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Home , Department for Transport, HM Treasury

From the Secretary of State The Rt. Hon.

Great Minster House 33 Horseferry SW1P 4DR

Tel: 0300 330 3000 E-Mail: [email protected]

Huw Merriman MP Web site: www.gov.uk/dft Chair of the Committee Transport Select Committee House of Commons London SW1A 0AA

4 December 2020

Dear Huw,

I am writing in response to your letter of 3 November 2020. This sought further information on my Department’s plans, following a decision by HM to postpone the multi-year approach in order to enable focus on responding to the immediate public health and economic emergency we face in light of the continued spread of COVID-19.

The material set out in Annex A provides a comprehensive response, in turn, to the original and further questions which you posed. I hope you will find your questions more fully answered because of the Spending Review having taken place last week and the Department now having confirmed budgets to work on various aspects of delivery for next year.

Yours ever,

Rt Hon Grant Shapps MP

SECRETARY OF STATE FOR TRANSPORT

Annex A – Responses to questions in turn

1. What your policy priorities are for the Spending Review period, including how these differ from those published in last year’s Single Departmental Plan, including those commitments made by the Government during the election

DfT has taken steps to evolve our objectives from last year’s Single Departmental Plan, in order to reflect the government’s priorities (including those outlined in the 2019 Manifesto) and take account of the impacts of Covid-19 and EU Transition. We will continue to develop these as part of post-Spending Review business planning and into 2021. We are focusing our work around the following areas:

• Improving Transport for the User: Build confidence in the transport network as the country recovers from Covid-19 and improve transport users’ experience, ensuring that the network is safe, reliable, and inclusive.

• Decarbonising transport: Tackle climate change and improve air quality by decarbonising transport.

• Levelling-up the economy: Improve connectivity across the and grow the economy by enhancing the transport network.

• Increasing our global impact: Boost our influence and maximise trade by having an outward-facing approach and being a world leader in the future of transport.

• An excellent department: Be a well-run department that focuses on delivery, drives value for money and embodies our values in all that we do.

The first three bullets above have been set as key priority outcomes as part of Spending Review 2020 (SR20) (as set out in the Spending Review document1).

2. Details of spending commitments already made for the Spending Review period, by year, and by amount

SR20 allocates multi-year funding envelopes to several of the ’s (DfT) major capital programmes. Profiles for each of these are detailed in the Spending Review document (Table 6.18) (and as below):

Department for Transport multi-year capital programmes:

£ billion 2021- 2022- 2023- 2024- Total 22 23 24 25 capital DEL 5.2 5.7 5.8 5.9 22.6 Road Investment Strategy 2 capital 3.8 4.4 4.8 5 18 DEL 's Control Period 6 5.8 5.8 5.8 - 17.5 capital DEL Intra-city settlements capital DEL - 0.8 0.8 0.8 2.5 Electric charging and 0.4 0.6 0.5 0.4 1.9 grants capital DEL

1https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/938052/S R20_Web_Accessible.pdf#page=81

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The Spending Review also allocates one-year (2021-22) Resource (RDEL) and Capital (CDEL) settlements for DfT programmes that are not in scope of multi-year funding envelopes. These will be reflected in DfT’s Main Estimate. Policy commitments and the associated funding implications are described later in this response (see question 6). The settlement also provides Covid-19 funding for Rail for the first quarter of 2021-22 intended to specifically address the fare income shortfalls DfT is experiencing as a direct result of the pandemic. The settlement further includes wider provision for budget pressures that DfT may experience as a result of Covid-19, particularly through a reduction in income.

3. How your Department has analysed its priorities and work for this Spending Round, including how it identified areas of cost saving, programmes and projects that can be brought to an end and the total resources dedicated to the Spending Round

Following the announcement of SR20 in July, a central Spending Review team was created with representatives from the finance and strategy teams to coordinate the department’s overall response (a core team of 10-15 people working flexibly on the Spending Review and related departmental planning work over a period of approximately six months). Central governance structures were created, including a Fiscal Events Programme Board to bring together Finance, Strategy and representatives from policy teams across the department. A Spending Review Analytical Board was created to assess funding bids. The central strategy and finance team commissioned the whole department to forecast financial requirements for the SR. As part of this, information was requested to support the prioritisation of these requirements and to identify opportunities for cost savings. This information included the level of commitment (e.g. legal or contractual) associated with each forecast, alignment with strategic objectives, value for money, deliverability and robustness to the impacts of Covid-19. Initial findings from this exercise were then stress-tested with teams and later via challenge panels with members of the department’s Executive Committee. Summaries of these financial requirements and associated information were presented to ministers to inform decision making on which programmes should be prioritised or de-prioritised from the department’s Spending Review bid.

4. How you intend to engage those outside the Department, such as civil society, in formulating ideas for savings and priorities

The department’s central SR and policy teams have engaged closely with key stakeholders throughout the SR process both to support the development of departmental priority outcomes and effective packages of proposals to support these outcomes as well as the government’s wider priorities. These stakeholders include industry representatives within specific modes and the transport sector more widely, both at the local and national level. They also include the department’s Arms Length Bodies (ALBs), Devolved Administrations, Mayoral Combined Authorities, and Local Authorities. Engagement with key stakeholders has continued in the immediate aftermath of the SR announcement, to brief them on the settlement, answer questions, and gather feedback.

5. What policy areas you have identified that require assistance from other departments, and how you have liaised with them;

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DfT works with other government departments across policy areas on an ongoing basis (for example, on issues such as EU Transition and security). Key areas of collaboration to deliver on our strategic priorities have included: • BEIS and Defra on Decarbonising Transport • MHCLG, BEIS and DfE for Levelling-up. Broader cross-cutting areas for the SR have included: • Defra – Working towards the 25 Year Environment Plan – including policy on managing green estate alongside railways and strategic ; and reducing air pollution from transport • BEIS – Net Zero by 2050: DfT will work alongside other departments including MHCLG, Defra and HMT to deliver policy, legislation and infrastructure. • DCMS - Increasing economic growth and productivity through improved digital connectivity and data infrastructure: Working with DCMS and MHCLG to support DCSM to make it easier and cheaper to deploy digital infrastructure. • MHCLG - Raising productivity and empowering places so that everyone across the country can benefit from levelling up: In coordination with BEIS, DWP, DfE and MHCLG

6. Policy commitments (including those in legislation) made which may have a significant spending impact, such as reducing carbon emissions to net zero by 2050, over the Spending Review period, with likely costs Significant areas of spend to deliver on policy commitments include: • Covid-19 response - supporting public transport services to ensure that people can make the journeys they need to safely and reliably: o Over £2 billion of confirmed funding in the first quarter of 2021-22 for rail services, building on the estimated £12.8 billion of support for transport services that the government has already committed to provide in 2020-21 • Levelling-up local and national infrastructure o Road Investment Strategy 2 (RIS2) and local roads and rail. Over £58 billion of investment for road and between 2021-22 and 2024-25, delivering some of government’s largest capital programmes. o £1.7 billion in 2021-22 for local roads maintenance and upgrades to tackle potholes, relieve congestion and boost connectivity – to help deliver against the government’s 2019 manifesto pledge to launch the biggest ever pothole-filling programme. o Local transport improvements - £850m for the Transforming Cities Fund and a multi-year settlement for the Intra-City Transport Fund, maintaining the government’s commitment of £4.2 billion for five-year, consolidated settlements. o £4bn national ‘Levelling-up Fund’ to invest in local infrastructure (joint between HMT, MHCLG and DfT)

• Decarbonising Transport to support the Government’s commitment to Net Zero by 2050 o A one year capital settlement which includes additional funding for zero emission buses and measures to support the Prime Minister’s Ten Point Plan for a Green . o Multi-year settlements for Plug in Vehicle Grants (£582m) and Infrastructure (£1.3bn)

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• Transformation of bus services and active travel (in line with the PM’s public £5bn ambition) o £257m in 2021-22 for cycling and walking o £120m for zero emission buses and £300m to drive transformation of bus services in 2021-22. If bus operators continue to require Covid-19 support in 2021-22, then it will be drawn from the £300m in the first instance A more complete breakdown of the department’s multi-year capital programmes can be found within the Spending Review document (Table 6.18).

7. Details of known unavoidable volume, demand, demographic or cost pressures and their likely costs impacts

In response to the impacts of Covid-19, DfT has provided financial support to enable essential transport services, such as rail and bus services, to continue to run. This support will continue in 2021-22 and we have secured an initial settlement at SR20 accordingly. However, the value of financial support required remains uncertain as it depends on future decisions about public health restrictions. Potential additional Covid-19 costs may emerge and key income streams (i.e. Driver and Vehicle Licensing Agency (DVLA) income from vehicle registrations) could be depressed. If so, we may need to seek funding from the Covid-19 Reserve. The transport element of the Covid-19 settlement SR20 is included in the Spending Review document (Table 2.1). Aside from Covid-19, the department continues to face a risk of inflation or other cost increases, which could lead to operational requirements that exceed those provided for in our SR settlement. The department will seek to mitigate this risk through a business planning process which will help to ensure that all parts of the business understand their budget settlements, and through close working with our supply chain.

8. Details of investment/capital spending priorities and likely costs Allocations associated with capital spending priorities are provided in the Spending Review document and responses above.

9. Plans for efficiencies, including information on how they might be achieved and details of the amounts of savings they are expected to generate. Which areas of policy or provision you regard as being efficient or where further savings can be made; and where further cuts may mean loss of provision or affect policy

The Spending Review in 2015 built in efficiency targets for DfT and its ALBs which continue to be delivered. For example, Network Rail and Highways have formal efficiency targets built into their Control Period 6 (CP6) and RIS2 settlements and performance against these targets is rigorously and regularly monitored. Moreover, DfT’S SR20 settlement is contingent on DfT identifying further savings across RDEL and CDEL and options will be considered as part of our upcoming business planning process. We have already identified £100m of RDEL savings from Network Rail in 2021-22, which will mostly be delivered by constraining workforce costs.

10. How you intend to measure your performance given any funding settlement

The DfT, as with all departments, will report upon departmental performance in 2020 in its Annual Report and Accounts, to be published in 2021. A reformed approach to

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business planning processes will be introduced for 2021 across . The newly titled ‘Outcome Delivery Plan’ will replace the ‘Single Departmental Plan’ and will focus on the ‘real world’ outcomes that the department aims to deliver, through reporting on milestone delivery and risk, monitoring of metrics and periodic assessments as set out in the Public Value Framework. Within the department, performance and assurance processes rely upon a tiered approach to governance and sponsorship relationships with our ALBs, underpinned by portfolio reporting to Investment Boards (and the Government Major Projects Portfolio (GMPP)), periodic assurance reviews of major projects, modal Boards and Memorandums of Understandings with delivery bodies.

11. How, as part of the Spending Review, you intend to assess the likely impacts of different spending proposals on advancing equality for different protected groups under the Equality Act 2010? Will full equality impact assessments of the outcome of the Spending Review, for each of the different protected groups, be published?

The department undertook an Equalities Impact Assessment as part of its SR20 bid to determine the impacts of its proposals on protected groups. The impact on equalities of the Government’s overall SR settlement is set out in Annex A of the Spending Review document. DfT has a wider, long-term programme of work on the Public Sector Equality Duty (PSED) and equalities. We are planning a renewed process for working with teams across the department over the coming months that will ensure all protected characteristics are considered in relation to spend and policy development, that evidence is adequately recorded and that access to relevant data and research are widened to further assist our planning processes.

Net zero emissions/climate change targets

12. What are DfT plans to ensure that nationwide public transport is provided on an ultra-low emission or zero-emission basis? What is the timeframe for this delivery, how much money will be dedicated toward this during the next Spending Review period?

Transport is the largest greenhouse gas emitting sector and the trend for emissions has been flat for decades. Tackling climate change and improving air quality by decarbonising transport is one of DfT’s three priority outcomes, as agreed with HMT during the Spending Review process. To help ensure public transport is provided on an ultra-low emission basis, as part of SR20 DfT’s one year capital settlement covers £120m funding for zero emission buses in 2021-22. This will support the delivery of over 500 new British-made electric buses in addition to 300 this year. It also includes funding to support for decarbonisation measures announced in the PM’s Ten Point Plan for a Green Industrial Revolution. In 21-22 this includes £93m for investment in transport R&D, including for hard to decarbonise sectors like aviation and maritime and £257m for cycling and walking. Approximately £0.9bn was secured in total for decarbonisation for 21-22. The department further secured multi-year settlements for EV Infrastructure and Plug in Vehicle Grants. Securing long-term investment for decarbonisation is necessary to support achievement of long-term carbon targets. This is why the department is developing a bold and ambitious Transport Decarbonisation Plan to achieve net zero emissions across all modes of transport. This is the biggest piece of work we have ever done to tackle greenhouse gas emissions from transport. The holistic and cross-modal approach to decarbonising the entire transport system will set out a credible and ambitious pathway to deliver transport’s contribution to carbon budgets and meet net zero by 2050.

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13. How much money in the upcoming Spending Review will DfT be requesting towards achieving the plans set out in “The Road to Zero: Next steps towards cleaner road transport and delivering our Industrial Strategy”?

Two key facets of the ‘Road to Zero’ report were Vehicle supply and demand and Infrastructure. As referenced in Question 12, as part of SR20 DfT secured funding to support the rollout of electric charging infrastructure across the UK, and the continuation of funding grants for plug-in vehicles. This was in the form of two multi-year settlements; £1.3bn for Electric Vehicle (EV) infrastructure (now DfT’s highest value decarbonisation project) and £582m for Plug In Vehicle grants. The Plug In Car grant (PICG) funding maintains the grant at a higher level than that announced at Budget, making these vehicles cheaper to buy, and thus supporting the transition. These subsidies will end in 22/23. These measures support the PM announcement as part of his 10 Point Plan to end the sale of new petrol and diesel cars and vans by 2030, ten years earlier than planned.

14. In December 2019, DfT issued the latest statistical release on “Electric vehicle charging devices”. Is the installation of charging points progressing fast enough to support Government targets, and what level of funding will be requested as part of the Spending Review to either continue, and speed up this programme?

The UK is a global front-runner in the provision of charging infrastructure. Our latest statistical release published in November this year shows that since 2015, there has been a six-fold increase in public charge-points, totalling over 19,000 as of October 2020. This includes over 3,500 rapid charging devices which have increased nearly ten- fold over the same period. We expect provision to accelerate with confirmation of the 2030 phaseout date for petrol and diesel cars and vans providing greater market certainty for investors of future demand for charge-points. To support private investment, at SR20 DfT secured a £1.3bn multi-year settlement for EV infrastructure. This funding includes: • £950 million in future proofing grid capacity along the Strategic Road Network to support the rapid expansion of the charging network in the 2020s. This will enable the private sector to provide charging provision for longer distances with around 2,500 high powered chargepoints across England’s motorways and major A roads by 2030. • £90 million to fund local EV charging infrastructure, to support the rollout of larger, on-street charging schemes and rapid hubs in England. • £275m funding for chargers at homes, workplaces and on residential streets.

15. Reducing the impact of aviation CO2 emissions is essential to achieving the 2015 Paris Agreement, as noted in “Aviation 2050: The future of UK aviation” but the Consultation Response issued in October 2019 is very light on action that will be taken to achieve this. Can you tell us what funds DfT will be requesting in the Spending Review to help lower these emissions?

It is critical that aviation plays its part in delivering the UK’s net zero ambitions. We are already acting: on 22 July 2020, the Transport and Business Secretaries co-chaired the first meeting of the Jet Zero Council – a new forum that will bring together senior leaders in aviation, aerospace and academia to drive the delivery of new technologies and innovative ways to cut aviation emissions. The UK is also taking a leading role in

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the work of International Civil Aviation Organization (ICAO) to reduce emissions from international aviation. We are committed to implementing ICAOs Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) and are negotiating to agree a long-term emissions reduction goal for international aviation. SR20 confirmed the following new funding to support this agenda: • £15m competition to support the production of Sustainable Aviation Fuels (SAF) in the UK, • £3m to support the establishment of a SAF clearing house, • £3m for R&D into the infrastructure required for zero emission aircraft operation, and • Plans to consult on a SAF blending mandate. The Secretary of State has also affirmed our intention to consult on our position on aviation and climate change shortly.

Health

16. In 2018 it was reported that over half of the National Cycle Network had poor paths and was desperately in need of improvement. At the time of that report, the National Cycle Network had guaranteed funding from the but not the English Government. Will there be guaranteed funding as part of this Spending Review given that use of the network has health benefits, as well as it being a zero-emission mode of transport?

DfT has secured £257m funding for cycling and walking in 21-22. This funding will enable a suite of key actions in the PM’s long-term cycling and walking plan to commence, including expansion of the Bikeability programme, development of Active Travel England, launch of a national e-bike support programme and delivery of early capital projects from Local Authority pipeline plans, as well as National Cycle Network (NCN) upgrade projects. Funding allocations for the NCN in 20-21 will be confirmed in due course. This is in line with the government’s manifesto commitment to expand cycle networks. Investment will help upgrade the NCN to improve safety, accessibility and route quality, part of a programme of upgrades to 12,763 miles of the network by 2040, around half of which is currently off-road.

17. In what way are the recommendations from the July 2019 report “Transport, health and wellbeing: an evidence review for the Department for Transport” being included in the Spending Review and what is the financial impact of implementing these recommendations?

The Transport, health and wellbeing report found that transport could have positive and negative impacts on physical and mental health in a number of key ways: • Transport availability affects the accessibility of health services • Travel choices can affect physical health in relation to body weight or traffic accidents • Transport infrastructure can influence wellbeing by the extent to which it facilitates social connectedness • Transport noise can cause stress as well as a range of health conditions • The amount of traffic and length of a journey can directly impact mental health

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It was further observed that where these impacts are negative, they are more likely to be felt by older people, younger people, economically disadvantaged people, and people with disabilities. Included within our SR settlement are initiatives that will contribute to public health and wellbeing by delivering better local transport in our towns and cities. These include: • A new Levelling Up Fund worth £4bn that will invest in local infrastructure that has a visible impact on people and their communities, including transport e.g. bypasses and other local road schemes, bus lanes, and railway station upgrades. It will prioritise bids to drive growth and regeneration such as in areas that have received less government investment in recent years. • Interventions to make transport modes like buses (known to be instrumental in access to health services) more affordable. We have secured £300m in 21-22 for wider bus reform (though to be used for Covid-19 support as necessary) • Investment in active travel – £257m in 21-22 for cycling and walking. • Effective, targeted relief for those most at risk of loneliness as a result of Covid-19, in the form of a £5.9m Shared Outcome Fund for Loneliness. • £148m to improve Air Quality. This is for the Joint Air Quality Unit, which has been transferred to DfT from Defra’s budget.

Additional questions

18. Due to the effects of Covid-19 you have not set out a Single Departmental Plan. How will the Department measure its performance this year to allow proper scrutiny by the Committee?

In light of the operational impact of Covid-19 and the continued uncertainty the government faces in recovery, and HM Treasury agreed with Ministers that there would be no requirement for departments to publish Single Departmental Plans for this financial year. This was communicated to the Public Accounts Committee in August. However, effective internal planning, prioritisation and performance management remains a priority across government. Cabinet Office and HM Treasury have continued to centrally support departments’ internal planning processes and have encouraged departments to carry on sharing their internal business plans. Cabinet Office, HM Treasury and No.10 have also continued to monitor performance centrally. The Department for Transport, as with all departments, will report upon departmental performance in 2020 in its Annual Report and Accounts, to be published in 2021.

19. What assessments has the Department made of the separate funding that will be needed for the economic consequences of Covid-19 (for example, additional cleaning costs and reductions in passenger numbers), the UK’s withdrawal from the European Union, and the ongoing needs of the Department, and can these assessments be provided to the Committee?

DfT’s Spending Review settlement, including funding specifically to address Covid-19 pressures, reflects our assessment of the economic consequences of Covid-19, the UK's withdrawal from the EU, and other requirements (see also responses to Questions 6 and 7). We have rigorous processes and controls in place to assess and monitor our financial requirements an ongoing basis. We regularly review our requirements with HM Treasury and it is recognised that should DfT’s requirements increase significantly then we may need to access the Reserve. Plans will be made available to TSC where

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required.

20. How will you monitor and report how the Department’s emergency Covid-related funding is used by its beneficiaries (for example, rail and bus franchises)?

The department regularly monitors how Covid-related funding is used by beneficiaries, such as through regular modally-led engagement with key stakeholders and weekly meetings of the Covid-19 Domestic Transport Programme Board. This includes continually measuring the impact of the changing picture of public health restrictions on effective capacity, revenue and demand. Furthermore, DfT has developed an action plan for post-event assurance and due diligence activity related to Covid-19 spend. The department looks to ensure delivery against the plan over the coming months and to provide assurance on the propriety and regularity of payments related to the department’s Covid-19 support schemes.

On rail Covid support, a similar budgeting process continues to apply under the Emergency Recovery Measures Agreements (ERMAs) as under the Emergency Measures Agreements (EMAs). Specifically, the department agrees on a budget for each period with each (TOC) which contains forecasts of costs, capital expenditure and revenue, and it is reviewed by the department in every period. Similarly, the department undertakes quarterly reviews to monitor and potentially adjust the payments for bus operators. Data submitted monthly is subject to due diligence checks to ensure it remains in line with the principles agreed, such as ensuring it reflects the actual level of services run by the operator concerned. There will also be an end of scheme review on an open book basis to ensure the department has not overpaid on services.

Under the terms of the extraordinary funding and financing package provided to (TfL), it was agreed that there would be a DfT chaired Oversight Group that would meet regularly for the duration of the deal. The objectives of this Group are to oversee progress of the measures agreed in the extraordinary funding and financing package, to work collaboratively to determine how conditions are being met and to consider proposals for resolution where necessary. TfL will also continue to provide monthly management accounts and cashflow forecasts to DfT, and these will be regularly reviewed with DfT supported by external advisors.

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