bottlenecks’ on the strategic road network, and making best use of the existing highway assets, not a widescale road building programme. Whilst TEES did examine large-scale highway building programmes firstly through a scenario test of the impacts of the Draft East of England Plan schemes (at the time), and secondly a scenario test of additional highway capacity enhancements on a number of the major radial routes in the region (scenarios 1 and 2 in Table 6 above), it was demonstrated that at best this only actually addressed 8-15 percent of the total regional costs of congestion and did not offer the best value for money.

• Rail – TEES tested a scenario where rail capacity on radial routes to London across the region was increased by 50 percent (scenario 3 in Table 6 above). The benefits from this test outweighed benefits from all other tests (including the highway capacity growth scenario) giving a one year benefit of £119million and a total benefit of £4.7billion over the 60 year appraisal period.

• Reducing demand – Further tests undertaken as part of the TEES work (but not illustrated in Table 6 above) looked at the potential economic benefits of measures to reduce demand for transport, both through fiscal pricing and travel planning. The tests indicated that measures that reduce demand for travel should also be prioritised.

3.6 These three priority areas for investment are explored further below using further specific evidence from the East of England.

Targeted improvements and making better use of the road network

3.7 The Eddington report identified that targeting pinch-points on the strategic road network would have significant economic benefits, and as outlined above, this has been validated at a strategic sub-national level by the East of England TEES report. EEDA has developed further evidence on some of these specific ‘pinch-point’ schemes to illustrate the validity of this conclusion.

3.8 One example is the A11, which is a highway from the A14 in Cambridgeshire to Norwich, except for a nine mile section of single- carriageway which experiences significant congestion and delay. The most recent estimation of the benefit cost ratio for the scheme by the Highways Agency, calculating the ratio between costs and ‘conventional benefits’ is estimated to be 21:1, an extremely high return on investment for a transport project which is directly related to the significant reduction in travel times and delays that the scheme provides14. In addition, the A11 Wider Economic Impacts Study15, published by EEDA, GO-East and Norfolk County Council in 2008 identified that upgrading would have significant wider economic benefits of an additional 20 percent of the benefits beyond the traditionally calculated

14 A11 Fiveways to Thetford Appraisal Summary Table, Highways Agency, (2009) http://www.highways.gov.uk/roads/projects/16382.aspx 15 A11 Wider Economic Impacts Study, East of England Development Agency (January 2009), http://www.eeda.org.uk/files/A11_Wider_Econ_Benefits_Summary_Final_Report.pdf

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economic benefits, through impacts such as increased agglomeration and access to labour markets for employers.

3.9 In the East of England region, the A5-M1 link road and the A14 Ellington to Fen Ditton scheme are the two other key examples where there is a strong economic rationale for addressing particular locational transport bottlenecks on the strategic road network. The EEDA A5-M1 Link Road Economic Impact Report16 identified that the alleviation of the transport bottleneck and congestion on the A5 through Dunstable by the construction of an alternative route would generate economic benefits of £748million (in return for estimated present value of costs of £135million).

3.10 In addition to capacity enhancements at targeted bottlenecks, there are economic benefits that could be accrued from making better use of the existing network. An example from the East of England is the Intelligent Traffic Management system recently installed on the A14 by the Highways Agency. This project provided real-time traffic information to drivers on the A14 to better inform them and manage traffic flows to reduce the economic and safety impacts of incidents. The business case17 for this project has demonstrated an economic benefit cost ratio of 2.74, which is classed by the DfT to be high value for money.18

3.11 Although making best use of our existing assets and targeted capacity enhancements should be a key priority, the maintenance of our transport infrastructure remains critical. Although this is of obvious relevance to key trunk routes, the role of supporting local networks on which longer distance freight and passenger journeys start and finish should also not be neglected given the importance of end-to-end transport provision.

3.12 Equally, and as recognised by Eddington, network resilience is key to a successful economy; the resilience benefits of transport spending should also therefore be a key consideration. Research undertaken in the East of England via the previous Government’s ‘Delivering a Sustainable Transport System’ (DaSTS) initiative proposed a methodology for identifying resilience hotspots19. A similar approach could usefully be applied nationally to identify key locations for transport spending which ensure resilience benefits are realised.

Rail

3.13 The TEES report suggested that investing in the rail network would have significant economic returns, particularly where there are still incremental improvements that could be made in terms of speed and capacity. The TEES report suggested that in the East of England, an increase in capacity on the Great Eastern Main Line would cause the most significant uplift in productivity of all the radial rail routes in the East of England. In order to examine this

16 A5-M1 Link Road Economic Impacts Study, East of England Development Agency (2010) www.eeda.org.uk/.../A5- M1_Link_Road_Wider_Economic_Benefits_Final_Report.pdf 17 A14 Corridor Traffic Management: Full Business Case, Highways Agency, 2007 18 Guidance on Value for Money, Department for Transport, http://www.dft.gov.uk/about/howthedftworks/vfm/guidanceonvalueformoney?page=1#a1000 19 See Network Resilience and Adaptation Phase 1 Final Report (2010) – Hyder – for Highways Agency and EEDA at http://www.eeda.org.uk/files/Network_resilience_and_adaptation_final.pdf

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further, EEDA has recently published a report examining the potential economic benefits that could be accrued from developing this rail route.20

3.14 The research demonstrated that over the standard 60 year appraisal period, economic benefits of £3.3billion could be realised from a range of improvements on the Great Eastern Main Line, including increased journey speed, increased line capacity and reduced overcrowding.

Reducing demand (travel planning and local schemes)

3.15 Economic efficiencies due to congestion are the result of an imbalance between the demand for transport and the supply of capacity. The evidence presented above shows that supply-side measures are important but it is also important to examine demand side measures too.

3.16 The TEES work looked at the economic impacts of reducing traffic levels in particular economic hotspots, including the three cities of Peterborough, Cambridge and Norwich, and the London Arc constellation of medium-sized towns. The results showed at a basic level that if traffic levels could be reduced by 10 percent in the three cities above, then economic benefits of £21million per annum could be realised. Furthermore, a similar level of traffic reduction in the London Arc zone of south Hertfordshire and south west Essex would generate economic benefits of £53million per annum.

3.17 Following these encouraging early results, EEDA examined further the economic benefits of travel planning to include all trips (not just those on the strategic road network). The results showed that implementing travel planning in the East of England so as to cause a 3 percent reduction in vehicle kilometres on the region’s roads (including up to 5 percent reduction in peak periods) could have economic benefits of up to £200million per annum.21 These economic benefits comprise £150million from decongestion benefits and £50million wider benefits such as agglomeration and labour market benefits.

3.18 The merits of prioritising spend on low-cost but high-impact local level schemes are further supported by evidence from the ‘Sustainable Travel Towns’ demonstration project. The Department for Transport sponsored three towns in England to take forward an advanced programme of travel planning, one of which was Peterborough in the East of England, but also including Darlington and Worcester. The combined results from the projects, which focussed on workplace and school travel planning, personal travel planning and sustainable travel awareness campaigns, demonstrated that travel planning in this instance reduced car driver trips by 9 percent and car driver distance by 5-7 percent, whilst increasing cycling by 26-30 percent and bus patronage by 10-22 percent. The programme cost £15million over five years in the three towns, with a conservatively estimated cost benefit ratio of around 4.5 (congestion only).22

20 The Economic Case for Investment on the Great Eastern Main Line, East of England Development Agency, May 2010 21 Workplace Travel Plans in the East of England – Final Report, Atkins for EEDA, 2010 22 The Effects of Smarter Choice Programmes in the Sustainable Travel Towns: Summary Report, Lynn Sloman, Sally Cairns, Carey Newson, Jillian Anable, Alison Pridmore and Phil Goodwin, Report to the Department for Transport, 2010

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3.19 In addition to the ‘softer’ elements of demand management discussed above, there is a wealth of evidence on the potential impacts of harder, fiscal, approaches to demand management available from Cambridgeshire County Council’s work under the DfT’s former Transport Innovation Fund initiative23.

3.20 This evidence suggests significant value for money and further expansion of these types of measures across the country to address transport’s economic issues.

Non-transport measures

3.21 In addition to the investment on the three categories of direct transport schemes outlined above, ‘non-transport’ spend that improves the productivity of travel time, or replaces travel time with productive time that could benefit the economy is also very important to consider. There are a number of examples of this, for example, expansion of the broadband and public Wi-Fi network and increased facilities for home or hub-based working.

3.22 A consortium of EEDA and local authorities has recently invested in Wi-Fi provision on Norwich to London Trains. In a research report by the University of East Anglia, it was demonstrated that rail customers, particularly business users, would value these types of measure:

“Broadband Access (Wi-Fi) and plug sockets for laptops and mobiles are the two main features which passengers believe it would be a big bonus for them if they are available on-board.”24 University of East Anglia / Shaping Norfolk’s Future

3.23 EEDA supported the installation of Wi-Fi on trains because the TEES report provided evidence to suggest that of all the rail lines in the East of England, investment in measures to reduce the costs associated with journeys on the Great Eastern Main Line would have the highest benefits in terms of economic productivity. The business case for installation of Wi-Fi utilised the results from a research study conducted by the Institute of Transport Studies in Leeds. Through analysis of responses to a range of scenarios, it was possible to estimate the value that passengers put upon the provision of Wi-Fi as an additional service improvement. This study concluded the values of time per hour to the user outlined in Table 6.

Table 6: The benefits of Wi-Fi provision on trains

Valuation of Wi-Fi provision by user at charge rate Wi-Fi provision Std Business First Class Free Wi-Fi £4.57/hr £8.20/hr Wi-Fi charged at £5 -£0.50/hr £6.36/hr Source: EEDA Wi-Fi Business Case25

3.24 Using these findings, it was possible to calculate in the business case for Wi- Fi on Norwich to London trains on the Great Eastern Main line that there would be productivity benefits to users of £0.84million in the first year alone arising from the installation of Wi-Fi, with a five-year benefit of £5.6million.

23 See for example http://www.cambridgeshire.gov.uk/transport/strategies/tacklingcongestion/backgroundinfo/tif.htm 24 The Great Eastern Line Project Report, Shaping Norfolk’s Future and University of East Anglia, 2008 25 Norwich to London Trains Wi-Fi Business Case, 2009, downloadable as a response to an FOI request at : http://www.whatdotheyknow.com/request/wifi_on_national_express_trains#incoming-80552

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This represents a significant economic benefit, and good value for money (as the capital cost of installation was £346,000).25 We would therefore recommend that Government and other policy makers should prioritise non- transport measures that aid productivity, such as this. In this instance, a specific recommendation would be that rail franchise specifications demand the installation of Wi-Fi and other wireless communication’s facilities on trains to increase the productivity of travel time, and that policy makers seek to secure Wi-Fi provision across the public transport networks including on buses and coaches.

4. Balancing revenue and capital expenditure

4.1 The Select Committee has set the following question: ‘How should the balance between revenue and capital expenditure be altered?’

4.2 In order to respond to this question, it is necessary to reflect on the responses to the previous question.

4.3 Whilst supply-side capacity enhancement schemes rely to a large extent on capital funding, it is increasingly necessary to provide revenue funding for the range of travel planning and sustainable transport measures that demonstrate high value for money, and often address the demand for travel.

4.4 It would be advantageous for local authorities to be able to have greater flexibility over the funding they receive, in order to match the funding to their own specific circumstances and to address their local economic objectives. A priority for one local authority may be a major scheme requiring large capital investment, whilst another local authority may prefer to implement a wide- scale smarter travel programme that needs large amounts of revenue funding. We would therefore suggest that DfT provides local authorities with the freedoms and flexibilities to determine how they receive their funding, including considering how best to support local smaller major schemes that historically may have been too costly for funding from ‘block’ allocations but possibly too small to compete with some of the larger scale schemes traditionally funded via the RFA.

4.5 In addition, it is worth noting that capital investment could actually lead to revenue streams for local authorities, most notably through pricing mechanisms. The work undertaken by Cambridgeshire County Council26 for the now-abolished Transport Innovation Fund demonstrated that investment in a congestion charging scheme would have generated revenue for the local authority that could potentially have been reinvested back into transport.

5. Assessing transport schemes

5.1 The Select Committee has set the following question: ‘Are the current methods for assessing proposed transport schemes satisfactory?’

5.2 The current methods for assessing transport schemes are defined by the New Approach to Transport Appraisal process, as outlined on the Department for Transport’s Webtag guidance27. This requires the consideration of transport’s contribution to five objectives (Environment, Economy, Safety, Accessibility

26 See http://www.cambridgeshire.gov.uk/transport/strategies/tacklingcongestion/backgroundinfo/tif.htm 27 Transport Analysis Guidance, WebTAG, Department for Transport http://www.dft.gov.uk/webtag/

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and Integration) which when considered together provide the decision-maker with the information needed to reach a considered judgement on the value of a project.

5.3 In order to answer the question, it is necessary to identify the advantages and disadvantages of the current methods.

5.4 We regard the advantages of the current methodology to be that it:

• Is quantifiable - It is based largely on quantified analysis, which in turn is based on scientific and mathematical analytical techniques. This ensures a strong rigour is employed.

• Allows monetary valuation of benefits – By requiring as much as possible a monetary valuation of the economic worth of schemes, it allows the costs of the scheme to be compared to the benefits of the schemes. This is extremely useful in establishing whether a scheme is good value for money.

• Enables comparison between schemes – The development of the appraisal summary table (as well as the monetary valuation of costs and benefits) allows comparisons to be made between schemes, which is particularly important when prioritising transport measures. In this ‘age of austerity’ where there is limited funding available, this is a particularly important feature of the current system that allows identification of those schemes that provide particularly good value for money.

• Is well established – Whilst arguably not a reason for continuing with it, the current system is well understood by the transport planning profession. A new system where monetary valuation is not required would give funding bodies less confidence that transport schemes could provide demonstrable value for money, and also require a retraining of a large section of transport planners in any new system.

• Incorporates a degree of flexibility – Where some impacts cannot be monetised, the appraisal summary table gives decision makers the information required to trade-off monetised impacts against non- monetised impacts (such as biodiversity etc).

5.5 We regard the disadvantages of the current methodology to be that it:

• Is biased towards some transport modes – The measurement and aggregation of small time savings can arguably take on a disproportionate value, which means that some highway schemes appear to perform better than would otherwise be the case. Furthermore, the assumption within NATA that fuel-related taxation revenues are a benefit can also significantly enhance the business case for road schemes but can be detrimental to the relative performance of public transport schemes.

• Incorporates long appraisal periods – Whilst some transport schemes have long life-spans, such as road and rail infrastructure, that continue to have a residual value over 60 years (the suggested NATA appraisal period), it is extremely difficult to forecast travel patterns and demand over a 60 year period and thus appraise what the benefits of those schemes will be in the latter years of the appraisal period. We simply do not know

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what the world will look like in 60 years time. Furthermore, it is arguably not appropriate to compare the cost, benefits and value for money of ‘long-life’ capital infrastructure schemes (funded in the short term with payback periods of 60 years) against more modern demand management and generally revenue-funded transport interventions (with lower capital costs but ongoing revenue costs) over the same time period.

• Is unable to capture all benefits – As alluded to earlier, some of the benefits of a number of transport interventions have benefits and impacts not covered or monetised in the NATA process. Walking and cycling, for example, may have significant benefits for health, and therefore widespread cycling and walking could provide financial benefits for the National Health Service, and for employers where healthier staff are more productive. It is difficult however, to isolate and monetise these impacts, so they are not considered, however important a contributory factor they might be, so the Committee may wish to consider how links to the wider Government agenda can best be reflected in transport appraisal. It is also questionable as to whether the carbon reduction benefits are accurately considered within the NATA process.

• Is onerous – The current system relies on the existence and use of transport models. Although probably the most rigorous and mathematically accurate method available to transport planners, models are onerous and expensive to run and continuously need updating.

5.6 In response to the question, the current system is probably ‘satisfactory’, but it could be improved by:

• incorporating a wider range of benefits, such as health benefits; • reducing the weighting towards the aggregated value of individual’s small time-savings, as these may not be perceptible or used productively; and • reducing the level of appraisal required for smaller or local schemes to avoid the resource intensive modelling required for a full NATA appraisal.

6. Planning future transport schemes without regional structures and strategies

6.1 The Select Committee has set the following question: ‘How will schemes be planned in the absence of regional bodies and following the revocation and abolition of regional spatial strategies?’

6.2 In addressing this question we consider it is worthwhile to reflect on the system that was in operation prior to the 2010 General Election and then to consider some of the issues that any new or replacement system will need to address.

Prior to the 2010 General Election

6.3 In England the Regional Assemblies and the Regional Development Agencies (RDAs) were respectively responsible for developing the Regional Spatial Strategy and Regional Transport Strategy, and the Regional Economic Strategy which typically includes transport/economic policies and goals. Together these provided an overview of how spatial transport and planning over the relevant region should contribute to social, economic and environmental challenges.

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6.4 Transport interventions on the ‘National Networks’ in each region were primarily driven by the Department for Transport (DfT) with the Highways Agency in the case of roads, and by DfT with Network Rail in the case of rail. In both of these latter cases, however, regional bodies had a strong influencing and evidence-building role to help make the case for key interventions that were aligned with the now revoked regional strategies outlined above. One example in the East of England would be the Felixstowe to Nuneaton rail freight enhancements.

6.5 However, in the case of what was previously defined as the ‘City and Regional Networks’, the regional bodies had an even more direct role with a key task being to identify and prioritise major scheme (>£5million) spend on these networks through the Regional Funding Advice (RFA) to Government.

6.6 Although the detailed process varied slightly on a region-by-region basis, the broad approach adopted was broadly similar. In summary, the approach adopted in the East of England was:

• The Department for Transport provided an indicative allocation of transport funding for spend on major schemes on the City and Regional Networks over a set period of time;

• The Regional Assembly and Regional Development Agency, working with the local transport authorities and the East of England’s Regional Transport Forum, developed a policy framework (based on national, regional and local policies for transport) and an appraisal mechanism against which proposed interventions could be developed and assessed;

• Scheme promoters (ie local authorities, Highways Agency and to some extent Network Rail) put forward transport schemes that they considered addressed the policies in the policy framework as candidates for funding via the RFA;

• The performance of the schemes was then assessed against the policy / appraisal framework to test ‘policy-fit’ and also to assess factors such as deliverability and the robustness of cost estimates;

• The performance of all of the candidate interventions was then considered by the Local Authorities via the Regional Transport Forum and Regional Assembly, and by the RDA Board, with final recommendations on the region’s transport priorities taken to the Regional Partnership Group (RPG) made up of businesses, local authorities, delivery organisations and the regional bodies. The RPG then submitted the agreed priorities to Government for their final approval.

6.7 A further task of regional bodies was the regional coordination of the previous Government’s ‘Delivering a Sustainable Transport System’ programme (DaSTS). In the East of England, the process was led by the East of England Development Agency28.

28 DaSTS East of England Progress Report (2010) – EEDA – available at www.eeda.org.uk/files/DaSTS_Phase_1_Regional_Report_final.pdf

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6.8 In addition to these formal roles, the regional bodes co-ordinated activity on a wide range of other transport issues, for example, leading on research, intelligence and evidence building, and integrating strategic transport decisions with planning policies and economic development (which transcend local authority boundaries). It is important to note that natural transport corridors, travel for work areas, and economic geographies do not stop at local authority boundaries. Intelligence development, strategy and decisions on major transport schemes is often required over wider geographical areas, and this is where sub-national bodies can add value.

6.9 In addition, strong sub-national bodies and alliances can lobby effectively at a European level on other significant transport priorities to lever in further funding for transport. In the East of England one such example was to secure TEN-T funding from the European Commission for the Felixstowe to Nuneaton Railway enhancement. Businesses in particular have been able to input into regional processes via the Regional Development Agency and other regional business groups, and it is important that their views continue to be heard in sub-national decision making on transport.

Post-2010 General Election

6.10 With the abolition of the regional bodies and revocation of the regional strategies, the key challenge is to ensure that any new systems put in place learn from experiences under the former regionally-based transport planning mechanisms. We have identified a number of key issues and learning points that the Committee may wish to consider. These are:

• Previously DfT tasked the regional bodies with identifying sub-national transport priorities – with the abolition of this intermediate tier it is currently unclear how major transport sub-national priorities will be identified. Although these could be put forward by local authorities and the Local Enterprise Partnerships this could create significant difficulties for DfT who could potentially have to liaise with and assess priorities across a much greater number of geographic areas;

• With the former RFA system, local authorities had some degree of certainty up to 10 years in advance whether their scheme would be likely to be funded. They were therefore in a stronger position as to whether to take the risk to invest funds into developing a scheme to full business case (which can cost hundreds of thousands of pounds). Any new system would need to recognise the importance of providing as much certainty as possible to scheme promoters to minimise risks of costly abortive spend;

• With the abolition of the regional tier, in many areas there are currently no clear leading sub-national authorities to provide the evidence for and prioritise (at a strategic level) transport schemes that were previously classed as ‘regional schemes’. One potential group of bodies that could fulfil these duties could be the Local Enterprise Partnerships (LEPs) that are being formed to replace RDAs. It has been suggested by the Secretary of State for Transport that a consortia of LEPs could take on an economic prioritisation role for transport:

“I hope that there may be an opportunity to encourage them [LEPs] to work together in appropriate groupings to look at transport issues on a

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sub-national basis around natural geographical areas that are relevant from a transport infrastructure point of view” Philip Hammond, Secretary of State, DfT (July 2010)29

• The delegation of transport roles and responsibilities to LEPs raises a number of potential challenges. Issues to consider include:

o Greater clarity is required on the resources that will be available to LEPs for them to take forward transport planning work and undertake sub-national strategy-making and prioritisation exercises previously led by the regional bodies and their staff; o Greater clarity is also required on the formal roles that LEPs will play with regard to transport. Private sector organisations emphasise the importance of LEPs having real purchase on transport planning and investment given the importance of access to markets and talent. Businesses have consistently stated that good transport infrastructure is a key priority; o There may ultimately be geographic gaps in coverage, where some parts of the country are not covered by a LEP. The treatment of transport issues in these locations would need to be considered; o There could be a misalignment between LEPs that are based on functional economic geographies and other statutory transport authorities, such as local highway authorities and Integrated Transport Authorities that may work to administrative or other boundaries. There will be a need for effective working relationships between institutional arrangements working on different geographic bases.

• A specific advantage of LEPs is that they could directly include the private sector perspective in transport decision making, which is vital in order to allow the private sector to contribute to supplementing the public funds for transport. The CBI’s submission to Government regarding the 2010 Spending Review ‘Galvanising Growth’ states that:

“Given the need to increase total infrastructure investment, new sources of private investment will be needed in areas hitherto funded directly from the public spending and this in turn will require new funding models to be explored. We see particular value in the following……more sophisticated approach to user charges…tax increment financing…asset management…” CBI (September 2010)30

• Given the above, one option for public funding might be to operate a system similar to the former RFA but to allocate funds to the ‘new’ economic geographies on a formulaic basis. However devising an appropriate formula would be challenging with a danger that the biggest authorities or LEPs would get more funding rather than this being focussed on where the need is greatest, where the return on investment could be maximised.

September 2010

29 The Secretary of State's priorities for transport, uncorrected transcript of oral evidence for the Transport Select Committee, Monday 26 July 2010, Mr Philip Hammond MP 30 ‘Galvanising Growth’, CBI Submission to the 2010 Spending Review, CBI, September 2010

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Memorandum from the British Ports Association

Main Conclusions:-

• Economic health is closely tied to investment in the right transport infrastructure. • Transport investment could be re-focussed on a range of smaller network improvements to reduce delays and congestion. • The planning regime nationally, regionally and locally is going through a period of change and uncertainty.

The British Ports Association (BPA) represents a broad cross section of ports operating in diverse markets. UK ports handled 508m tonnes of cargo in 2009, maintaining the UK’s position as the largest port sector in the EU. The reliance of the UK economy on the trade represented by these figures is self evident. In turn, port efficiency substantially depends on the adequacy of their links to the transport network.

The Committee’s inquiry therefore is a matter of strong interest to the industry and decisions likely to be taken in the short and medium term on investment in the transport system will have a significant impact on ports.

1. Have the UK’s economic conditions materially changed since the Eddington Transport Study and, if so, does this affect the relationship between transport spending and UK economic growth?

Clearly the UK’s economic condition has changed since the 2006 Eddington Transport Study but it is a matter of speculation whether this represents a material long term change to demand. The DfT’s own forecasts for port traffic, readjusted to take account of the recession, and published in the draft National Policy Statement for Ports, show significant long term growth for unitized traffic.

Although economic conditions may have changed, ports and indeed the transport network still need to be part of a long term planning and investment programme on the basis that economic cycles will not affect the relationship between transport spending and UK economic growth. Good transport infrastructure improves business productivity, improves the efficiency of the labour market and reduces costs to the final consumer. It has a significant regeneration role as investment in the right infrastructure can have major regional and local impacts by providing improved market access. Transport growth is closely tied therefore to economic growth and should not be treated in isolation form its beneficial impacts.

We are concerned that the Coalition Government’s programme in its transport section (para 30) makes no mention of either freight or maritime. The concentration is on passenger schemes such as Crossrail and high speed rail. Bearing in mind the strong likelihood of significant cuts, this will not achieve a proper balance between freight and passengers or indeed between rail and road. Although we accept that rail will always be

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part of a decarbonisation agenda, two-thirds of goods still leave and enter ports by road and the generally anti-road policies of successive governments have been short sighted. We hope that one of the Committee’s conclusions from this inquiry is that a much stronger emphasis can be placed on a broad based government transport policy which looks at not only personal mobility, but at the role of freight and efficient freight distribution.

2. What type of transport spending should be prioritised, in the context of an overall spending reduction, in order best to support regional and national economic growth?

Assuming an overall transport spending reduction, this could create the opportunity to focus on a larger number of smaller schemes which can improve connectivity where there are growing problems of delay and congestion. The strong view we have from many BPA members is that it is the final legs of journeys which suffer from lack of investment. Solutions can involve not only new links connecting to both road and rail networks, but also IT solutions such as better information to hauliers about onward travel options, better information about motorway access and a more managed approach to traffic flows, all under the umbrella of “smart” solutions.

One of the conclusions of the Eddington study was that the UK has a mature and strong basic transport network and government should resist the temptation to pool resources into “prestige” schemes. It should deploy resources more widely, tackling broader issues of transport integration. The Eddington Report described ports as the “key gateways for UK trade in goods” and identified strong cost benefit ratios for investment in surface access to ports of anywhere between 3 and 15, indicating strong GDP benefits. At a time of likely exceptional public spending constraints, we would encourage the government to give full recognition to these figures.

Notwithstanding these comments, Strategic National Corridors cannot be ignored and will require maintenance and improvement. We welcome, for example, the recent decision to identify the A1 north of Newcastle as a route of strategic national importance, although we note that even so, this “will not guarantee funding for major improvements”. The government will also be responding soon to the EU Commission’s consultation on the Trans European Network (TEN-T). This will also identify priority UK routes, but again with only a remote prospect of funding.

The Committee should also note that in comparison with other EU member states, the UK has a system of developer contributions for road and rail developments which we believe is unique to the UK. This means that under a process devised by the Department for Transport, ports are required to fund infrastructure which in other member states would be the entire responsibility of the government.

3. Are the current methods for assessing proposed transport schemes satisfactory?

The appraisal system itself, as set out in the Transport Analysis and New Approach to Appraisal document, is complex but nevertheless reasonably balanced. The challenge we currently face is the uncertainty surrounding the planning regime generally. For example, the government has decided to abolish the Infrastructure Planning Commission and replace it with a Major Infrastructure Planning Unit. The IPC was of course only set up in 2009. It is also the case that national policy statements dealing

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with ports, road and rail have either yet to appear or yet to be designated. There is considerable uncertainty about the future of these statements beyond the fact that they will in future be subject to ratification by Parliament. For the very largest transport projects at the moment, therefore, plans would be submitted to an organization that is about to be wound up and against national policies that have yet to be decided.

We have no strong views on which institutions might deliver a more efficient planning system, but we are firmly of the view that the delays and uncertainty associated with the previous system need to be tackled. Similar uncertainty surrounds local authority schemes. We note from the Minister for Regional and Local Transport’s recent statement that local authorities should not assume that the previous government’s funding allocations would be funded to the published levels and that the Major Schemes Guidance for local authorities is suspended. This also means that public inquiries on schemes requiring DfT funding are postponed and decisions will be taken in the light of the spending review to be announced in October.

We would add to this the recent setting up of the Marine Management Organisation (MMO) which will deal with port development applications below the IPC threshold, which will be the great majority. The MMO will need time to build up expertise and resources. Planning for all types of schemes, therefore, is going through a period of major change. The extent to which the new planning system is able to deliver real improvements will have a major influence on the transport network.

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

Considerable effort was put into agreeing regional spatial strategies and ports played an active part in their production. The creation of Local Enterprise Partnerships, and the greater emphasis on local authorities may have advantages, and we are monitoring their progress and their grip on transport and economic issues closely. We are concerned that individually, LEPs will simply not have the critical mass to make a contribution to transport planning that can take into account connectivity to the regional and national network; the extent to which they might pool resources is untested. This change added to the very significant changes to the planning system at a national level will continue to create uncertainty.

September 2010

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Memorandum from the British Air Transport Association (BATA)

1. The British Air Transport Association (BATA) welcomes the opportunity to submit evidence to the inquiry entitled ‘Transport and the Economy’, being undertaken by the House of Commons Transport Select Committee.

2. BATA is the trade body for UK registered airlines. Our ten members cover all sectors of the airline industry – including freight, charter, low fare, regional operations and full service. In 2009, BATA members directly employed over 71,000 people, operated two thirds of the UK commercial aircraft fleet and were responsible for some 80% of UK airline output, carrying 81 million passengers and 1 million tonnes of freight1.

3. We understand that a number of BATA’s member airlines intend to make their own, individual submissions to the Committee. This submission should therefore be seen as supportive of those separate submissions.

4. We appreciate that aviation, given the nature of both its funding and operation, will not be a prime focus of this inquiry. Nevertheless, we do wish to bring to the Committee’s attention a number of issues which we believe are of relevance.

5. Unlike other modes of transport in the UK, aviation is virtually all funded and operated by the private sector. Indeed, it receives no subsidy from the taxpayer, apart from a very small number of ‘lifeline services’ operated in the more remote parts of the UK. Airports are generally privately owned and costs such as air traffic management services, security and the regulatory authorities (Civil Aviation Authority and European Aviation Safety Agency), are paid for by airlines in the form of fees and charges.

6. Aviation raised £1.9 billion in the form of Air Passenger Duty (APD) for the Treasury in 2009/102, a figure forecast by the Office for Budget Responsibility to grow to £3.8 billion in 2015/163. This ever increasing level of tax is a barrier to the ability of the UK to compete for international investment and inbound tourism on an equal basis with other nations. It is also likely to have an adverse effect in the regions where air services may become unviable. This will impact upon jobs and regional development.

7. We would wish to point out that the 23 million international sea passenger journeys through UK ports in 2009 attracted no equivalent tax to APD. Yet shipping 4 contributes at least as much as aviation in terms of global CO2 emissions . There is therefore a glaring inconsistency in the approach taken by government in addressing the “Polluter Pays” principle between these two transport modes, both of which are vital for sustaining the UK’s economic recovery.

8. A study of aviation’s contribution to the UK economy, published in November 2009, was undertaken by Oxera Consulting Ltd for the Airport Operators Association.

1 CAA ‘UK Airline Statistics: 2009 – Annual’, Tables 1.6, 1.14 and 1.11.2 2 ‘HMRC Air Passenger Duty Bulletin Dataset’, published August 2010, Section 1 3 OBR Budget Forecast contained within ‘Budget 2010’, HC 61, published 22 June 2010, p 100 Table C11 4 Report to the CCC by AEA ’Greenhouse Gas Emissions from Shipping’, September 2008, p11

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The study found that aviation represented 1.5% of the UK economy, contributing £18.4 billion towards UK GDP in 20075.

9. A previous study, by Oxford Economics in 2006, found that aviation directly employed around 200,000 people and supported over half a million jobs either directly or indirectly6.

10. We appreciate that the Department for Transport, like other Government departments and public bodies, is facing a significant cut in its budget and this will obviously result in reduced support for transport projects and initiatives that require state funding and subsidy.

11. BATA fully supports the logical argument that effective and efficient transport systems, infrastructure and networks, are required for economic prosperity. Aviation is a critical component of the transport system of an island trading nation such as the UK. 30% of all UK exports by value are transported by air7.Over 50% of the UK’s exports of manufactured goods that are exported to destinations outside the EU travel by air8. The importance of air travel in our modern globalised world was clearly exposed by the consequences of the disruption to flights caused by the volcanic ash cloud earlier this year, with not just people stranded at airports all over the globe but also fresh produce and key industrial components and goods.

12. Air links between the UK regions and also between UK regional centres and European and longer haul destinations play an important part in driving and growing regional economies.

13. Aviation is a global industry and as such it exists in an extremely competitive environment. If the UK decides not to meet demand by limiting capacity and infrastructure at our key international gateways, other competing airports in Continental Europe and further afield will prosper at the UK’s expense. This will have a direct impact on UK jobs and future economic growth.

14. Offering air services to key developing markets such as India and China is crucial for the future health of the UK economy.

15. The vast majority (74% in 2009) of inbound visitors arrive in the UK by air9. These visitors spent nearly £13.8 billion (over 83% of total visitor spend)10 and many were from places such as North America, Australia, China, the Indian sub-continent and the Middle East – where there no realistic alternative option of travel to the UK other than by air.

16. Good air links are vital if the UK is further increase its attractiveness to overseas visitors, something the Prime Minister in his speech about tourism on 12th August 2010 indicated he wants to happen, when he said;

5 Airport Operators Association Press Release, 9th December 2009 (http://www.aoa.org.uk/media/news_show.asp?NEWS_ID=162) 6 Oxford Economic Forecasting, ‘The Economic Contribution of the Aviation Industry in the UK’ October 2006, Executive Summary, p 5 7 Ibid, p 33 8 Ibid, p 33 9 Office for National Statistics Travel Trends 2009, p 37, Table 2.08 ‘Spending in the UK: by mode of travel and purpose of visit 2005 to 2009’ 10 Ibid, p 27, Table 1.07, ‘Overseas residents’ visits and spending in the UK: by mode of travel 1984 to 2009’

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“[Tourism is] fundamental to the rebuilding and rebalancing of our economy. It’s one of the best and fastest ways of generating the jobs we need so badly in this country.”

17. Later in the speech, he talked about the importance of the UK being competitive and attractive destination:

“I want to see us in the top five destinations in the world. But that means being much more competitive internationally. Take Chinese tourists, for example.

We’re their 22nd most popular destination. But Germany is forecast to break into their top ten. Why can’t we?

Currently we only have 0.5 per cent of the market share of Chinese tourists. If we could increase that to just 2.5 per cent this could add over half a billion pounds of spending to our economy and some sources suggest this could mean as many as 10,000 new jobs. Currently we have 3.5 per cent of the world market for international tourism. For every half a per cent increase in our share of the world market we can add £2.7 billion pounds to our economy, and more than 50,000 jobs.” 11

18. Heathrow, the UK’s main international air hub and gateway, currently offers services to just three cities in China (including Hong Kong), which is the same number Helsinki airport serves, while Paris Charles De Gaulle and Amsterdam Schiphol both have services to four cities and Frankfurt provides services to seven.12

19. For the UK economy to continue its recovery and be able to return to strong sustainable growth, we believe that it will be important to stimulate inward investment, improve connectivity and increase productivity. Aviation will be integral to this.

20. It seems sensible to us, that at a time of deep public spending cuts and reigning in of capital investment in infrastructure, the provision of a positive policy agenda on capacity and taxation could protect and enhance those transport links which cost the public purse nothing; offering the greatest return for least expenditure.

21. We therefore call on the Government to;

• Publish as soon as possible a coherent, comprehensive policy which supports and facilitates the sustainable development of UK aviation

• To reconsider government decisions which will result in capacity constraints and limitations on infrastructure being imposed upon the industry and travelling public

• To reduce and then phase out tax on air travel (whether in the form of the current Air Passenger Duty or any new per plane tax) with the entry of aviation into the EU ETS in 2012.

11 http://www.number10.gov.uk/news/speeches-and-transcripts/2010/08/pms-speech-on- tourism-54479 12 Source: Websites of Heathrow airport, Helsinki airport/Finnair, Aeroports de Paris, Schiphol Amsterdam airport and Frankfurt airport, accessed 22nd September 2010

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22. BATA would be pleased to provide oral evidence to expand on the points made in this submission.

September 2010

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Memorandum from Centro

Centro is the West Midland Integrated Transport Authority, we promote and develop integrated transport across the seven West Midlands Metropolitan Authorities of Birmingham, Coventry, Dudley, Sandwell, Solihull, and Wolverhampton. From April 2011 Centro will also take responsibility for the coordination and delivery of the West Midlands integrated transport strategy - Local Transport Plan 3. Our aim is to transform transport so that the people of the West Midlands have a world class integrated transport system provided by a best in class organisation. Centro seeks to ensure everyone in the region benefits from an effective transport system that meets the economic, social and environmental needs of the West Midlands.

Summary of Key Points Centro believes an efficient transport system is an essential prerequisite of a successful vibrant economy. This was well illustrated in the Eddington report and despite the economic slowdown we believe the case made by Eddington that transport investment should be focused on the major conurbations is still relevant. However, in order to maximise the benefits of an efficient transport network it is essential to target investment on those areas which not only deliver the connectivity required for people to access jobs but also to establish a basis for rebalancing the national economy, address social inequality, contribute to other sectors including health and help the UK significantly reduce its carbon footprint to meet global and national targets. In order for this to take place the role of transport needs to re-evaluated and re-prioritised as an area of Government spending which can bring far wider benefits than traditional thinking has allowed. High Speed 2 (HS2) provides a good example of how transport can have a direct impact on the economy of an area through its potential to attract investment, broaden travel horizons and labour markets and ultimately act as a major catalyst to rebalance the national economy. HS2 will provide high quality access to attract investment in the West Midlands and beyond, regenerate Birmingham city centre and boost the wealth and economic output throughout the region. HS2 therefore needs to be recognised as a national priority for investment over the forthcoming years. However, whilst HS2 provides a major opportunity for the UK in the longer term it is important to recognise and understand the broader role that transport can play in the shorter term. Centro believes the way transport and in particular public transport is currently prioritised and evaluated is misleading and does not reflect the true role and impact good transport initiatives, including rail and light rail schemes can have directly and indirectly on the local and national economy. There is a growing recognition of the role transport can play in addressing health issues such as obesity through active travel and respiratory problems through improving air quality. This is just one area where the wider role transport can play in addressing cross sector issues is not currently recognised fully enough either through funding allocations or appraisal of initiatives. Cities will play a crucial role in delivering sustainable economic growth but in order to facilitate this, a number of key issues need to be addressed. These include how transport can be delivered and enabled to ensure cities are shaped in a way which can promote sustainable growth. Funding mechanisms such as Accelerated Development Zones (ADZs) recognise the role that enabling infrastructure can have on attracting investment, delivering future growth and ultimately ensuring an urban renaissance can take place and occur in a direction which promotes sustainable travel. This principle has been recognised in London through the expansion of DLR and is being promoted further in Paris through their Land Use Masterplan for the city. TE 62

This shift in how transport initiatives are delivered and the growing need for this to happen faster is exemplified in the role that transport will play in the UK achieving their carbon reduction targets. Road transport accounts for almost a quarter (22%) of all UK CO2 emissions therefore whether investment is made through capital or revenue funding the need to reduce carbon levels and the role transport can play in addressing this means the emphasis on this investment should be public transport which can attract investment and usage.

Question 1 - Have the UK’s economic conditions materially changed since the Eddington Transport Study and, if so, does this affect the relationship between transport spending and UK economic growth? 1. The key change to economic conditions since the Eddington study is the slowdown in the economy and the fiscal deficit resulting in affordability becoming the key constraint on transport investment. We are not aware of any research being undertaken to examine if Eddington’s recommendations should still be considered valid. 2. However we believe there is a strong case for supporting the view that Eddington took for the following reasons: i) The appraisal of transport schemes takes place over 60 years and there is no reason to believe that similar economic conditions to those in place when the study was undertaken will not prevail for most of this period. ii) Eddington highlighted the relationship between economic prosperity and a successful transport system. As outlined below we believe that the economic impact of transport investment should be a key criterion in selection of schemes as a successful economy will result in rising tax revenue making schemes more affordable and allowing further investment in the future. iii) The growing move to decentralisation and funding through Local Enterprise Partnerships with strong business representation would favour transport schemes with a strong economic growth bias. 3. A key point highlighted in the study was that the strategic economic priorities for long-term transport policy should be growing and congested urban areas and their catchments; the key inter-urban corridors and the key international gateways that are showing signs of increasing congestion and unreliability. We believe that this is still the case as these are the areas where transport constraints have the potential to significantly hold back economic growth and will offer the best economic return given investment.

4. Regional and national economic performance relies heavily on the productivity of cities because of their concentrations of infrastructure, assets, high-value business and jobs. For example, the Birmingham economic area (the City Region) produces more than half of the entire region’s economic output, whilst Leeds and Sheffield’s combined account for more than two-thirds of Yorkshire’s (Ref 1). Question 2 - What type of spending should be prioritised in the context of an overall spending reduction, in order best to support regional and national economic growth? 5. At the current time there is considerable pressure to reduce the level of public expenditure. It is therefore of paramount importance that where the Government does spend money it achieves high levels of benefit. These benefits should be line with Government objectives, for example supporting the emphasis on transport schemes supporting economic growth and reducing carbon. As highlighted above we believe that if investment is to be reduced in the short term then it should be focused on urban areas, the driver of the UK economy. 6. In a situation of high Government deficit there is a strong case for ensuring that investment levels are not neglected and that cuts focus on expenditure where the direct impact on future prosperity is low. TE 62

7. A key area in which any Government can, and needs to invest in order to produce a prosperous economy is transport, which in many cases is capital intensive. The Eddington Report (Ref 2) provided many examples of this relationship including i) a 5% reduction in travel time for all business and freight travel on the roads could generate £2.5 billion of cost savings – some 0.2% of GDP ii) 55% of commuter journeys are to large urban areas. 69% of business trips are less than 15 miles in length. iii) 89% of the delay caused by congestion is in urban areas 8. Government inevitably has to be a major funder of infrastructure. At the time of writing webtag guidance is suspended and under review. As the revised guidance will be a key determinant of the type and level of transport investment many of the recommendations in this submission relate to suggested changes to the appraisal guidance and the approach taken to appraisal. 9. Traditionally transport appraisal has been based on welfare benefits. Where a cost benefit ratio exceeded 2:1 the investment was deemed to be high value for money and assuming that it was affordable and deliverable the project stood a good chance of being progressed. While relying on benefit cost ratios for project selection and prioritisation has its limitations this has been a key part of the decision making process for many years and it is likely to remain so in the future. 10. We believe there is the potential to simplify the appraisal methodology particularly for schemes below a certain threshold say £20m. However for all schemes we feel there is good potential to simplify the process through greater testing of options at an early stage deciding on a preferred option and developing that scheme in detail. In the past too much time has been spent on detailed appraisal of one or more alternative options even when it is clear which would be the final choice. In addition we feel there is also scope for speeding up the decision making process by DfT as delays often give rise to the need for reappraisal as guidance or circumstances change over time. Addressing both these issues would have the following benefits i) Early achievement of welfare benefits ii) Early achievement of economic benefits and tax income generated iii) Reduced scheme preparation costs for promoters. As nearly all scheme promoters are within the public sector this will further reduce public expenditure even if this impact is not fully felt by Central Government. 11. Suggestions for detailed changes to the appraisal methodology are outlined in the methods for assessing schemes below. 12. Over recent years there has been growing recognition within the transport industry that the economic impact of transport investment has not been fully recognised. The Department for Transport recognised this in part, and were planning to include a wider economic impact assessment in scheme appraisal from April 2010. Due to the election and change of Government the revised guidance was not implemented. 13. The wider economic impact assessment aimed to quantify the following benefits i) Agglomeration ii) Labour market impacts iii) Benefit of increasing output in imperfectly competitive markets 14. These were to be quantified in terms of net national impact as opposed to local and regional impact. While this was the prime definition of interest to Government there was recognition that benefits which accrued in areas of deprivation could be considered of greater worth and the appraisal guidance attempted to quantify the impact of benefits on different areas and groups in society. The wider economic appraisal did not impact directly on the benefit cost ratio but was designed to be a supplementary tool within the decision making process. TE 62

15. While the approach planned by DfT was welcomed by the transport industry there is a growing body of evidence supporting the view that it did not fully quantify the wider economic impacts. This is a view which Centro shares. We believe that given the high deficit there is a case for prioritising schemes which provide a strong economic stimulus and provide future tax revenues. We outline below our views on how the appraisal process could be modified to achieve this. It should be noted that it is not designed to replace the welfare test (ideally modified as in the response to question 4) but to complement it. Maintaining the welfare test acts as a guarantee of value for money. 16. The importance of transport investment to business to overcome the two key problems of lack of capacity on transport networks and inability to operate reliable services was clearly highlighted by the CBI in 2009 in a report assessing the state of UK transport networks and the concerns of businesses in regard to these issues. (Ref 3) 17. An efficient transport network has the ability to add to GDP and a poor one can reduce it with consequent implications for taxation and welfare spend. 18. There are considerable benefits to be had by targeting investment where, in addition to providing welfare benefits, it can support economic growth. As noted above the DfT has recognised the benefits of agglomeration and how reduced travel costs can increase the available pool of labour. 19. As transport makes an area more attractive both to businesses and those who wish to work in those businesses this can influence the number and type of businesses that choose to locate in that area. 20. In terms of productivity it is important that transport links businesses to pools of labour which meet employers’ needs. Much has been made in recent years about transport addressing worklessness and while it is true that good transport connections can reduce this, it should be recognised that this issue has many causes of which poor transport is just one. However in the case of unemployment and particularly structural unemployment (within a wider region) transport has the ability to address this issue quickly. Achieving this benefit may require larger scale schemes such as improvements to the heavy and light rail networks which expand the viable commuting region around major cities especially those outside London where longer distance commuting is less common. 21. The potential for schemes such as this exists in many areas. For example in the West Midlands investment in the Camp Hill Chords would allow an expansion of inter regional rail services. In addition new suburban services to Tamworth, on the to Kings Heath and on the would also be possible. The benefits would include: i) Expanding the labour market. For example there would be a much improved rail service from the large and expanding town of Tamworth. There would also be a station at which is an area of high social deprivation. A scheme such as this has the potential to provide better links across an area which incorporates a wide range of social mix and skills levels which is what is required to meet the needs of business. ii) Changes in the sectoral mix. As noted above good rail connections improve the productivity of businesses and the mix of those businesses. This could be of great benefit to the GVA of the West Midlands. In a recent report (Ref 4) The West Midlands Regional Observatory highlights that “the most significant contributors to the regional economy are the lower value added private sector activities”. The same report also highlights characteristics of individual towns in the region highlighting that Tamworth has historically been associated with low value added activity but that it is now diversifying its economy. There would be a considerable benefit from better linking the town to other major centres. Nuneaton is recognised as another town with similar characteristics. This also is linked with a major scheme bid for a rail scheme upgrading the Nuneaton Coventry rail line. iii) Schemes such as this and the expansion of the Midland Metro into Birmingham City Centre would also provide agglomeration benefits especially for the main TE 62

regional centre of Birmingham. Work undertaken for Centro by CEBR showed that extension of the Midland Metro would have annual benefits of £47m pa in 2021 (2006 prices). 22. Many other cities have major transport projects with well researched economic benefits. This does indicate that in many cases if the aim is to invest in schemes which will add to economic prosperity that the emphasis should be in the major conurbations. This should include areas outside the South East which in many cases already has good transport connections. Outside London the costs of construction and operation are likely to be lower and in the longer term the tendency for the London economy to overheat will be reduced improving the UK’s international competitiveness. This is likely to be of increasing importance in coming years as countries with lower cost bases such as Eastern Europe and in the Far East have increasingly skilled workforces. Such a policy is also in line with the current Government’s plans to rebalance the economy. In a speech given by David Cameron on 28th May 2010 (Ref 5) he stated 23. “Today our economy is heavily reliant on just a few industries and a few regions – particularly London and the South East. This really matters. An economy with such a narrow foundation for growth is fundamentally unstable and wasteful – because we are not making use of the talent out there in all parts of our United Kingdom” 24. In addition to benefits for business the economic benefits from vibrant economic centres spread throughout a region. High Speed Rail has the ability to act as a catalyst for investment and will play an important role in bridging the economic divide between London/South East and the rest of the country if a comprehensive network is delivered. Analysis produced on behalf of Centro (Ref 6) into the economic benefits of High Speed Rail between Birmingham and London show that if the high speed line is combined with changes to local and regional and national rail services the benefits to the West Midlands economy more than double and the benefits are much more widely distributed throughout the region with each worker, on average, earning around £300 more per annum. 25. The bus has an equally important role to play in supporting the economy. In the West Midlands over 300m journeys are made each year. Many of these are vital journeys to work or leisure trips involving spending which supports the local economy. As noted in the response to question 3 the bus can play a key role in reducing worklessness. In many areas of the country it is the only alternative to the car for journeys where walking or cycling is not practical. It is therefore imperative that if the economy is to thrive and be accessible to all continued investment in the bus network and associated infrastructure measures such as bus priority need to be maintained. 26. In summary the case for continuing to invest in transport infrastructure is strong. Given the importance of access to cities and the increasing importance of reducing carbon levels the emphasis should be on public rather than private transport. Question 3 - How should the balance between revenue and capital expenditure be altered? 27. The history of transport investment by Government in the UK outside London has focused on capital schemes. This is especially true in the bus and light rail industries. There is a saying that transport scheme promoters are ‘capital rich and revenue poor’. 28. Revenue expenditure has the ability to impact service levels, quality and frequency. Where changes in these areas are desirable they can be implemented much more quickly than capital schemes giving faster returns. An example from the West Midlands is the £1.5m which is being put into improving the number, frequency and hours of operation of buses around Birmingham Airport and the National Exhibition Centre. In this case funding is coming from the private sector. It is aimed at improving modal split in favour of public transport. For example public transport links from North Solihull (an area of high deprivation) to the airport have been poor and for the many shifts at the airport which begin around 0400 services are nonexistent. The new services will allow those without a car to access jobs for the first time with benefits for those seeking work and the airport businesses that have difficulty in recruiting for positions where pay is low. TE 62

29. Capital schemes give rise to revenue funding needs as maintenance arises. Some local authorities are discouraged from seeking capital funds due to concerns about revenue implications (Ref 7). A DfT study also noted that rates of return of 30:1 can be achieved from some revenue funded schemes such as personal journey planning (Ref 8). 30. The private sector has the potential to provide some funding streams. For example in Japan 30% of non fares revenue comes from property, advertising and consultancy compared to 5% in the UK. (Ref 9). Funding may also be available from Business Improvement Districts or through Accelerated Development Zones. 31. The key benefits of revenue investment are i) Benefits achieved much quicker than through capital investment ii) Ability to withdraw or switch investment if returns do not materialise iii) There is the opportunity to offer improvements to the public transport network iv) Costs likely to be lower than for capital schemes at least in the short term where funds are limited v) Fewer objections as no capital works and construction involved vi) Rates of return comparable to capital schemes vii) Adequate revenue funding ensures capital schemes well maintained and that good schemes are not put off for fear of revenue liability. Question 4 - Are the current methods for assessing proposed transport schemes satisfactory? 32. There are a number of detailed changes and additions which we would welcome within the welfare appraisal. Detailed consideration of these is beyond the scope of this submission and we will submit views when consultation on the new guidance takes place. However some of the key changes we would welcome are outlined below: Health Benefits 33. Many public transport schemes encourage greater physical activity and therefore can offer significant health benefits. As these projects have the ability to reduce the financial burden on the health sector and have been shown by a number of promoters to have excellent business cases it is recommended that funding for suitable transport schemes could be redistributed from health to transportation budgets. Cycling and walking schemes have the potential to reduce health costs and wider economic losses by reducing the physical inactivity that contributes to a range of chronic diseases. (Ref 10). Carbon

34. The UK has passed legislation which introduces the world’s first long-term legally binding framework to tackle the dangers of climate change. The Climate Change Bill was introduced into Parliament on 14 November 2007 and became law on 26 November 2008. The act includes a legally binding target of at least an 80 percent cut in greenhouse gas emissions by 2050, to be achieved through action in the UK and abroad and a reduction in emissions of at least 34 percent by 2020. Both these targets are against a 1990 baseline.

35. Road transport accounted for almost a quarter (22%) of all UK CO2 emissions in 2007, an increase from the 1990 baseline position unlike a range of other industries such as energy supply and business emissions, which have fallen over the same period.

36. The low value of carbon used within the DfT’s methodology means that the impact is often lost within a scheme appraisal. This means that schemes with a positive carbon impact have little impact on the overall business case and schemes with a negative carbon impact but large time saving benefits e.g. new road schemes can be prioritised above them. This is a significant issue if the UK is serious about meeting its obligations on climate change. We propose it is addressed by reviewing the value attributed to TE 62

carbon within appraisal and also by providing additional funding (outside the transport budget) for schemes which will make a significant contribution towards achieving these targets. (Ref 11) Smarter Choices 37. There are no plans to include factors such as ticketing within the appraisal framework despite DfT having commissioned research into the benefits associated with such measures. 38. On the basis of what is outlined above, Centro welcomes the recent Government announcement on the creation of a Local Sustainable Transport Fund which appears to very much support these principles and those outlined in the Campaign for Better Transport’s Carbon Reduction Fund Proposal. Question 5 - How will schemes be planned in the absence of regional bodies and following the revocation and abolition of Regional Spatial Strategies? 39. The West Midlands has a history of working productively and effectively together. Through a thorough analysis of the problems and opportunities it faces the Metropolitan Area has a clear view of the most appropriate interventions it needs to implement and support its Growth Agenda. 40. In the case of transport, the emerging Local Transport Plan 3 (LTP3) provides an integrated transport strategy which reflects the distinct challenges and opportunities across the Metropolitan Area. LTP3 sets out the transport requirements needed to deliver the regeneration and growth strategies of the West Midlands through an understanding of the transport issues and a close alignment with Local Development Frameworks. Post 2011, LTP3 will form the basis of a balanced integrated transport package of measures which will provide the platform for the connectivity required to deliver success in a changing economic environment. 41. However, current structures are not optimal for economic development, regeneration and transport and therefore the Metropolitan Area is not performing to its full potential. Following the Local Transport Act (2008) the West Midlands conducted a transport governance review which highlighted that transport strategy setting and delivery is currently fragmented. This will improve with the ITA having responsibility for the delivery of LTP3 for the Metropolitan Area from April 2011. However the link between regeneration, the low carbon economy and transport means there is an overriding imperative to ensure transport and regeneration strategy are fully integrated - do nothing is not an option. 42. The new coalition government came to power in May 2010 and announced the abolition of a number of regional structures in favour of Local Enterprise Partnerships (LEPs). Transport will play a vital role in the success of LEPs to delivering improved economic performance. It is therefore essential that decision making and strategy setting are fully aligned and on this basis the ITA have developed a proposal for a Commission for Integrated Transport which could work in partnership with the LEPs to ensure transport is prioritised and delivered effectively. 43. The Commission for Integrated Transport (CfIT) would assume the role of strategy setting, planning and commissioning the delivery of transport interventions across the LEP areas embracing the journey to work area.

44. The foundation for this would be the planning of an optimal integrated transport network coordinated across a number of LEPs - the Integrated Transport Strategy for the travel to work area would meet the economic development aspirations of those LEPs in the context of transport. This would include a funding strategy, coordinating integration between transport modes and ensuring transport fulfils its full contribution to the delivery of economic growth and regeneration priorities. In order to ensure coordination of strategic transport planning functions protocols will be put in place with Network Rail and the Highways Agency to ensure coordination of transport strategy setting and delivery across the area. TE 62

45. Further discussion is needed on the membership of CfIT, however it is envisaged that membership would come from both local authorities and the LEPs within the CfIT area. The LEPs would help secure the funding and through CfIT would commission the delivery of transport initiatives through a number of delivery ‘agencies’ including local authorities for highway works and Centro for public transport. This proposal would advance how transport strategy is set and delivered within the West Midlands

REFERENCES 1) Driving Economic Recovery: The Core Cities – A new partnership with Government, September 2010 2) Sir Rod Eddington – The Eddington Transport Study – December 2006 3) CBI – Time to Change Gear: Assessing the UK Transport Networks – February 2009 4) West Midlands Regional Observatory – The West Midlands Economy Post Recession: Key Issues and Challenges – Final Report June 2010 5) “Transforming the British economy: Coalition strategy for economic growth” – speech made by David Cameron on 28th May 2010. 6) High Speed Rail and Supporting Investments in the West Midlands: Consequences for Employment and Economic Growth, KPMG for Centro, June 2010 7) Local Transport Planning and Funding – UK Parliament Transport Select Committee - 2006 8) Department for Transport – A Review of the Effectiveness of Personalised Journey Planning – 2005 9) Focus – Chartered Institute of Logistics and Transportation – June 2000 10) An Analysis of Urban Transport – Cabinet Office – November 2009 11) Review of Low Carbon Technologies for Heavy Goods Vehicles – Ricardo plc – March 2010 12) Campaign for Better Transport Carbon Reduction Fund: A Proposal for the Department for Transport’s Carbon Reduction Strategy – April 2009 September 2010 TE 63

Memorandum from Living Streets

Summary

• Living Streets considers that the business case for investment in low-carbon, cost- effective transport infrastructure is stronger than ever in the current economic circumstances • From our research and experience, Living Streets considers that spending on pedestrian infrastructure, particularly ensuring that rural and urban housing is linked to high streets and district centres, has considerable benefits relative to its costs, is optimally delivered by local mechanisms and well-suited to community decision-making, and is a tangible and value for money way to boost both economic growth and quality of life • Living Streets recognises the need for a wider context of transport investment which also supports, promotes and expands public transport and cycling as alternatives to the car, and the potential benefits of such an approach to economic growth, particularly in low- growth or economically deprived regions • In order to achieve this broader vision, Living Streets would favour greater flexibility between capital and revenue expenditure in the settlement with local transport authorities • Living Streets considers that methods of assessing proposed transport schemes should be clarified and improved, particularly where elements such as health and environmental outcomes impact on future public expenditure • Living Streets welcomes the announcement of the Local Sustainable Transport Fund, having advocated its establishment, and see a substantial fund, a balance between revenue and capital spending, ambitious criteria, third sector involvement and an emphasis on walking and public realm issues as crucial to the Fund’s effectiveness

1. About Living Streets

1.1 Living Streets is the national charity that stands up for pedestrians. With our supporters we work to create safe, attractive and enjoyable streets, where people want to walk. We work with professionals and politicians to make sure every community can enjoy vibrant streets and public spaces.

1.2 The history of Living Streets demonstrates the strength of our agenda. We were formed in 1929, as the Pedestrians Association, and have grown to include a network of 100 branches and affiliated groups, 28 local authority members and a growing number of corporate supporters. As well as working to influence policy on a national and local level, we also carry out a range of practical work to train professionals in good street design, and enable local communities to improve their own neighbourhoods. We run high profile national campaigns such as Walk to School and Walk to Work Week, to encourage people to increase their walking levels and realise a vision of vibrant, living streets across the UK.

1.3 Living Streets’ response focuses on the business case for walking and cycling (collectively referred to as active travel) infrastructure and promotion as the most cost-effective, practical, noticeable, healthy, green and egalitarian area for transport investment. The response draws on our 80 year experience of standing up for pedestrians. Our arguments and evidence led to such road safety milestones as the introduction of speed limits and the driving test in the 1930s, the green cross code in the 1970s, and 20 mph zones in the 1990s.

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2. Responding to the inquiry: the economic case for walking

2.1 Living Streets was delighted to have made a tangible contribution of evidence to the Eddington Study, which reflected a considerable body of research on active travel in its verdict on the relative benefits and costs of active travel schemes, stating that they have ‘the potential to provide benefits to the economy and welfare through both reduced congestion and the associated likely reduction in greenhouse gas emissions and other pollutants, and improved health’1.

2.2 Since the publication of the Eddington Report, the policy landscape has been dominated by the economic downturn. Whilst acknowledging the Secretary of State’s decision to ‘prioritise those transport investment schemes which support economic growth’, we argue that this should be done in such a way as to prevent detriment to, and where possible enhance, the environment, public health and overall quality of life. We advocate that the costs and benefits of projects are assessed in such a way as to recognise the full economic and social value of positive environmental and health outcomes emerging from active transport projects, and ensure that the projects funded are those which provide the maximum public benefit in the most cost-effective manner. We argue in particular that walking schemes have a measurable, positive impact on efficiency and deliver benefits far beyond their cost by reducing the necessity for public expenditure through improved health and wellbeing. Additionally, in constrained economic circumstances it becomes all the more important that all modes of transport pay their full cost to the environment, as recommended by Eddington, in order that an informed assessment of costs and benefits can be made.

2.3 In this context, we note with approval the priority placed by the Eddington Report on reducing urban congestion and the economic benefits attributed to this, and suggest that the economic downturn has only seen this increase in importance as businesses struggle to make the most of their resources. Eddington quotes a 2004 British Chamber of Commerce (BCC) survey in which ‘three quarters of businesses said that transport delays had caused them to incur increased operating costs in the form of penalties for late deliveries, overtime costs, missed meetings affecting contract negotiations and lower productivity’2, as well as lost person-hours. Taking the same series of surveys, these problems have only escalated in the time since the Eddington Report was published. The BCC reported in 2008 that over 85% of businesses considered congestion to be a problem that has a material impact on their livelihoods.3 The costs per year, as estimated by businesses, of problems with the UK’s transport infrastructure stood at £17,350 per business on average in 20084 and had gone up to £19,0805 by the time of a comparable BCC survey in 2010, an increase of 10%. Throughout, a lack of alternatives to the car has increasingly been reported by businesses as a key reason for congestion. In light of the pressing need for job creation and attracting inward investment, congestion reduction is even more important to business now than it was at the time of the Eddington Study. 2.4 In terms of congestion alone, there are huge benefits delivered by active travel. As we noted in a recent joint letter to Secretary of State for Transport, the Rt Hon Philip Hammond MP, in support of Smarter Travel Choices (STC) programmes: ‘The evidence… shows a strong case for supporting the local implementation of low cost, high value STC packages. Your department’s own report showed that they delivered exceptional value for money (a Benefit : Cost Ratio of 4.5 for congestion alone), reductions in car-driver trips of 9% and in emissions from car driving of 4.6%, as well as significant health and local environmental benefits.’6 In Living Streets’ own experience, an independent evaluation of

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the Walk Once a Week (WoW) scheme found that walking rates were on average 9% higher than the National Travel Survey average where schools were taking part in WoW than where they were not – with associated reductions in congestion, health and environmental benefits and social benefits. The evaluation calculated a benefit: cost ratio of 3.1 for the WoW scheme nationally.7

2.5 As well as ‘soft’ behavioural change schemes, ‘hard’ physical infrastructure to promote walking and cycling has consistently shown benefit-cost ratios that are hugely higher than road schemes.8 Our experience indicates a particularly sustained and tangible effect where soft and hard measures are combined, as with Living Streets’ ‘Fitter for Walking’ project delivery. In Marks Gate, in the London Borough of Barking and Dagenham, resurfacing, dropped-kerbs and raised tables on desire lines, clutter reduction and pedestrian signage through a problematic subway were allied with community planting, a clean-up and an art project with local children to make route maps. Residents have responded strongly to the improvements, taking pride in the work they’ve contributed to the overall project, and in their neighbourhood. In Bensham, Gateshead, a road scheme linking several schools in the Orthodox Jewish community has widened footways, reduced clutter, and introduced a build out and raised table to improve pedestrian crossing. This has been combined with community events encouraging pledges from parents to walk their children to school. Having several community leaders on board has reinforced the message that too many vehicles are a source of danger, rather than being a safer way of getting large families to school.

2.6 Nationwide, Fitter for Walking schemes in areas with high obesity rates have seen 75% of people on the scheme reporting walking more and 64% feeling fitter and healthier as a result. Meanwhile, national research has explored the potential for improvements to the public realm that enable more walking to lock in economic benefits to the local economy9.

2.7 The Department for Transport report referred to adds that ‘Including environmental, consumer-benefit and health effects on the basis of recent Department for Transport modelling could broadly double the congestion-only figure.’10 We would draw attention to the positive implications of mainstreaming active travel for both public expenditure and quality of life, as indicated in the Eddington Report and in authoritative research on a broad range of interlinked but separate subjects, from the established subjects of physical health and climate change to the mental health effects and impact on productivity of long commutes in poor conditions.

2.8 An obvious and hugely important impact of investment in pedestrian environments is a reduction in road casualties. Living Streets campaigns, alongside many others, for a default speed limit of 20 miles per hour in all residential areas and, where appropriate, in other streets, such as high streets that function as a ‘place’ more than as a corridor for movement. In Portsmouth, where default speed limits of 20mph were imposed on 94% of the road length in the City Council area, road casualties fell by 22%, far outstripping the national trend.11 Particularly where this is implemented through default speed limits rather than ‘zones’ with signage and humps, it can be achieved very cost-effectively. The application of ‘naked streets’ design principles such as decluttering and widening of pavements, which encourage more cooperative and responsible road user behaviour through design rather than regulation, can also have benefits far outstripping their costs if they are well-implemented. A prominent example is Kensington High Street, which saw overall road casualties drop by nearly half after a naked streets redesign.12 Living Streets also campaigns against inconsiderate parking behaviour, which is inconvenient,

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dangerous and unfair for pedestrians and people with mobility difficulties and which could also cost lives if, for example, it prevented emergency services vehicles from gaining access to an area. With the average road traffic collision carrying an estimated cost of £75,000 – and a fatal incident costed by the Department for Transport at nearly £2m13 – the direct economic value of pragmatic, high-quality pedestrian-focused design, combined with the potential to safeguard human life and improve quality of life and perceptions of safety, is undeniable.

2.9 The contribution of active travel to the reduction of carbon emissions and air pollution, which increasingly entail considerable financial implications, is increasingly well established. The Committee on Climate Change has therefore called for a national roll out of the STC programme, which it estimates would save 2.9 metric tonnes CO2 equivalent per year.

2.10 Similarly well established are the effects of inactivity on obesity levels, and the costs of obesity to the workforce and the NHS, are well established. If current trends continue, by 2050 it is estimated that almost 60% of the UK population could be obese with the economic cost reaching £49.9 billion at today’s prices.14 Meanwhile, the estimated costs of physical inactivity in England are £8.2 billion annually, which does not include the contribution of inactivity to obesity which in itself has been estimated at £2.5 billion annually. These figures include both the costs to the NHS and costs related to the economy, such as absence from work.15

2.11 Investment in active travel infrastructure can also ensure that economic growth and improvements to quality of life are targeted where they are most needed. Walking is a cheap and effective mode of physical activity that promotes independence and is evidently the method most suited to tackling health inequalities: it is almost unique in the fact that there is no financial outlay and, unlike gym-going in particular, cuts across financial divides. The cost-effectiveness of active travel as exercise further extends to the infrastructure needed, particularly in a context where funding for sports and leisure infrastructure, at least outside the Olympic area, is likely to be vastly reduced. Living Streets’ favoured ‘naked streets’ approach to improving the pedestrian environment, whereby high quality, inclusive street design is preferred to regulatory approaches such as excessive signage and traffic signals and pedestrian segregation, can often be implemented at low cost, for example when decluttering is carried out as part of a programme of scheduled maintenance.

2.12 Poor, unsafe walking environments are a typical attribute of areas of deprivation. A recent, detailed statistical study of child road casualties found that children living in Preston are more than twice as likely to be injured on the road than the national average, and five times more likely than those in Kensington & Chelsea.16 In addition to the horrifying direct consequences of this, an intimidating, unsafe walking environment is a powerful disincentive to physical activity.

2.13 The potential of walking to be the mode of choice for a vast range and number of people is a powerful argument for targeting investment to ensure that travel over shorter distances receives as much attention as travel over longer distances. 2008 Transport for London research17 found that over two thirds of Londoners are receptive to walking more over the next year (as compared with one in four who were receptive to cycling more). Getting the quality of the built environment right is crucial to tapping into this latent demand: making streets and places where people feel comfortable and safe and where they want to both

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walk and spend time. An effective public realm improvement can make people feel safer by opening up and populating spaces, which also has powerful implications for the development of social capital and the release of space for community events and informal meeting. This is demonstrable even (or especially) in highly trafficked areas and even where changes are temporary. For example, London’s Very Important Pedestrian (VIP) Day, where Oxford Street is closed to motor traffic, has been a great success, warmly welcomed both by shoppers and retailers. The New West End Company, the Business Improvement District covering Oxford Street, reported 2 million visitors to the 2009 event, with 81% of retailers surveyed reporting increased or constant sales despite the economic conditions, and 79% of shoppers surveyed indicating that they would like to see more traffic-free events. The Company quotes a Return on Investment ratio of £157:118. Conducted well, the process of identifying more permanent improvements can in itself bring people together to consider community responses to common challenges, as with Living Streets’ Community Street Audits, which equip local stakeholders to evaluate the quality of their streets and be part of the solution.

2.14 The economic circumstances and the localism agenda entail a pressing need for transport spending to respond to public priorities in a visible, place-based and democratic way. As budgets reduce and the management of expectations comes to the fore, public realm schemes clearly have a huge role to play. To put this in perspective, several genuinely transformative and impressive urban pedestrianisation or naked streets schemes which enable and encourage walking, with the associated benefits, where once driving would have been the norm, could be built for less than the realistic cost of a single mile of motorway.19 Clear, shared objectives and a demonstrably broad base of local support can engender ownership of a public realm scheme which can itself have powerful financial implications, as in the East Riding of Yorkshire, where Living Streets’ Community Street Audit training led to an additional £100,000 being leveraged for improvements, much of it from private sources. More long-term, established research by academics and practitioners, including Transport for London, has found clear positive correlations between pedestrian improvements and increases in retail footfall, and between travel by foot and total level of spend. One recent Manchester-based longitudinal study showed pedestrian priority schemes increasing retail footfall by 20-40%, with an increase in turnover of over 17%.20

3. The wider transport context

3.1 Living Streets recognises that walking, whilst a hugely significant part of the everyday transport mix for people in the UK, cannot be the sole solution to the transport challenges that the UK faces. To that end we would advocate a wider framework of transport investment which also supports, promotes and expands cycling and public transport as alternatives to the car, and emphasise the potential benefits of such an approach to economic growth, particularly in low-growth or economically deprived regions.

3.2 We would draw attention to the importance of adequate pedestrian infrastructure, particularly easily navigable, safe and attractive interchanges, as a major influence on mode choices involving public transport in particular and would encourage the funding of

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low-cost, community-led solutions for the improvement of the pedestrian experience at public transport interchanges.

3.3 Living Streets is not anti-motorist and notes that all motorists are pedestrians at one time or another. However, in line with Eddington, we recognise the need for the mix of incentives around modal choices to reflect the undesirable environmental, social and health-related impacts of car dominance and car-dominated planning. A Parliamentary question by Norman Baker MP revealed that the real cost of motoring, including the purchase of a vehicle, declined by 14 per cent between 1997 and 2009, while public transport costs conversely increased by more than 13 per cent21. The economic circumstances make it all the more important that this inequity is considered as a key factor when considering which transport modes can best afford to bear the brunt of cuts and which should be protected.

4. Assessing, funding and coordinating transport schemes

4.1 In order to achieve this broader vision, and in response to the cost-effectiveness of properly delivered smarter choices programmes, Living Streets would favour greater flexibility between capital and revenue expenditure in the settlement with local transport authorities. This is very much in line with the government’s welcome moves towards more local control of revenue. Coupled with an emphasis in national guidance frameworks on the need for behavioural change and infrastructure improvements to be coordinated in order to achieve the best results, this can form part of a realistic response to the high costs and mixed outcomes of road building.

4.2 Living Streets considers that methods of assessing proposed transport schemes should be clarified and improved, particularly where elements such as health and environmental outcomes impact on future public expenditure. In particular, we would argue that the New Approach to Transport Appraisal (NATA) places too high a value on notional time savings as set against tangible and substantial health and environmental outcomes, and contains other anomalies which can lead to car-based schemes being favoured. The case for improving appraisal to take better account of which schemes make the largest net positive difference at the best value for money has been well argued elsewhere.

4.3 Urban public realm schemes are ideally suited to local delivery and do not rely on regional strategies or input, which also has positive implications for the ease of measuring the economic and wider impact of such schemes. Unlike road schemes that cross borders, joint working between neighbouring authorities could be carried out on an ad-hoc basis where necessary with relative ease. Living Streets’ Community Street Audit process, whereby local stakeholders are facilitated in evaluating their streets from their everyday perspective as a pedestrian and equipped to identify realistic but transformative improvements, shows the vast potential for democratisation of public realm schemes, whilst the potential for budgetary capture by communities for low-cost, high-impact street scene improvement measures has already been demonstrated in ward and neighbourhood budgeting exercises in local authority areas around the country and across the political spectrum. In order to support this localist approach, Living Streets advocates clear guidance on the importance of public realm in the forthcoming national planning framework and the availability of suitable professional support and development for local authority practitioners in implementing good design.

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5. Pump priming: a fund for local sustainable travel

5.1 Living Streets welcomes the announcement of the Local Sustainable Transport Fund, having been one of several organisations advocating the establishment of such a fund to back or match fund the delivery of low-cost, high-impact active travel projects to underpin economic growth and regeneration.

5.2 We would envisage two key criteria for a successful and effective fund: it should be substantial in scale, particularly when compared to expenditure levels on conventional capital projects, and it should welcome bids for revenue and ‘pump-priming’ funding as well as for capital funding in order to promote and support the behavioural change agenda.

5.3 Living Streets hopes that the Local Sustainable Transport Fund will invite innovative bids to transform local transport, focusing particularly on low carbon solutions, particularly related to walking and the enhancement of the public realm, which also deliver wider health, social inclusion, congestion, road safety, environmental and quality of life benefits. We advocate that the fund also supports the mainstreaming of resulting projects and approaches within local transport plans. The involvement of third sector organisations, such as the members of the Active Travel Consortium, community transport groups and social enterprises, will be an important way of ensuring that schemes are genuinely place- based, community-led and draw on existing best practice and expertise.

5.4 The fund’s central purpose should be to enable transformational change and act as a lever to encourage local authorities to be ambitious, above and beyond the contents of their Local Transport Plans. It should provide for behaviour change schemes to encourage more walking and cycling, as well as infrastructure, traffic management and other projects. This should include incentive schemes and promotional measures such as car free days. Allocation of funds would be tied to ambitious goals on improving sustainable travel as well as bidders’ demonstrable use of existing best practice.

5.5 The fund should emphasise the importance of public realm and built environment improvements which would have a beneficial impact on the number of people walking and cycling, and enable smaller schemes to promote such modal shift, as well as larger projects. While Living Streets places great value in the potential of large scale “place making” projects (such as, for example the redevelopment of Trafalgar Square in London) to open up urban areas and make them more conducive to walking, smaller behavioural change projects, particularly when linked explicitly to such public realm improvements, can deliver value for money results as discussed above. There are many examples of such improvements leading to modal shift to walking and cycling, such as the Walworth Road 22 project in South London , and the redesign of Sheffield City Centre.

Living Streets would be delighted to provide further evidence and information to the Select Committee or to discuss these issues more informally.

1 HM Treasury and Department for Transport. 2006. The Eddington Transport Study, p.157 para 3.44. London: The Stationery Office. 2 British Chambers of Commerce. 2004. Getting Business Moving. Quoted in HM Treasury and Department for Transport, 2006. The Eddington Transport Study, p. 92 para 2.77.

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3 British Chambers of Commerce. 2008. The Congestion Question, p.10. Available at www.britishchambers.org.uk/6798219244790033732/Transport_Survey_2008.pdf , accessed 9 September 2010 4 British Chambers of Commerce. 2008. The Congestion Question, p.22. Available at www.britishchambers.org.uk/6798219244790033732/Transport_Survey_2008.pdf , accessed 9 September 2010 5 British Chambers of Commerce. 2010. Reconnecting Britain: A Business Infrastructure Survey, p.12. Available at www.britishchambers.org.uk/6798219246885060772/BCC%20Infrastructure%20Survey.pdf , accessed 9 September 2010. 6 ‘Using the Comprehensive Spending Review to mainstream Smarter Travel Choices’. September 2010. Letter to Philip Hammond MP from seven leading NGOs. 7 Wavehill Consulting. 2009. Independent evaluation of the Walk Once a Week scheme for Living Streets, Department of Health and Transport for London. 8 Dr Adrian Davis. 2010. Value for Money: An Economic Assessment of Investment in Walking and Cycling. Bristol: Bristol City Council/NHS Bristol 9 Commission for Architecture and the Built Environment. 2007. Paved with Gold: the real value of street design. London: CABE. 10 Sloman, L., Cairns, C., Newson, C., Anable, J., Pridmore, A. and Goodwin, P. 2010. The Effects of Smarter Choice Programmes in the Sustainable Travel Towns: Summary Report, p.8. Available at www.dft.gov.uk/pgr/sustainable/smarterchoices/programmes/pdf/chap1.pdf , accessed 2 September 2010 11 Department for Transport. 2010. Interim Evaluation of the Implementation of 20 mph Speed Limits in Portsmouth. Available at www.dft.gov.uk/pgr/roadsafety/speedmanagement/20mphPortsmouth/pdf/20mphzoneresearch.pdf , accessed 21 September 2010. 12 Swinburne, G. 2006. Report on Road Safety in Kensington High Street. London: Royal Borough of Kensington and Chelsea. Available at http://acocksgreenfocusgroup.org.uk/wp- content/uploads/2009/06/Ken-High-Street-Stats2.pdf , accessed 9 September 2010 13 Department for Transport. 2009. Reported Road Casualties Great Britain: 2008 Annual Report. London: DfT. Available at www.dft.gov.uk/adobepdf/162469/221412/221549/227755/rrcgb2008.pdf , accessed 7 September 2010. 15 Government Office of Science. 2007. Tackling Obesities: Future Choices. London: Foresight. 16 Chief Medical Officer (2004). At least five a week: Evidence on the impact of physical activity and its relationship to health. London: Department of Health. 17 Road Safety Analysis. 2010. Child Casualties 2010; A study into resident risk of children on roads in Great Britain 2004-08. Available at www.roadsafetyanalysis.org/wp-content/uploads/2010/08/PR-Child- Casualty-Report-RSA-edit.doc, accessed on 20 August 2010 18 Synovate / Transport for London. 2008. Attitudes to Walking 2008 Research Report 19 New West End Company, ‘Shop West End Marketing Strategy 2010-11’, www.newwestend.com/generic/document/content/415 , accessed on 20 June 2010 19 Highways Agency. 2005. ‘Cost Per Mile of Constructing a Motorway’ [response to Freedom of Information request]. Available at www.highways.gov.uk/aboutus/documents/crs_463367.pdf , accessed 21 September 2010. 21 Whitehead, T., Simmonds, D., and Preston, J. 2006. ‘The effect of urban quality improvements on economic activity’. In Journal of Environmental Management, 80 (1), July 2006, pp.1-12. Available at www.sciencedirect.com/science?_ob=MImg&_imagekey=B6WJ7-4JKYWJV-1- 5&_cdi=6871&_user=10&_pii=S0301479705001180&_origin=search&_coverDate=07%2F31%2F2006&_sk =999199998&view=c&wchp=dGLzVtb- zSkzV&md5=ed2cf55db91dc5fd770010b16b23ae9b&ie=/sdarticle.pdf , accessed 2 September 2010 22 Hansard, HC (series 5) vol.505, col. 534W (5 February 2010). Available at www.publications.parliament.uk/pa/cm200910/cmhansrd/cm100205/text/100205w0001.htm#100205370000 25 , accessed 13 September 2010 22 See NSL case study at www.nsl.co.uk/case-studies/1-transformation-of-walworth-road

September 2010

Memorandum from London TravelWatch (TE 64)

1 Introduction

London TravelWatch welcomes the opportunity to contribute to House of Commons Transport Committee’s inquiry into transport and the economy. The impact of the recession has been felt in the transport industry in the form of both reduced revenue and public funding. We urge that the lessons of past recessions are learnt: that delaying investment and contracting transport can result in insufficient capacity when the economy recovers.

London TravelWatch is providing a written submission to the Transport Select Committee inquiry in its capacity as the independent transport user watchdog for London, and the watchdog for rail passengers in the area surrounding London.

London TravelWatch believes that the transport needs of London and its surrounding area are unique in the United Kingdom. The region is the economic heart of the British economy and transport is central to the success and growth of the region, this is illustrated by the following points:

1. Central London employment is dependent upon the availability of transport and London as a whole contributes between £14.3bn and £19.4bn to the UK economy in the difference between public expenditure and tax paid.1 2. Public transport in London has a larger modal share of trips than any other region of the UK. 3. While there has been investment in transport capacity over the last ten years the average number of passengers per train, bus and tram has also risen in the same period.2 4. The subsidy per passenger kilometre for London and the South East operators is generally lower than the rest of the UK.3 5. Everyday 1.11 million people commute into or out of London4, for most of these journeys public transport is the only viable option available to them. It is therefore of great importance to the wider economy that public transport quality and capacity is invested in and maintained.

1 Source: Page 102, London’s Place in the UK Economy, Oct 2009, City of London 2 Source: Travel in London Report 2, 2010, TfL 3 Source: ORR Statistics 2008 http://www.rail-reg.gov.uk/upload/xls/nrt-tables-ch6-misc-240610.xls 4 Source: Travel in London Report 2, 2010, TfL

2 London TravelWatch Written Submission

Have the UK’s economic conditions materially changed since the Eddington Transport Study and, if so, does this affect the relationship between transport spending and UK economic growth? London TravelWatch accepts the premise of the Eddington study that the linkage between transport spending and economic growth is present provided that the investment is targeted. The study provides case studies where lack of investment constrains economic growth in Ireland and India. London TravelWatch argues that this position is the same in London where without investment in the capacity of the network as a whole the disbenefits to the economy will be significant in terms of road congestion and crowding on public transport. As a result we recommend wider road user charging to fund increased investment in public transport, walking and cycling.

The Eddington study also argued for efficient utilisation of existing transport infrastructure and improving its performance. In this context we recommend that road user charging is investigated to reduce traffic congestion, as well as a means to fund improvements in alternative means of transport. The study recommended a long term strategic policy approach to transport provision but with sufficient flexibility to respond to changes in circumstances. Given the long-term view of the Eddington study, London TravelWatch does not believe that there have been material changes to alter the priorities set out by the study.

What type of transport spending should be prioritised, in the context of an overall spending reduction, in order best to support regional and national economic growth?

• London’s roads

London TravelWatch recommends the retention of existing congestion charging zones and an expansion of congestion charging, but with an increasing level of sophistication. In 2010/11 Congestion Charging is forecast to be £378m budgeted to fall by £51m in 2011/12 with abolition of the Western Extension Zone.

The increased sophistication could be in the form of separate zones and GPS technology. This technology could support more intelligent charging for example by varying operating hours for specific areas or charging zones. The income from congestion charging could be used to fund public transport in London, as well as reducing congestion by encouraging behavioural change and modal shift.

• London’s public transport as a whole

Current public transport capacity should be maintained and expanded to meet forecast demand. This may mean additional bus services to compensate for delayed infrastructure.

London has the greatest dependence on its public transport network of any region in the UK. The role of public transport as the only practical means of transport for many commuters means that it is central to the continued economic growth of London. Since the first quarter of 2009/10, public transport usage has grown following a contraction as a result of the recession. This continued growth of transport demand means that there is still a need for investment in the capacity of the transport network. For this reason it would not be in the interests of the passenger to revisit the schemes already specified in the High Level Output Statement (HLOS) or TfL London Underground upgrade. This is partly because of the complexity and time that revision would involve, but more importantly because passengers need the investment in the capacity and performance of public transport.

• Buses

In recognition of the role the bus plays in London’s transport system, the quality and volume of service should not be decreased. Buses account for 20% of the modal share of journeys in London which is by far the largest share of public transport.5 London TravelWatch’s research into ‘Bus passengers’ priorities for improvements in London’ (2010) http://www.londontravelwatch.org.uk/document/4152/get found that passengers prioritised the following areas for improvements: 1 More buses are on time or within 5 minutes of when they are scheduled to arrive. 2 Buses run more frequently at times when you want to use the bus. 3 Electronic displays showing the correct length of time until the next bus is due to arrive are available at all bus stops. 4 The correct route number and destination is clearly displayed on the outside of all buses. 5 All bus drivers are helpful and have a positive attitude.

London TravelWatch recommends because passengers’ prioritisation of journey time reliability that bus priority measures are extended to increase the efficiency of the bus network by improving journey time reliability. Additional priority measures also have the potential to reduce the cost of bus operation and enable them to transport more passengers more quickly.

• London Underground and National Rail

The last recession in the early 1990s led to delays in infrastructure spending which ultimately meant that supply did not keep pace with demand once passenger numbers started to grow. Demand in 2009/10 has now started grow following the impact of the recession. Given the long lead times for investment, delays would not be in passengers’ interest as the levels of forecast growth, while lower than prior to the recession, are showing an increasing level of transport demand over the next 20 years.

For London Underground and the national railways, maintenance and renewals must continue in order that performance does not decline.

We recommend a gating strategy is developed for London to systematically increase revenue collection. There are also substantial benefits for passengers from gating in terms of potential means to fund increased levels of staffing and the perceived sense of security at stations. There are a number of strategic gaps in gating in certain areas

5 Page 44, Travel in London Report 2 (2010), TfL

such as south east London. However, a combination of revenue support and the allocation of the London revenue make it hard to justify individual investment by a single operator. A strategic approach by TfL or the DfT, however, could capture significant volumes of revenue currently lost, by looking at gating schemes across entire areas.

How should the balance between revenue and capital expenditure be altered? It is the goal of the ‘Delivering a Sustainable Railway’ (2009) White Paper that the balance of contributions of passengers should increase and the proportion of tax-payer funding should decrease over the period up to 2014. For TfL, its 2010/11-2017/18 business plan also sees fares revenue forming a greater percentage of its income.

London TravelWatch is concerned that only 48% of national rail passengers in the last National Passenger Survey were satisfied with the value for money of their tickets. This indicates that passengers are not getting what they deem a sufficient service given the cost of travel. As a result, we recommend a strategic fares review in London and the South East to ensure that passengers get the best value for money and that the system is fair across the whole region. This review could also be linked to the role of fares in contributing to the funding of the rail industry. This review might consider: • The fairness and value for money of fares • Review of the Travelcard boundaries • Value for money from the perspective of the passenger and tax-payer • Review of concessions: For example, an end to the 0930 concession for as the peak resource requirement drives the main element of cost, or a limit (albeit generous) on free children’s travel concession.

In a more general sense, a review of the balance between capital expenditure and revenue should consider the impact of deferral of capital expenditure on the future ability of the transport network to cater for demand in the future.

Are the current methods for assessing proposed transport schemes satisfactory? London TravelWatch has concerns about the potential for increased private investment in the rail network to distort funding decisions in favour solely of financial rates of return on investment. Affordability is a key requirement but public spending should also take into account the wider economic benefits of transport. London TravelWatch has a specific concern about longer rail franchises, which relates operator investment to extend the franchise beyond the 15 year maximum. In our experience, operator investment tends to target more lucrative longer distance passengers at the exclusion of suburban metro passengers. London TravelWatch would not want to see operators ‘cherry-pick’ lucrative routes for investment. We recommend, therefore, wider economic benefits must also be factored into investment decisions.

In terms of appraisal methodology in the DfT’s Transport Analysis Guidance, there are always weaknesses with any assessment methods because the future is, necessarily, an uncertain place. However, in the context of the rail industry the standard forecasting tool MOIRA is in need of update because its methodology is only really appropriate for incremental changes to the network. It is not able to forecast accurately the impact of new journey possibilities not previously possible by rail.

How will schemes be planned in the absence of regional bodies and following the revocation and abolition of regional spatial strategies? London TravelWatch has contributed extensively to the Draft Replacement London Plan and its predecessors. Outside of Greater London, the revocation and abolition of regional spatial strategies has the potential to make planning decisions less certain about strategies for employment and housing growth. Both of these factors have a key influence over the long term requirements of the transport network. There are therefore challenges that are created by the absence of regional bodies and revocation of regional spatial strategies.

3 Conclusion

In the context of potential cuts in service provision and for increased fares or congestion charge revenue, there will be an impact on those in society least able to afford transport costs. It is very important that all levels of decision makers within Government and transport operators seek to minimise the impact on the people in society who are least able to afford rises in the cost of transport, and who will be most affected by declines in quality and quantity of services.

Decisions about transport spending priorities need to protect the core functions of transport in London and its surrounding area to ensure that capacity is present both now and in the future. Decisions about transport priorities should take into account the potential future impacts on the transport network and not made on short-term cost cutting grounds.

September 2010

TE 65

Memorandum from the CBI

1. The CBI is the UK’s leading business organisation, speaking for some 240,000 businesses that together employ around a third of the private sector workforce. With offices across the UK as well as representation in Brussels, Washington, Beijing and Delhi the CBI communicates the British business voice around the world.

2. We therefore have a strong interest in ensuring the UK’s international and national transport networks are capable of enabling economic recovery in the short term and economic growth in the medium to long term.

3. Overall we still believe the conclusions of the Eddington study remain highly relevant and robust. More recent studies that we are aware of and the CBI’s own surveys of its members continue to emphasise the cost of congestion to the economy, and the need to focus on the performance of transport networks as a whole and addressing ‘bottlenecks’ in particular. The attached submission, which draws heavily on the CBI’s recent submission to the Government’s Spending Review, summarises the overall economic case for investment in transport and sets out how the CBI believes public funding should be prioritised.

4. However, we recognise that given the scale of congestion, especially on roads, and the constraints on Government capital spending investment in improved transport infrastructure alone is not the only answer. We would draw the Committee’s attention to our recent report on roads policy: Tackling congestion, driving growth: A new approach to roads policy, a copy of which is attached. This report in part discusses the question of whether changes in working patterns (some a consequence of the recession) could help reduce congestion.

5. Infrastructure in the UK can be broadly divided into those projects that have traditionally been funded by the public sector, i.e. road and rail investments, and infrastructure that has been largely provided by the private sector such as airport capacity. Protection of public investment in the former and the creation of a regulatory framework that maximises private sector investment in the latter should be the central aims of government policy as it searches for ways to reduce the deficit without damaging the long term growth potential of the UK.

6. It is widely acknowledged that there are both direct and indirect links between economic growth and well managed infrastructurei. Other research has shown that the decisions government makes regarding levels of investment in infrastructure, particularly transport networks, will have a major impact on future levels of growth.ii

7. However, the UK’s infrastructure has historically lagged behind other developed economies, ranked 33rd in the world by the World Economic Forumiii. From 2000‐07 the UK was the lowest investor of all OECD countriesiv and, although investment did increase in the years 2005‐2009, investment is still low by European standardsv. Around £434 billion of new investment in infrastructure is required in the UKvi.

8. We recognise that the government’s overriding concern should be to correct the UK’s fiscal deficit by bringing the public debt under control. However government should direct what money it does have at investments that will most benefit the country in the short to long term. A core area of this should be the UK’s infrastructure, in particular its transport network.

9. The CBI argues that: • The UK needs a major infrastructure upgrade which must begin during the CSR period • Total UK infrastructure investment must increase to deliver this upgrade • Infrastructure investment must also become more efficient • Prioritisation of publicly funded transport investment must be improved and made more transparent

The UK needs a major infrastructure upgrade which must begin during the CSR period

Well funded infrastructure is crucial for future economic growth and competiveness

10. History shows a compelling link between infrastructure, in particular transport, and economic prosperity, with new transport connections enabling new economic opportunities, making regions and markets more accessible for business. However poor infrastructure can be a barrier to higher efficiency and growth, an issue that the UK is currently grappling with.

11. It has been argued that a substantial proportion of private sector productivity growth is linked to the size of a country’s infrastructure base and how much is invest in it annuallyvii. For example, in 1999 France had a 25% higher productivity rate than the UK, thanks to much more effective infrastructure, despite having a rigid labour marketviii. Eddington estimated that ‘by 2025 an additional £22billion might have to be added to the cost of congestion in England alone’ix. Given the UK’s poor performance in comparison to its global competitors, this would suggest we have some way to go to ensure private sector growth is maximised.

12. In particular, the UK’s transport networks, in particular roads, are highlighted as being a major barrier to economic expansion. It has been noted that ‘good roads are good business’x. Eddington argued that a smooth running transport network feeds through to the wider economy through greater business efficiency, more investment and innovation, improved functionality of agglomerations and labour markets, increased competition and trade and attracting globally mobile resources. He also pointed out that a 5% reduction in travel times would amount to around £2.5 billion in cost savings to business.

13. On top of this, the CBI’s 2005 ‘Business of transport’ survey found that business leaders highlight the UK’s transport infrastructure as a major barrier to the UK remaining globally competitive, all the more pertinent given the current state of the economy. In particular, the survey found that more than 40% of companies reporting that staff often arrived late at work as a result of transport problems. A further 38% of companies said transport issues had led to problems with staff recruitment and retention.

The UK lags behind its global competitors in terms of its transport infrastructure

14. A series of international studies has found that the UK has historically underinvested in infrastructure and that public funding in transport networks has lagged behind major competitors. The World Economic Forum recently ranked the UK 34th in the world on the basis of the quality of its infrastructure, well below most other developed countries and despite being the 6th largest economy in the world. Furthermore, public spending in infrastructure investment as a proportion of GDP between 2000 and 2004 came in at 1.5%, compared to 6% in Japan and 3% in the United States, France and Italy.

15. Although the UK has invested an estimated £150bn in infrastructurexi over the last five years and an estimated £195bn of investment currently being plannedxii over the next five years, this remains inadequate, given that the UK is starting from a much lower base than its global competitors. When OECD estimatesxiii of demand for infrastructure investment as a percentage of GDP are applied to the UK, this would suggest that an average of £50bn per annum could be required from 2015‐2030. This is significantly more than either historic or planned levels of investment and highlights the scale of the investment required if the UK is to ensure that it remains competitive and its economy functions efficiently.

16. As a consequence, the OECD in its most recent ‘Going for Growth’ reportxiv states that under‐ investment in the UK’s public infrastructure has resulted in road and airport congestion and an unreliable rail system, which add to business costs and constrains productivity. It advises on the need to follow through with planned levels of spending and ensure that investment does not fall below these planned levels. Infrastructure investment has highlighted a major priority area by the OECD for the UK since 2005, and has always focused specifically on transport infrastructure.

17. This situation is likely to become more pronounced in the coming years as many countries invest hundreds of billions in transport infrastructure as a means not only to stimulate weak economies (see next section) but also as a way of readying a country for economic expansion. This is most clearly seen in China where around 13,000km of high speed rail are due to be completed by the 2020s. Even in the USA, where rail has not historically been an attractive mode, high speed rail is now seen as one remedy to economic weakness and a method of ensuring future economic growth.

Infrastructure improvements will also help rebalance the economy

18. The Coalition Government is looking to rebalance the economy in various ways and infrastructure investment could help support this. Firstly infrastructure can push the economy onto a lower carbon path. For example, this could be done by rolling out of electric vehicle infrastructure. Secondly transport infrastructure enables an export orientated economy: for example by ensuring better surface access to ports and airports, and by making the UK more attractive to inbound tourism. Finally, and perhaps most crucially, infrastructure investments tend to be spread across the regions and nations of the UK. This investment must begin during the CSR period

19. Infrastructure investment is one of the most efficient ways to provide an economic stimulus to the economy. Infrastructure investment has a much higher multiplier effect that other types of government expenditure.xv Given how constrained the public finances will be in the coming years, identifying which public spending will have the most beneficial impact on the economy is crucial. Conversely, reducing public spending in an area with a higher multiplier effect would have a disproportionately more damaging impact on the overall economy.

20. In terms of stimulating demand, infrastructure investment as opposed to other forms of public spending will have much wider benefits for supply chains and employment levels. Given the complexity and long‐term nature of big infrastructure projects, extensive and varied supply chains are often relied upon. This not only provides an added incentive to invest in these projects, but could also provide substantial opportunities for UK based companies and reduce the need for imports. In this way infrastructure investment can be a positive driver both in terms of increasing overall economic activity, productivity and competitiveness.xvi

21. In addition, infrastructure projects tend to be labour intensive. This has been noted in the context of the Obama stimulus programme, where the number of those employed indirectly as a result of infrastructure project was around 60% as opposed to only 47% for health. This reflects the potential investment in human capital as well as upgrading infrastructure.

Total UK infrastructure investment must increase to deliver this upgrade

22. Infrastructure UK has set out the 50% increase in historical UK spending levels on infrastructure that will be required over the next few decades. Much of this will come from private sector sources, but despite the deficit public funding of infrastructure will remain important. Government has three main tasks in order to ensure that aggregate public and private investment is sufficient:

1. Restore public infrastructure investment to 2.25% of GDP and make more predictable 2. Use new funding models to attract private sector funding to areas previously fully publicly funded 3. Creating better investment frameworks for privately funded infrastructure

Restore public infrastructure investment to 2.25% of GDP and make more predictable

23. The Chancellor’s commitment in the ‘emergency’ Budget not to make overly deep cuts in public infrastructure investment was welcome. But significant cuts are already underway from pre‐recession levels and investment levels should be returned to 2.25% over the CSR period. It is also important that public investment becomes more stable and predictable. The impact of constrained public finances on long term infrastructure projects tends to lag behind overall economic cycles. This means that cuts in public spending on infrastructure today will only be noticeable in several years, requiring more than a short term view of investment priorities.

24. This is particularly important when considering the impact of public spending cuts on complex supply chains. Without the required long term vision for infrastructure, with the attendant transparency and certainty enjoined in this, there are two key impacts on supply chains. Firstly, without long term certainty, private investment in infrastructure could be limited as investors remain reluctant to commit to projects that may not be required in the future. Additionally, fluctuations in spending on infrastructure can destabilise fragile supply chains, as skills required for complex projects, are lost. This is most clear when looking at the absence of skills in the UK required for such projects as construction of nuclear new build and the electrification of the West Coast mainline.

25. Government could ensure long term consistency by ensuring annual public spending on infrastructure remains at 2.25% of GDP over a period of 20 years. Furthermore, to ensure that the private sector remains confident about medium term investment levels, there should be a level playing field between investment horizons for road and rail. Currently the Highways Agency does not have a longer term funding arrangement along the lines for High Level Output Specification for rail, which puts in place 5 year periods for spending plans.

Use new funding models to attract private sector funding to areas previously fully publicly funded

26. Even if public investment is restored to 2.25%, given the need to increase total infrastructure investment, new sources of private investment will be needed in areas hitherto funded directly from the public spending and this in turn will require new funding models to be explored. We see particular value in the following:

27. Increased ‘copayment’ in transport: Both road (indirectly through Fuel Duty) and rail are funded by a mix of public spending and user payments. The balance of user payments will need to increase. On road this should take the form of tolls to fund new road infrastructure (including potentially tolled additional lanes to enable widening for existing roads at congestion pinchpoints). Local authorities may also need to investigate road toll schemes to fund local transport improvements (we do not however favour workplace parking levies as these risk acting as a tax on employment). Regarding rail fares, an alternative to the current funding situation would be to make users of transport responsible for a greater share of total funding. Government has already expressed its support for shifting the burden for the funding of the rail network to passengers to around 75%, up from its current 50%. This would require guarantees from government that in the event of economic decline, when passenger numbers tend to fall substantially, revenue would be protected. Another possibility would be to look at reforming the current RPI+1 model for fare prices, which would allow train operating companies greater flexibility when looking to invest.

28. Tax Increment Financing: TIF can enable local authorities to raise funds for infrastructure improvements which will increase economic activity in the future. TIF has been widely used in the US for many years. It is not a panacea but could be appropriate for certain schemes. TIF is currently being considered, for example, for the Northern Line extension to Battersea.

29. Subdividing major projects into smaller sections with bespoke financing/funding arrangements: For example, as set out in the report on HS2 funding by David Ross et al the main line investment could be simplified and funded by central government but then station development and city links are funded and justified separately by local governments and/or private sector developers. This could divide what seems like an insurmountable investment into well structured projects which are both practicable and fundable.

Creating better investment frameworks to privately funded infrastructure

30. Major parts of our transport infrastructure such as airports and sea ports are funded entirely by the private sector. The capital that funds such investment tends to be global capital that has investment options around the world. The Government must focus on ensuring the UK offers an attractive investment framework in these areas. We argued in our report ‘Green Skies Ahead’ that aviation will play a central role in ensuring the UK remains an economic hub, emphasising the need to ensure there is sufficient capacity and an appropriate level of tax on airlines and airports. Similar issues can be raised in terms of port capacity. The key elements of this are:

31. A streamlined, predictable planning system: The replacement of the IPC with a major Infrastructure Unit must not undermine the benefits of the 2008 Planning Act. In addition, the NPSs for transport must be finalised and designated as soon as possible.

32. Regulatory frameworks must be conducive to efficient investment: For example, DfT must ensure rail franchises are reformed with longer franchises specified at a high enough level to encourage efficient, innovative investment by TOCs.

33. Green Investment Bank/project bundling: Investors such as pension funds are looking for low risk/long term return investments. In principle such investors should have an appetite for infrastructure investment, but in practice may be deterred from investing for example because they do not want to take on the construction risk in a major infrastructure project. A GIB may provide a way to bundle projects together in a way which dilutes this risk and makes investment more attractive.

Prioritisation of publicly funded transport investment must be improved and made more transparent

UK transport investment has been over politicised

34. Traditionally, UK transport appraisal tends to be narrowly focused on user benefits (eg time savings) rather than encompassing wider benefits such as labour market and connectivity impacts. This in turn has encouraged political considerations to be overlayed on appraisal results, or for the two to be blurred, which is one of the reasons why UK transport spending has fluctuated so much, and for major projects such as Crossrail to be argued over for so many yearsxvii.

Appraisal methodologies must be improved 35. An appraisal methodology has been developed which recognises a potential project’s impact on ‘the real economy’ as well as user benefits.xviii This would allow strategic spending decisions in transport and infrastructure in general to focus on wider parameters than currently used. The impact on land use and business mix will be recognised by using such a measure and will provide a more comprehensive understanding of the long term impacts on the real economy at both regional and sub‐regional level. A further advantage of this new methodology would be to focus more closely on specific regional and local conditions. Identifying where economic growth could be most aided by a substantial infrastructure project would become as central. This appraisal method would look at the impacts of a potential project on the supply side of the economy and whether it would make a region more attractive to investors. It would look at a project’s impact on the sort of economic activity in a given area as well as whether this would reduce levels of unemployment. Now is the appropriate time to explore further possible alternative methodologies, although it is crucial that this does not lead to a freeze in projects appraised under the existing model being taken forward.

Debate over priorities must be more transparent

36. Appraisal methodologies will never be perfect, and political issues can be legitimate factors provided they are transparently debated. Government should be more explicit about the sensitivities of appraisal methodologies and the extent to which political considerations have been factored in when prioritising transport spending.

September 2010

i Eddington, ‘Eddington Transport Study: The Case for Action’, December 2006 ii J. Llewellyn & B. Dharmasena, ‘Conditions for Growth’, Centre for Policy Studies, July 2010 iii World Economic Forum, ‘The Global Competitiveness Report 2009‐10’ iv OECD, Going for Growth, 2010 v OECD, Going for Growth, 2010: Country Notes: UK vi Helm, D., Wardlaw, J. and Caldecott B. (2009), ‘Delivering a 21st Century infrastructure for Britain’, Policy Exchange vii F Rodriguez, ‘Have collapses in infrastructure spending led to cross country divergence in per capita GDP?’ Wesleyan University, 2006 viii Helm, Wardlaw and Caldecott, ‘Delivering a 21st Century Infrastructure for Britain’, Policy Exchange, 2009 ix Eddington, ‘Eddington Transport Study: The Case for Action’, December 2006 x Aschauer D, ‘Highway capacity and economic growth’, 1989 xi Source: Infrastructure UK xii Source: Infrastructure UK, based on aggregating individually planned investments that have been publicly declared in both the public and private sectors. xiii OECD: Infrastructure to 2030: Telecom, Land Transport, Water & Electricity, 2006. xiv OECD, Going for Growth, 2010: Country Notes: UK xv Does the Composition of Government Expenditure Matter for Economic Growth?* Gemmell, Kneller And Sanz, 2009 xvi Infrastructure UK and HM Treasury, 2010 xvii Volterra, ‘Economic Importance of Infrastructure’, August 2010 xviii KPMG on behalf of Network Rail, ‘Rail, Transport, Infrastructure and the Economy’, 2010

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Memorandum from the Chartered Institution of Highways and Transport’s (CIHT)

The CIHT is pleased to have the opportunity to submit evidence to the House of Commons Transport Select Committee.

1. Have the U.K.’s economic conditions materially changed since the Eddington Transport Study and, if so, does this affect the relationship between transport spending and U.K. economic growth?

The economic recession commenced in the second quarter of 2008 and proved to be much deeper than expected and has impacted on a global basis. There had been some earlier signs that there was an imminent recession but the Eddington Report was produced when there was much greater optimism about the economy.

The downturn in the economy does not however, affect the relationship between transport spending and economic growth and Eddington’s conclusions remain essentially valid. If anything, the global nature of the recession has highlighted the need for individual countries to achieve a competitive edge in order to attract international investment from other competing parts of the world. An essential component of this is an effective, efficient and reliable transport infrastructure.

There does appear to have been a small shift in activity since Eddington and there has been a strong emphasis on the development of land and facilities associated with our ports and airports as owners seek to realise the value in both the land and the connectivity of these sites. In order to realise the benefits there is a need to improve the transport infrastructure in these areas.

The development and improvement of our inter-urban links and the reduction in congestion in the regional road network remain fundamental targets for investment. Key elements of this essential investment continue to be those that will give good access to ports and airports as well as between major centres.

The other area of growth activity is in the waste and energy sectors. This consists of the transport of waste to the newly planned disposal and treatment centres, the growth of the transport of fuels to energy generation sites and the need for transport of people and materials to the sites when under construction. Transport infrastructure is key to these developments and all principal transport modes can be effective in these areas.

The UK is now emerging from the recession with a small level of growth being generated by the private sector. It could be the public sector’s role to support the private sector by providing the framework needed to allow business development and economic growth. The recession has shown that reliable infrastructure is a permanent requirement through good times and bad and must be supported by an adequate level of investment.

Without proper investment the infrastructure will not perform to the necessary standards and economic growth opportunities will go elsewhere in the world. The benefits of infrastructure investment will depend on how effective it is in supporting complementary

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private sector investment which delivers economic growth. The appetite of the private sector to make these investments has changed since the Eddington Study and so there is a need for more integrated planning between the public and private sectors.

2. What type of transport spending should be prioritised, in the context of overall spending reduction, in order to best to support regional and national growth?

The fundamental requirement is to avoid the transport infrastructure deteriorating to the point where it becomes inefficient, unreliable and the costs of maintaining it become unaffordable. Adequate maintenance of the existing assets must therefore be the top priority.

Funds should also be made available for infrastructure improvements which will encourage and support economic recovery and growth. Eddington set out some objectives which investment should be aimed at supporting. These include:

• supporting business efficiency; • encouraging investment; • developing labour markets; • encouraging competition; and • developing trade.

These continue to provide a robust set of objectives which will be largely delivered by having a reliable and efficient network. The form of the investment will differ depending on the regional circumstances. For example, in London and the South East there are currently major investments in the rail network with the East London Line, Thameslink, CRTL, Crossrail and the London Tube and stations upgrades. These are appropriate for the South East because of the difficulties in making improvements to the highways network. Elsewhere in the UK it is more practical and it would generate more economic benefit to focus investment on the highway infrastructure.

The CIHT Transport Manifesto ‘2010 and Beyond’ sets out the following priorities that we believe should be the main order in which transport spending is prioritised: 1. Maintaining and safely operating the network; 2. Making better use of that network; and 3. Making targeted infrastructure improvements.

With a deteriorating highway network and the need to ensure the highest safety standards in road, rail and air, it is essential that the first priority has to be in the maintenance of the existing infrastructure. The real cost of delays due to poor quality infrastructure and the cost of accidents are high. A further deterioration of the network can only exacerbate the situation as well as putting more pressure on the police and rescue services at a time when they will be subject to close financial scrutiny.

Increased capacity through making better use of the existing network through upgrades such as the managed motorway programme, improvements to the rail network and signalling, and small improvements to our airports can all deliver greater capacity at relatively low cost. Smooth flow rates rather than direct capacity increases will bring benefits in terms of journey reliability and accident reduction.

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Improved information systems and through-ticketing can also deliver a more efficient use of the existing infrastructure, allowing users to make better-informed choices and, while not necessarily affecting large numbers in terms of percentage use, will bring about a degree of modal shift.

The priority for capital investment should be where demand is clearly exceeding capacity and where there is no reasonable alternative option. Greater consideration should also be given to investment planning which allows the private sector access to better value labour markets and land prices to make the UK more competitive on a national basis.

In recent years we have seen a considerable increase in the use of technology related projects to make better use of existing assets such as electronic message signs and speed control on the motorway network. These may not be as expensive as the construction of new assets but they are not low-cost solutions. In addition, as with any technology systems they have high maintenance costs and their lifetime is limited. Caution is needed to ensure that investment in technology solutions is not considered as a replacement to investment in the core assets.

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

The optimal balance between revenue and capital expenditure can only properly be considered if it takes account of whole life costs and value. One of the keys is likely to be a relaxation of the very rigid rules defining the two and ensure decision makers are able to use whatever resources are available to them to deliver the most cost effective solutions and greatest whole life benefits.

A major problem is that infrastructure management and improvement continues to be considered and planned in very short time horizons that are linked to the Government’s spending review cycles which in the past have been three years. The Coalition’s plan to increase this in future to a four year cycle will only have a small improvement for infrastructure investment planning.

Clearly in the short-term the priority has to be on revenue expenditure in order to maintain the infrastructure assets in a reasonable condition. The Government should however, recognise that there is a permanent requirement to maintain and improve the country’s assets and this should be supported by a long-term asset management plan with committed expenditure. Long-term planning would allow more effective and efficient use of the available resources. It would allow long-term relationships to be developed with the supply chain which would drive efficiencies and deliver continuous improvement to be achieved.

In the current fiscal climate there is however the need to carefully consider the current revenue funded subsidies for different transport modes, at present there is no relationship between these and they have evolved independently over time as new political policy ideas or in response to public/media pressures. The overall benefits being delivered, including environmental, by these subsidies need to be evaluated and used as a way of informing future decisions on this aspect of any spending reductions.

4. Are the current methods for assessing proposed transport schemes satisfactory?

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The current method does not provide a total solution but they are the best available as considerable work has been done in recent years to improve them, particularly on the back of developments in multi model and environmental assessments, which now include carbon impacts. The real benefits of journey time assessments are in debate, there is clear evidence that some of these benefits translate into longer commutes rather than time savings with the consequent planning and development control issues that this causes.

Having said all that, transport scheme assessments have long been recognised as probably the best developed tools across all government spending programmes, so a better return could be obtained by focusing on better assessment of other government spending areas rather than investing time and resources on trying to improve what are good, if not perfect methods for transport schemes.

A major issue seems to be that there is no national strategic transport plan to provide a robust basis for coordinated regional and local plans. At the strategic level the national planning of highway, rail, air and water transport investment is not effectively joined-up. This is compounded by the bureaucratic and lengthy procedures involved in making strategic planning decisions.

There is the additional risk, as we have recently seen, that changes in Government will result in changes to the planning structures and systems which result in abortive work, additional cost and uncertainty. Strategic infrastructure planning and planning approvals should be separated from the political framework although the Government would have to retain responsibility for funding arrangements.

The new Local Enterprise Partnership’s have the potential to give better consideration to the needs within cities or regions. Emphasis should be given to how available monies can be best applied if spread thinly rather than on major schemes, with the major schemes treated separately and, as with Crossrail, Forth Replacement Crossing and HS2, having to make a case within both a local and a strategic setting.

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

CIHT believes that this will be carried out with great difficulty and will require close collaboration between Local Authorities. The Government needs to support collaborative working through appropriate funding incentives but it will be difficult to identify national priorities without desired national transport outcomes. CIHT is willing to work with the UK Government, devolved administrations and local authorities to develop transport outcomes and assist in their dissemination and implementation. Alternatively, CIHT in collaboration with other organisations is willing to develop a forum where local authorities can come together to discuss and collaborate on transport issues in the future.

September 2010

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Memorandum from Associated British Ports

PORTS The UK’s gateways to green growth

Introduction

1. ABP is the UK’s largest and leading ports operator with 21 ports around Britain handling around one quarter of the UK’s entire seaborne trade. ABP’s ports include Grimsby & Immingham, the UK’s largest port by tonnage, and Southampton, the UK’s principal cruise port and home to the nation’s second largest container terminal.

2. Since the Eddington Transport Study was published in 2006 the UK has experienced a severe economic recession. Whilst this has brought about a change in wider economic conditions, efficient access to global markets remains a key driver of economic growth. Investment in transport infrastructure to support this is therefore an essential component of successful economic recovery.

3. However, the focus of Eddington inevitably does not reflect the fresh ambition to shape the economic conditions of the future. In particular, there are now clear policy objectives to re-balance the economy and achieve ‘green growth’. These objectives, as expressed by the coalition Government, increase still further the importance of efficient transport links to ports and effective port infrastructure.

Re-balancing the economy and achieving export-led growth

4. Achieving the important goal of re-balancing the economy and aspiration towards export-led growth depends on making sure that UK manufacturers have the best possible access to our international TE 67

gateways. Offering efficient access to global markets is also essential for attracting new UK and foreign investment to further boost the nation’s manufacturing capacity.

5. The Department for Transport’s ‘Delivering a Sustainable Transport System’ (November, 2008) identifies the UK’s most important international gateways, including Grimsby & Immingham, Hull and Southampton. Therefore DaSTS can undoubtedly provide the correct basis for prioritising future public investment in transport infrastructure.

Delivering green economic growth

6. Ports have a crucial role in delivering green economic growth by helping to build the low carbon economy of the future and facilitating sustainable distribution networks. As such, they are key to creating thousands of green jobs.

7. Many ABP ports are at the forefront of the drive towards renewable energy. For example, ABP Hull is planning for the development of state-of-the-art manufacturing facilities to support a massive expansion in offshore wind power. The £100 million investment is one of the key drivers behind the Humber Green Economy Gateway and is projected to create over 2000 jobs. By developing the skills base of the Humber workforce, particularly in areas such as engineering, the scheme has the potential to support the sustainable transformation of the local and regional economy over the long term.

8. Ports also have a key role in supporting green economic growth by facilitating sustainable distribution networks. According to Freight by Water, a 2000 tonne coaster is the equivalent to 80 lorry loads and three times as efficient.

9. In so far as it does not rely so much on expensive infrastructure, coastal shipping offers considerable potential to deliver carbon-friendly TE 67

transport solutions on a cost-effective basis. Unfortunately, this potential remains largely untapped. It is therefore important that Government adopts a more holistic and thorough approach to deliver low carbon distribution that represents best value-for-money for the taxpayer.

CASE STUDY

ABP Hull: A gateway to green growth ABP Hull is a prime example of how UK ports are key to economic recovery and shaping our future prosperity by re-balancing the economy together with promoting green growth.

The Port provides thousands of businesses with essential access to global markets. Its container and ro-ro terminals alone offer shipping services that connect the UK to Northern Europe and a range of destinations world-wide.

Beyond its position as a leading international gateway, ABP Hull is planning for a £100 million scheme to provide a base for the manufacturing and pre- assembly of offshore wind turbines and their components. The project will support a massive expansion of offshore wind power generation off the UK’s east coast and is projected to create over 2000 jobs. Uniquely, the scheme benefits from a planned supply of renewable electricity generated on the port estate. This will make sure that green industry is powered by green electricity.

In addition to the site for the manufacturing facility, ABP Hull offers further port land to support the sustainable development of a much wider cluster of renewables and other manufacturing businesses. These businesses can also be connected to a renewable electricity supply and will enable Hull, and the wider Humber region, to rapidly become a key part of creating the UK’s green economy. As the developments will make use of existing port infrastructure, they will mitigate the impact on the environment while offering a fast-track TE 67 route to delivering green jobs and growth.

ABP is proactively engaging with Hull City Council and other partners to develop these sites as the foundation of a ‘Green Economy Gateway’. The Humber Green Economy Gateway offers the exciting prospect of delivering a huge boost to the local and regional economy.

Securing private sector investment

10. Government investment is central to making sure that the UK’s ports have road and rail links which are fit-for-purpose. However, private sector investment is critical to delivering effective port infrastructure. In the past 5 years alone, ABP has invested in excess of £350 million.

11. To secure future private investment in the ports industry Government must ensure fair competition between ports and an efficient planning system. It must also ensure that the introduction of marine planning under the Marine and Coastal Access Act 2009 does not add cost or delay to impede port development, and ensure that the new Marine Management Organisation provides the highest possible standard of service to the ports industry.

12. It is important for Government to recognise that the UK must compete for investment in its port infrastructure on an international basis. Creating the right environment for investors is therefore absolutely critical.

Conclusion

13. Eddington rightly identified access to international gateways as a crucial driver of economic growth. The need for economic recovery means that the Government’s future spending priorities should reflect this. The case for investment in transport links to ports is strengthened TE 67

still further by the desire to re-balance the economy and promote green economic growth. The Humber Green Economy Gateway is an excellent example of ports’ critical role in achieving these objectives.

14. ABP would be delighted to answer any further questions the Transport Committee may have about our submission.

September 2010

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Memorandum from City of York Council

City of York Council Perspective - Summary

Background

• City with strong growing economy tightly linked with good transport provision • Sub-regional service centre with high inward and outward commuting levels • Good national/international connectivity vital for tourism and knowledge-based industries. • Previous transport improvements have provided significant boost to economy

Transport Constraints

• Historic street layout and river and rail crossing points limiting capacity • Congested network constrains economic activity – delay costs > £30m per year • Strong business community support for infrastructure improvements • Local Development Framework –inward commuting projected to increase • Most of future growth on brownfield sites with high infrastructure enabling costs

Transport Opportunities

• Economic Vision – Car free city centre • Sustainable modes offer realistic transport option – flat compact city • Proposed Access York Park & Ride and ring road upgrade will reduce city centre congestion growth

Specific Transport Select Committee Questions

Impact of Changing Economic Conditions

• Public/Private funded schemes delayed • Rising public transport costs/fare and reductions in services. • Alternative funding routes and sources need to be made available e.g. Tax Increment Financing.

Transport Spending Prioritisation

• Prioritisation even more important with reduced funds • Must be geographical/regional dimension in methodology • Make most of existing infrastructure where practical

Balance between Capital & Revenue Expenditure • Increased revenue funding required to realise full potential of new and existing infrastructure.

Methods for Assessing Transport Schemes

• NATA too involved for smaller schemes TE 68

• Lighter touch guidelines required • Lower preparatory costs and shorter timescales required

Planning of Strategic Schemes

• Sub-national transport decision making required • Clear programme of future schemes beneficial • Possible to sift transport scheme through LEPs? • Delegation of approval to lower level would streamline delivery • Concerns that DfT will not have the capacity to approve all schemes centrally. • Separate block allocation useful for smaller major schemes

Summary

1. There is a particularly strong link between transport and prosperity in the York area. The tourism industry, which is especially reliant on good access to the historic and leisure attractions in the city centre, is one of the cornerstones of the economy. However, York is not reliant on a single sector and has a diverse growing economy with new bioscience and other knowledge based industries developing rapidly through the Science City initiative. The ability to embrace these new industries is facilitated by a good transport network allowing movement of a flexible workforce over a wider area.

2. The addition of new infrastructure, such as the improved connectivity provided by the northern outer ring road in the late 1980s, can provide a significant boost to the economy. The construction of this route, in particular, enabled the development of large new residential and employment areas in the north and west of the city. A similar level of investment is needed to resolve the city’s current congestion problems which are becoming a significant constraint on businesses activity. York has a need for mass transit systems which provide quality alternatives to the private car.

3. Since 1990 the Park & Ride system has enabled people to travel to the heart of the city without impacting on congestion and air quality levels. The city has developed the Access York project to enhance the Park & Ride service and upgrade the northern outer ring road. Progress of phase 1 of the project providing 40% more Park & Ride spaces is currently on hold pending the results of the government’s spending review.

4. It is essential that the distribution of the limited national funds supports successful economic areas with growth potential. Capital funding for targeted infrastructure improvements and revenue funds for solutions which encourage the most sustainable use of the existing network are needed. Streamlined processes need to be in place which enable a more rapid allocation of funds to resolve identified bottlenecks. Clarity over the funding of preparatory investigation and feasibility work is required at an early stage to minimise abortive expenditure at a local level. The delegation of funding approval of smaller schemes (<£25m) to a sub-national (potentially LEPs) level would reduce overall project timescales and preparatory costs.

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5. Responses to the specific Transport Select Committee questions are included in Annex 1.

Background

6. York is almost unique in the north of England as a city with significant growth prospects however it has similar transport problems to many other urban areas across the country. It has a large rural hinterland, which encourages higher car use, combined with a historic urban centre which restricts the space available for vehicular movements. Critical strategic routes are operating at capacity through most of the day. The city has two Air Quality Management Areas where worsening emission levels are a significant concern.

7. Good transport links are particularly important for an economy heavily reliant on tourism. In addition accessibility to the health, education and retail facilities in York is important for many who live in the sub-region. The city is a net importer of work trips however due to the high quality of life for residents there is also considerable outward commuting particular to Leeds. Both national & international connectivity is crucial for the success of the world-class university and Science City developments.

8. Transport options are constrained by the layout of the city and the built environment. The river Ouse in particular provides a barrier for movements in the area. The four city centre bridges and two ‘bypass’ bridges provided strategic river crossing points with alternative routes over 15 miles away. The narrow city centre streets and radial approach routes limits the options for bus priority measures and dedicated cycle routes.

9. Congestion in the city centre and on the north and west section of the ring road constrains economic activity and damages the environment. Journey times are longer and the quality of life of residents is reduced due to severance , noise and poor air quality.

10. There is a close link between transport improvements and the prosperity of the city. Over recent years it can be demonstrated that the introduction of major transport infrastructure has stimulated the economy. In the 1970s the construction of the southern A64 bypass removed strategic coast-bound traffic using the city centre river crossings. The construction of the northern bypass in the late 1980s removed traffic from the north and west of the city transforming the potential of major employment and residential sites at Clifton Moor and Monks Cross. A major review of the bus network delivered a 50% increase in passenger numbers between 2001 and 2005 reducing congestion and facilitating growth.

11. To maintain the vibrancy of the city centre whilst minimizing the environmental impact of vehicular traffic the council has encouraged sustainable travel options for many years. A large area of the city centre was pedestrianised in the 1980s and some cross city routes closed to traffic. The removal of traffic TE 68

from the dedicated footstreets area of the city centre has transformed the environment encouraging more people to visit.

12. By intercepting traffic at the edge of the city using a ring of 5 Park & Ride sites and pursuing a policy of relatively high parking charges car trips to the city centre have been substantially reduced. The introduction of a fleet of new low emission vehicles for the Park & Ride Service in 2009 further reduced the environmental impact of travel in the city. Cycling (over 12% of work trips) and walking (15%) is a viable option for many trips by residents because of the flat terrain and compact urban area. These modes have been encouraged by a safe routes to school programme and the provision of a citywide cycle network supported by key infrastructure improvements such as the Millennium Bridge river crossing. This structure significantly improved access to the university and Science City from the residential areas in the west of the city.

13. The current economic downturn combined with relatively stable driving costs has put severe pressure on the commercial bus services within the city resulting in the withdrawal of some routes and rising fares potentially increasing the number of tips by car. The resulting lower differential between car parking charges and bus fares has also reduced the incentive to use public transport within the city.

Transport Constraints

14. Recent work for the City’s Local Development Framework indicates that excess journey times caused by existing traffic congestion in York is currently costing over £30m per year. This cost is projected to rise dramatically over the next 15 years to over £100m as the population and economy grows Although higher than levels in the 1990s transport investment in the city over the last 10 years has lagged behind the rising impact of congestion. LTP integrated transport block funding has been insufficient to deliver the required step change in transport provision.

15. The business community in York has identified poor transport links as one of the key issues constraining economic activity in the city. In the 2007 Future York Group Report the independent business-led group identified transport constraints as being a significant concern for the future growth of the city and in particular the lack of capacity on the northern ring road.

16. Recent consultation for the city’s third Local Transport Plan has identified that businesses are even more concerned than the resident population about the level of congestion in the city and are more likely to support major infrastructure improvements. This position reflects the importance that transport has for the local economy.

17. Whilst the northern ring road enabled major development in the adjacent areas of the city to progress journey times at peak periods and through most of the day are now excessive. The single carriageway route carries over 30,000 vehicles per day (more than many dual carriageways) and has 13 TE 68

roundabouts over a 10 mile length. Average traffic speeds at peak times are below 10 mph over the most strategic central river crossing section.

18. The Local Development Framework proposes a scenario with more jobs being generated than can be directly supported by the housing growth. The transport challenge for the future prosperity of the city will be to maximize the use of sustainable options for residents traveling within the city and reduce the impact of inward/outward commuting. Currently approximately 40% of trips by residents who work within the city are by car whereas nearly 80% of longer distance inward and outward commuting trips are by this mode.

19. The development of brownfield land within the city, which is critical to minimizing the impact of future growth on the Green Belt, is only possible through significant investment in transport infrastructure. In particular, the 40 ha York Central site, which is land locked by railway lines, could provide a significant proportion of the necessary development land up to 2026 but is reliant on the construction of major new access points. Although the access costs are high, the transport benefits are considerable with the opportunity to provide a dedicated bus corridor through the site into the heart of the city.

Transport Opportunities

20. The draft York Economic Vision recently prepared by Professor Alan Simpson’s team highlights the negative impact of vehicular traffic on the city and proposes a long-term objective of a car-free city centre. This will improve the quality and attractiveness of the public realm to visitors and residents and create greater capacity for movement within the existing infrastructure. However, to enable larger sections of the city to be traffic free additional capacity will be needed on key orbital and radial routes away from the central area.

21. The city has a vision for an integrated public transport system with through ticketing, better interchange, higher frequency, greater citywide coverage and more attractive fares. Additional investment will enable the use of more hybrid/electric vehicles for public transport services. The move to non-carbon fuelled engines in the wider vehicle market will be encouraged by taking a lead on the provision of the necessary infrastructure.

22. The relatively compact urban area allows sustainable travel modes to be a realistic option for many trips. York already has higher than average cycling levels and it is anticipated that the promotion of cycling, walking and public transport modes combined with targeted infrastructure improvements will further reduce the demand for car use within the city. This approach will be complemented by the Access York Project which includes the upgrade of the northern ring road and the provision of new Park & Ride sites to intercept traffic at the boundaries of the city. Opportunities to improve the connectivity, particularly by rail (electrification, tram/train, additional stations etc.), between the main population centres (Harrogate/Leeds/Selby etc.) in the area also need to be progressed. Increased rail capacity will provide a realistic TE 68

sustainable option for many commuters removing car trips closer to their origin rather than dealing with the congestion problem at their destination.

23. Processes to enable the smaller major schemes need to be streamlined to ensure the benefits of the transport investment is realised as rapidly as possible. Responses to the specific Transport Select Committee questions are included in Annex 1.

Conclusion

24. Targeted infrastructure investment is critical for the future economic prosperity of the country. However, the most cost effective solutions will arise from combining capacity improvements at bottlenecks with softer measures to encourage alternative travel modes and patterns and demand management to ‘lock-in’ the infrastructure benefits. For these ‘smarter choices’ to be successful the alternative sustainable travel modes must provide a viable option for the type of journeys people want to make.

25. Further investment is critical to the future growth of city’s such as York. It is critical to: • Ensure growth isn’t constrained by congestion • Increase the availability of realistic sustainable travel options • Unlock key development sites • Further enhance the quality of place

26. Processes need to be in place to enable the rapid delivery of the smaller scale schemes which will have significant sub-regional impact. Delegated authority to deliver these smaller major schemes at a Local Enterprise Partnership level will ensure growth is encouraged complimenting the economic benefits which will arise from the larger infrastructure projects.

Annex 1

Specific Transport Select Committee Questions

Impact of Changing Economic Conditions

A1. Changing economic circumstances have meant the options for progressing significant transport infrastructure improvements have become more limited. Key elements of the city’s transport strategy rely on investment by both the public and private sectors. There has been a suspension of some projects where private funding from developments was expected to provide the improvement directly or by the provision of funds. Reprogramming has been required for more complex projects where it was proposed that a consortium of developers and the council would fund the improvement. The flexibility for the council to front fund certain improvements in masterplan areas is also diminished. Stalled developments have prevented key elements of infrastructure being progressed such as a new raised junction on the A19 which would have prevented flooding disruption of this major route into the city.

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A2. The necessary changes to financing rules need to be made to enable the use of alternative funding mechanisms such as Tax Increment Financing to deliver infrastructure improvements.

Transport Spending Prioritisation

A3. In times of limited resources prioritisation to ensure funding is directed to the most effective schemes becomes even more important. Schemes which support areas with greatest economic growth potential should be weighted more highly. However there needs to a geographical dimension in the methodology to ensure equitable division across the country. Alternatively blocks of funding could be top-sliced by mode or locality to ensure fair distribution.

A4. Schemes which make the most of the existing infrastructure and target the removal of bottlenecks will be the most cost effective. In addition measures and campaigns which encourage use of more sustainable modes will allow more road space to be available for vehicles essential for economic activity.

Balance between Capital & Revenue Expenditure

A5. The evidence from the Sustainable Travel Towns suggests that a combination of revenue and capital investment is necessary to achieve a change in the way people travel. Capital investment through the Local Transport Plan system has been much higher over the last ten years but revenue allocations have lagged behind. In some cases this has meant that the full benefit of the infrastructure improvements has not been achieved because of limitations on promotion and travel planning.

A6. The Cycling City grant (£3.6m 2009-2011) for York has a relatively high revenue element (30%) which enables more educational, marketing and promotional campaigns to be progressed to compliment the infrastructure improvements being introduced. These campaigns often have a much wider influence than the localised effect of an isolated piece of infrastructure. In this way revenue funding can be more cost effective in increasing overall behaviour across a wider area. The success of sustainable travel campaigns is dependent on having realistic travel alternatives to promote. For York the cycle network is already extensive and well used creating a highly visible alternative for many across the city. The health, journey time saving and cost benefits are self evident - the difficulty is getting people to take up the option for the first time. For many the reluctance is based on a concern about safety which can be partially overcome by a combination of infrastructure improvements, training and promotion of routes away from high traffic areas. Revenue funded marketing campaigns have a significant role to play in this area. Funding is also needed for rolling out further travel planning initiatives and supporting public transport provision.

Methods for Assessing Transport Schemes

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A7. The current NATA system may work for larger schemes but there is a concern that a lighter touch approach would be more effective for smaller schemes (<£25m). A balance has to be struck between the need to ensure that a scheme is good value for money for comparison purposes and the cost of undertaking the necessary work to prove the case. Using a process designed for a large highway scheme for a smaller integrated transport package of measures is inappropriate and far too time consuming and costly. A £4m roundabout scheme funded through the LTP in York was taken from initial concept through to completion in two years whereas if it had been funded through the Major Scheme process the funding approval alone would have taken longer.

A8. A less involved lighter touch national methodology would be useful for determining the benefit of smaller transport projects and for prioritising schemes at an early stage. Additional guidance on the evaluation of the impact of schemes on objectives which are not easily monetised would also be useful.

Planning of Strategic Schemes

A9. The benefit of the Regional Funding Allocation process was that a clear programme of work was established for regionally significant schemes which enabled resources to be applied to detailed bid preparation at an appropriate stage. This process also enabled non-national trunk road schemes promoted by the Highways Agency to be included in an overall review. If the new process includes for bids to be issued directly to the DfT then the strategic endorsement of the scheme and the management of the overall programme at a more local level could be lost.

A10. With the removal of the regional layer some alternative sub-national strategic transport decision making processes are required. This may be possible through individual or consortia of Local Enterprise Partnerships but an overall strategic view may be lost and the assessment of priorities may be more difficult as separate systems are established in each LEP.

A11. A two or three stage approach which sifts out schemes for more detailed evaluation is needed. However the prioritisation methodology for the early stage sifting needs to be clear so that schemes are compared on an equitable basis particularly if schemes are being ranked across a number of Local Enterprise Partnership areas. It would be expected that an initial sift would be on the basis of policy fit and deliverability however there may need to be an interim mini-NATA stage prior to preparation of a detailed business case for approval nationally. The inclusion of additional stages may increase overall scheme approval timescales but would reduce the risk of abortive development costs. An arrangement to approve funding for smaller schemes at a more local level would help to substantially reduce the overall time to deliver schemes.

A12. The previous methodology gave some certainty over the availability of funding through the Regional Funding Allocation system which prevented a free-for-all bidding process to central government. However the DfT processes and resources still did not appear adequate even to deal with this reduced work TE 68

load. If the schemes are to be prioritised at an early stage at Local Enterprise Partnership level there may need to be some form of funding restraint mechanism to prevent the DfT being overwhelmed with bids. This risk would be reduced if spending authority could be delegated to a lower level for the smaller schemes. A separate budget block for relatively small locally important schemes would prevent all funds being directed to a small number of large regionally/nationally significant schemes.

September 2010

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Memorandum from DB Schenker

1. DB Schenker is pleased to submit evidence to the Transport Committee’s Inquiry into Transport and the Economy.

2. DB Schenker is the largest UK rail freight operator. DB Schenker moves around 80 million tonnes / 10bn tonne kilometres of freight a year and employs 3500 staff in Great Britain. Besides transporting coal for electricity generation, steel and petroleum, we move stone, deep- and operate international freight services through the Channel Tunnel in connection with our open access freight business in France and Spain. DB Schenker is wholly owned by Deutsche Bahn AG, the second largest logistics provider in the world.

3. Rail freight produces between three and four times less CO2 per tonne moved than road haulage and up to ten times less polluting emissions. Whilst rail must continue to reduce its own carbon footprint, its primary contribution to Climate Change is to continue to attract traffic from more polluting modes.

4. Rail freight in Britain has been one of the success stories of privatisation and has grown by over 60% in the last fourteen years, increasing its surface market share from 8% to 11.5%. At the same time the industry has become more efficient with DB Schenker having reduced key asset numbers and costs by over 30% in the past five years. Although rail freight volumes have reduced during the recession, the industry continues to invest in the firm expectation that absolute growth, as well as increased market share, are achievable.

5. Rail freight industry forecasts, endorsed by the Department for Transport and Network Rail, suggest a doubling of rail freight activity by 2030. The rail industry’s “Planning Ahead” document anticipates an increase in rail freight’s market share from 11.5% to 20%.

6. Increasing rail’s market share is perfectly feasible –critical to this will be both the development of both new terminals and the Strategic Freight Network ( see http://www.dft.gov.uk/pgr/rail/strategyfinance/strategy/freightnetwork.)

Rail Freight and the Economy

7. Rail freight has a key role in certain sectors of the economy and has historically been the transport mode of choice in the movement of certain bulk products such as TE 69

coal for electricity generation and iron ore for steel making.

8. Network Rail’s recent publication, The Value and Importance of Rail Freight, estimates that rail freight directly contributes £870m to the economy but supports a turnover six times greater.

9. In nearly all the markets that rail freight trades in, it plays a major role despite facing strong modal competitive pressures, primarily from road haulage but also from shipping, pipelines and product substitution in some markets.

10. Rail freight’s importance to the economy therefore continues.

Have the UK’s economic conditions changed materially since the Eddington Transport Study ?

11. The economic sectors that rail freight trades in have all suffered, to a greater or lesser extent, from the impact of the Recession.

Steel and Aggregates are two bulk sectors where volumes were notably adversely affected although they have since started to recover.

In parallel, but not directly as a result of the Recession, coal lost market share to gas in the market for electricity generation and movements of coal have been correspondingly reduced whilst record levels of inventory were reduced.

In contrast, however, both rail’s market share and the absolute volume carried of containers – the key growth market for the future – have continued to grow over each of the past four years. Growth in tonne kms of containers grew by 9% in both 2006 and 2007, by 0.2% in 2008 (with growth still being achieved in the depth of the recession) and by over 6% in 2009.

12. The impact of the Comprehensive Spending Review may impact on the recovery of the economic sectors with which rail freight trades – eg the Steel and Construction industries are dependent to a significant degree on public sector investment in roads and other infrastructure projects.

13. However, none of this suggests that the main conclusions of Eddington – the need to reduce congestion on inter-urban corridors, to / from key international ports and in urban areas – have changed or become less valid.

Container traffic to / from international ports and gateways continues to be the major growth traffic for rail freight and this underlines the continuing relevance of Eddington.

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What type of transport spending should be prioritised ?

14. DB Schenker believes that transport spending should concentrate on delivering :

a. Economic growth and regeneration b. Reducing carbon, where rail is the key to low carbon freight transport c. Improving sustainable transport. d. Reducing costs or increasing value for money.

15. Rail freight has a track record of helping UK PLC achieve all of these objectives, primarily through modal switch from road transport and development of its own efficiency.

16. DB Schenker also consider that small scale interventions, as well as major projects, should be protected and prioritised as local initiatives can have major local benefits.

17. Examples of transport spending that DB Schenker believe meet the above criteria include :

a. The development of the Strategic Freight Network (see section 6 above) b. The use of modal shift grants to switch traffic to more sustainable and carbon friendly modes c. The development of inter-modal terminals to facilitate transferring traffic to more carbon-friendly and sustainable modes.

18. DB Schenker would submit that significant spending on rail industry restructuring (whether of the DfT, Network Rail or other parts of the rail industry) would represent neither good use of scarce funds nor good value for money at the moment.

Scarce funds should be used to promote services that deliver the above objectives and improve services for customers

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

19. Rail is a capital intensive mode of transport. For any party to invest in rolling stock or terminals is a very considerable undertaking and this is one reason why development of new rail freight traffics is complex and can take many years.

20. Often customers will only make such a decision when they reach a key point in their natural product investment cycle.

21. Government support for such capital investment has historically been available through grants - albeit at very low levels – but the major investments in key facilities have been made by the private sector Operators, customers and third parties. For them, the major contribution Government can make is to reduce risk by providing certainty of the environment.

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22. In an environment when public spending is going to be constrained, DB Schenker would submit that :

a. There should be as much flexibility in the rules and classification of expenditure as possible b. The key should be supporting schemes which deliver the objectives set out in section 13 irrespective of classification c. Government should ensure that the environment is made as attractive as possible for private sector investment that delivers these objectives through : i. Certainty of track access charges until the end of CP5 ii. A supportive planning regime, eg for new rail freight terminals iii. Continuing resistance to measures that undermine rail freight, eg longer and heavier lorries.

Are the current Assessment Methods satisfactory ?

23. DB Schenker submit that the assessment methods should concentrate on delivering the objectives set out in section 13.

24. DB Schenker believe that all external costs of different freight modes should be treated equitably in NATA, the model currently use by DfT.

25. DB Schenker submits that carbon reduction should be given a higher weighting.

26. DB Schenker also submits that improvements to operational efficiency ( eg of rail freight operators, Network Rail or other rail users as many projects have benefits such as capacity enhancement or line speed improvements) should also be adequately covered by the assessment criteria.

How will schemes be planned going forward ?

27. DB Schenker has major concerns about the proposed reform of the planning system. It has never been easy to obtain planning consents for major developments such as rail freight interchanges or terminals and it would now appear to be going to be even more difficult than before.

28. DB Schenker cannot overstate the negative impact this has on prospective clients.

29. Major interchanges over 60Ha presently come under the Infrastructure Planning Commission. The proposed changes to the Commission are unlikely to be particularly problematic, although there are concerns over the criteria that Ministers will apply to decision making once an inspector has concluded.

30. However we have yet to see even a draft version of the National Policy Statement for National Networks, which will be a key document in determining how rail freight interchanges will be assessed. The document will need to be clear in setting out the national and sub national need for such facilities, and the criteria which should apply. The document should seek to balance local needs with the national need and not be TE 69

dominated by the localism agenda. We would also be very concerned if there were any attempt to increase the threshold for consideration of interchanges.

31. As well as the larger facilities, there are also many developments which fall below the threshold of the IPC. The abolition of regional strategies is unhelpful for such sites, as they had previously helped to balance the local issues and regional benefits and need. We consider that Local Enterprise Partnerships must be empowered to support the development of such facilities.

32. Overall therefore, rail freight needs the planning system to include;

a. A strong National Policy Statement with clear guidance on the national and regional need for rail freight terminals;

b. A clear role for National Policy Statements in the planning process for schemes below the threshold level;

c. The ‘duty to co-operate’ requirement on local authorities extended to clarify the areas which must be covered by such co-operation and the outputs which are expected;

d. Clarity on the legal status of documents produced by Local Enterprise Partnerships in consideration of planning applications;

e. Incentives given to Local Authorities to plan for ‘unpopular’ developments such as rail freight terminals in their areas, akin to the recent announcement of incentives for house building.

33. DB Schenker intends to submit supplementary written evidence relating to the Comprehensive Spending Review after it is published in late October.

September 2010

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Memorandum from Freight on Rail

Freight on Rail would like to thank the Transport Select Committee for the opportunity to respond to its inquiry into Transport and the Economy.

Summary Freight on Rail, a partnership of the rail freight industry, the transport trade unions and Campaign for Better Transport, works with local and central Government to promote rail freight, the low carboni, energy-efficient safe alternative to long distance road freight which reduces road congestion. The sustained growth of rail’s share of consumer traffic over the past 7 years demonstrates the demand for this alternative mode for trunk haul. In fact, rail has increased market share despite a 15 per cent reduction in consumer imports into the UK over the past year.

As it stands a quarter of all products imported through the SE container ports are transported by rail. For example, Thamesport transported a quarter of its containers by rail in July 2010.

1. Have the UK’s economic conditions materially changed since the Eddington Transport Study and, if so, does this affect the relationship between transport spending and UK economic growth?

Eddington’s conclusions on the need to reduce congestion on inter-urban corridors and key international ports are still as relevant today and in the foreseeable future. The importance of rail freight’s role in reducing long distance road congestion is recognisedii. In fact, the economic recession makes the case even stronger for targeted interventions to stimulate the green economy.

Road congestion is claimed to cost businesses £17 billion per annum. FTA The Importance of Rail Freight 2008

DfT estimate the cost of congestion being £1 per lorry miles on the most congested roads.

2. What type of transport spending should be prioritised, in the context of an overall spending reduction, in order best to support regional and national economic growth?

Freight on Rail believes that rail freight transport spending should be prioritized because key limited targeted interventions for rail freight provide significant benefits for society and the economy and are in line with Coalition’s Programme for Government commitment to make the transport sector greener, more sustainable and reduce carbon dioxide emissions.

Rail freight links are an important driver of economic regeneration. The latest Network Rail research shows that the British economy is boosted to the tune of £870 million by the rail freight industry which further supports indirectly an economic output of £5.9 billion over six times its direct turnover.

For example, it is recognised that investments which relieve bottlenecks on the rail network can have huge benefits in productivity for existing rail freight and passenger services which benefit the economy. Reduced journey times reduce train running costs and decrease the amount of capital that is tied up in the form of goods in transit. Upgrades improve reliability which key to customers as delays can halt production or construction as well as deterring the customer from choosing rail in future.

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Case for the Strategic Rail Freight Network Building a robust reliable rail network with diversionary routes, as defined in the Strategic (Rail) Freight Network (SFN) vision, are crucial if rail freight volumes are to increase. The SFN will provide a reliable robust strategic network with diversionary routes to cater for the growth in intermodal rail freight which will connect national major freight routes, including links to the ports. To start realising the benefits of the SFN, the previous Government committed £200m to start building the network. However, these schemes which have attracted third party funding commitment and were part of the Government High Level Output Statement (HLOS) are now awaiting the outcome of the Comprehensive Spending Review. We urge the Coalition Government to retain these upgrades so that rail freight can provide the low carbon energy efficient alternative long distance freight mode the country needs.

The rail freight industry has invested more than £1.5bn in the industry in the past ten years and needs these Government interventions to give it the confidence to invest longer term. An example of improved productivity to be gained from upgrade schemes in the SFN project would be to cater for 775 metre trains on the network which would allow better asset usage (sweating).

Consumer rail freight has grown and increased market share despite the recession In the last year, the share of consumer freight transported by rail has increased by 6.5 per centiii, representing the seventh consecutive year of growth, which means that container traffic is larger than coal now. Industry experts have demonstrated that with the correct support consumer rail freight can increase fivefold in the next 20 years.

Examples of services in key emerging consumer market The intermodal service run by DB Schenker for Stobart which commenced in Autumn 2009 carrying refrigerated fresh produce from Spain to the UK is the longest rail freight service in Europe under the operation and direct control of a single operator. This service has 30 intermodal reefer boxes and avoids 13.7 million road kms per annum between Spain and the UK and reduces CO2 emissions by 8625 tonnes per annum.

DB Schenker started a direct train service linking the Midlands with Italy at the beginning of June 2010. The flow from Birmingham to Padova in Northern Italy builds upon existing twice weekly DB Schenker services which take only 42 hours via the Channel Tunnel with customers ranging from retailers, food producers and manufacturing. The train provides customers with a saving of at least 24 hours over traditional road haulage.

Direct Rail Services have relaunched a five day supermarket service for WH Malcolms with each daily train hauling up to 26 containers. It is estimated that CO2 savings of 12,000 tonnes per year will be made. This equates to removing over 13,000 lorry journeys off the road network between Daventry and Mossend.

Revenue Grants – Mode Shift Revenue Support (MSRS) It is crucial that revenue grant budget is retained at existing levels as these grants underpin existing business without which this traffic would be forced back onto the roads with the resulting increased road congestion, increased emissions and exposure to accidents. In England and Wales, the budget has been confirmed until March 2012. However, a longer period of certainty is needed for customers to have confidence to sign contracts.

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In particular, these grants are key for the new emerging domestic intermodal traffic which is a very competitive market, (partly because of the cost of the two road legs involved). The increase in market share of consumer rail freight, both deep sea and domestic intermodal traffic, demonstrates the demand for these services. The grants system is designed to recognise the advantages to the economy of reducing long distance road freight congestion as well as the social and environmental advantages of rail freight. The rail freight industry has been actively working to reduce its dependence on grant support over the past five years and will continue to do so. Grants are only awarded and paid for actual lorry miles taken off the roads.

The role of grants in supporting sustainable freight movements Capital grants The capital Freight Facilities Grants, which were suspended in July 2010, pending the CSR, are important to offset the initial start-up costs of the transfer to rail and in the context of future business.

Need for 24/7 railway In order to offer full services to customers, 24/7 railway is needed, especially for emerging new retail business. The logistics industry needs to be able to access the rail network on Sundays which is often not possible at present. This approach is in line with the Coalition Government’s aim to improve asset utilisation.

Example of a small enhancement which would yield significant benefits Access from HS1 to London riverside terminals is crucial to expand international services for key markets such premium freight. This is an example of a small project which would provide a big win.

Financial analysis showed a favourable scenario for the Southampton to West Midlands gauge enhancements with the £70.7 million project below having a Net Present value of £376m. The Seeda led Impacte gauge enhancements project with partners AWM, ABP, Network Rail (NR), European funding;

Through limited targeted Government support for rail freight, combined with third party funding it has been possible to implement significant and crucial upgrades to the rail network which are allowing the rail freight industry to expand services to customers and shift long distance freight onto the railways to relieve road congestion and reduce emissions.

The Transport Innovation Funding Productivity Fund TIF is an example of Government support which has brought in third party funding to upgrade the rail freight network to make it more efficient.

Humber Ports upgrades an example of partnership of public and private sector Northern Way, a consortium of different authorities worked with Network Rail & ABP. The Hull Docks Branch upgrade – increases trains from 12 to 22 per day. (£15.5M) on the Hull docks branch and improvements in network resilience with the re-opening of the Brigg Line for freight services.

Value of Logisitics sector • How valuable are logistics jobs? Dispatch clerks, warehouse pickers £300 pw HGV/truck operatives £350 pw Supervisory £400 pw Call centre operators £278 pw Main logistics positions needs skills including IT TE 70

Source Midlands Logistics Study MDS Transmodal Regeneris 2005

Daventry Rail Freight Interchange Northampton on a site of 160 hectares employs 2,595 employees which equates to 14.4 employees per hectare.

Analysis of data by Network Railiv shows that rail freight generates almost double the national average output per employee. This reflects the high productivity and physical capability of the industry.

3 How should the balance between revenue and capital expenditure be altered? Freight on Rail believes that there should be more flexibility between capital and revenue funding so that funds can be transferred between capital and revenue budgets, where appropriate.

4 Are the current methods for assessing proposed transport schemes satisfactory? No, appraisal should ensure that all external costs of the different freight modes are fully internalised which is not the case currently with NATA, the model used by the DfT. There should also be a consistent model used across Government departments.

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

Need for Strategic Spatial Planning As it stands, there are tensions between the Localism agenda and economic growth which need to be addressed in the Localism Bill.

We believe some form of strategic sub-national transport planning, in addition to local and national spatial planning is needed if the Coalition Government is to meet its commitments to reduce carbon dioxide emissions and build a green economy. Unless strategic planning structures are put in place it will remain difficult to get planning permission, for a wide range of schemes to help regenerate the economy including medium sized wind farms and rail freight terminals, if the schemes are opposed locally. This level of transport planning is needed to give confidence to investors, infrastructure providers, community initiatives, transport operators, developers and local enterprises

Transport projects are rarely confined to local authority boundaries which means that without a larger than local spatial planning structure it will be difficult to plan key infrastructure projects which cross local authority boundaries This could result in projects, ranging from, medium-sized and small rail freight terminals and wind farms not being granted planning permission, because of local opposition, even though there are wider benefits to society of these schemes.

Rail Freight needs planning permission for a network of terminals if volumes are to increase A supportive spatial planning framework is needed if rail freight is to play its role in reducing freight’s emissions; rail freight needs approval for a network of terminals, situated in the right places to meet market requirements.

Major infrastructure projects such as large Strategic Rail Freight Interchanges (SRFIs) will, in the longer term, be addressed through the Major Infrastructure Unit (MIU) which will replace the Independent Planning Commission. However, the threshold for schemes being considered by the MIU is 60 hectares and the majority of rail/road transfer stations are not of this scale. So we believe that the planning framework needs to recognise the importance of getting planning permission for medium-sized and small TE 70 rail freight terminals without which freight cannot be shifted to rail and all the economic, social and environmental benefits to society cannot be realised.

Currently, with the abolition of the RSSs, there is a planning vacuum as there is neither national or sub national policy with only local plans, (which everybody recognises are crucial), in place.

Need for the National Planning Framework to talk full account of rail freight. a) the need for a network of terminals b) Strategic Rail Freight Network should be part of framework c) Existing safeguarding transport lands policies in PPG13 need to be incorporated in new Framework so that rail alignments and suitable sites for terminals and interchanges can be protected by local authorities in Local Plans. There is already a shortage of suitable sites beside the railway, which could be lost for ever without this level of protection.

National Policy Statement for national networks a) Needs to define the need for Strategic Rail Freight Interchanges and medium-sized and small terminals b) Recognise the role of rail freight in servicing the economy in a sustainable safev way c) Interchanges should only be given planning permission if they are capable of being rail served to help the Coalition Government meet its climate change targets d) Need to be able to protect key national rail corridors, both existing and former for future possible rail use.

Sub-national Planning and Local Enterprise Partnerships The economic regeneration benefits of rail freight investment have previously been widely recognised by local and regional authorities so it is critical that Local Enterprise Partnerships (LEPs) have a framework to support and fund transport schemes

Freight on Rail believes that Local Enterprise Partnerships could be well placed to develop additional transport schemes of this nature to expand the rail freight network as long as they are set up taking into account certain criteria. RDAs were very effective in bringing together public and private finance and forming partnerships to fund projects which is a role that is hugely important and needs to be replicated in LEPs which need to :- a) To cover a sufficiently large geographical area to be viable for developing transport projects b) To have access to funding for rail freight schemes which regenerate the local economy and relieve bottlenecks on the route from Felixstowe to Nuneaton eg the Ipswich Chord supported by Suffolk County Council. c) As well as local authorities and private business, LEPs should include environmental groups, community amenity groups and trade unions. d) Some form of sub-national strategic planning is needed for economic growth because strategic transport decisions, which affect several regions, cannot be dictated solely by local decisions if sustainable economic regeneration is to take place.

TE 70 e) Clarity is needed on what the duty to co-operate requirement for local authorities means in terms of output and participation

Examples of partnership working at local, sub-national and national levels which have been and will continue to be a crucial part of realizing transport projects

• Access to Liverpool Port supported by TIF funding, Merseytravel, NR, Northern Way/ERDF/consortium of 6 authorities LTP funding for Olive Mount Chord

• Kilbridge Group has taken over the Keypoint Swindon Rail Freight terminal and invested in improved road access to allow cars from the neighbouring Honda manufacturing plant to access the terminal directly from the factory http://www.kilbridegroup.com/docs/case-studies.asp Swindon Keypoint rail freight terminal

September 2010

i Rail freight produces 70% less CO2 emissions than the equivalent long distance road journey DfT Logistics Perspective Dec 08 ii An average freight train can remove 50 long distance HGVs journeys from our roads - Network Rail 2010 iii Rail freight has increased its market share in deep sea traffici by 12 per cent- ORR Rail trends February 2010 Q3 09/10 on q3 in 08/09 despite the fact imports over the quay have reduced by 10-20%. iv National Input-Output table 2007 Office of National Statistics in Value of Rail Freight July 2010 v Rail freight is safer than road freight on major roads as HGVs are over 3 times more likely to be involved in fatal accidents than cars due to a combination of size, lack of proper enforcement of drivers hours, vehicle overloading and differing foreign operating standards. Source -Road Statistics 2008, Tables 3.2 and 3.6, Road Freight Statistics 2008 Section 5, DfT