House of Commons Transport Committee

Local transport expenditure: Who decides?

Seventeenth Report of Session 2013– 14

Report, together with formal minutes relating to the report

Ordered by the House of Commons to be printed 13 May 2014

HC 1140 Published on 3 June 2014 by authority of the House of Commons London: The Stationery Office Limited £10.00 The Transport Committee

The Transport Committee is appointed by the House of Commons to examine the expenditure, administration, and policy of the Department for Transport and its Associate Public Bodies.

Current membership Mrs Louise Ellman (Labour/Co-operative, Liverpool Riverside) (Chair) Sarah Champion (Labour, Rotherham) Jim Dobbin (Labour/Co-operative, Heywood and Middleton) Jim Fitzpatrick (Labour, Poplar and Limehouse) Karen Lumley (Conservative, ) Jason MᶜCartney (Conservative, Colne Valley) Karl MᶜCartney (Conservative, Lincoln) Mr Adrian Sanders (Liberal Democrat, Torbay) Chloe Smith (Conservative, Norwich North) Graham Stringer (Labour, Blackley and Broughton) Martin Vickers (Conservative, Cleethorpes)

Powers The Committee is one of the departmental select committees, the powers of which are set out in House of Commons Standing Orders, principally in SO No 152. These are available on the internet via www.parliament.uk.

Publication The Reports of the Committee are published by The Stationery Office by Order of the House. All publications of the Committee (including press notices) are on the internet at http://www.parliament.uk/transcom. A list of Reports of the Committee in the present Parliament is at the back of this volume.

The Reports of the Committee and the formal minutes relating to that report are available in a printed volume. Written evidence is published on the internet only.

Committee staff The current staff of the Committee are Gordon Clarke (Clerk), Nick Beech (Second Clerk), Richard Jeremy (Committee Specialist), Adrian Hitchins (Senior Committee Assistant), Stewart McIlvenna (Committee Assistant), and Hannah Pearce (Media Officer)

Contacts All correspondence should be addressed to the Clerk of the Transport Committee, House of Commons, 14 Tothill Street, London SW1H 9NB, The telephone number for general enquiries is 020 7219 6263; the Committee’s email address is [email protected]

Land transport expenditure: Who decides? 1

Contents

Report Page

Summary 3

1 Introduction 5

2 Local transport governance and finance 7

3 The new funding landscape: devolution and competition 10 Devolution of decision making 10 Competition for funding 10 Criteria for funding and funding for regions 12

4 Accountability 14 Accountability to stakeholders 14 Accountability for public money 15

5 Alternative funding methods 17 Alternative sources of funding 17

6 Conclusion 19

Conclusions and recommendations 20

Annex–Maps 22

Formal Minutes 25

Witnesses 26

Published written evidence 27

List of Reports from the Committee during the current Parliament 29

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Summary

New arrangements for allocating funding to local transport schemes will be introduced in 2015. We examined the proposed arrangements and concluded that—

• Competitive bidding for funds might result in wasted expenditure on unsuccessful bids and could favour better resourced authorities.

• Strategically significant transport projects may not be funded if they do not deliver immediate benefits for LEPs or local authorities.

• Regional economies may not be sufficiently well developed to allow the private sector to invest significant sums in local transport schemes.

In the light of those challenges, the Department for Transport must closely monitor how the new provisions work in practice. The key test of the new arrangements is whether transport spending is distributed more equitably across . More widely, schemes for funding local transport expenditure have been subject to considerable change in recent years. A period of stability will therefore be welcome, but this will be achieved only if the Department maintains effective strategic oversight over the implementation of the new arrangements.

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1 Introduction

1. There have been significant changes to arrangements for the funding and delivery of local major transport projects in recent years. We decided to investigate the complex network of bodies involved in local transport decisions to find out how they work together, both within and across local authority boundaries. We also sought to evaluate the different funding schemes that are available to fund local transport projects and the extent to which these meet local needs.

2. The Committee announced its inquiry into local decision making in transport expenditure on 30 October 2013, with a call for evidence. We posed the following questions:

• What is the rationale for the Government’s proposals to devolve to a local level decision-making on transport expenditure? What are the advantages and disadvantages of the Government’s approach? Are there better models?

• Do local bodies (including local authorities, local enterprise partnerships, passenger transport executives, integrated transport authorities and local transport boards) have the capacity to assess, prioritise and deliver local transport schemes? What would the optimum delivery body look like?

• What is the best way of dealing with major transport schemes that cross local authority boundaries, or have wider regional impact?

• How effectively do local bodies work with each other and with Government departments and national transport agencies?

• Do the current funding streams for major local transport schemes meet the needs of local authorities? How do current funding streams compare with previous arrangements?

• What impact will the devolution in 2015 of funding to Local Transport Bodies and the introduction of the Single Local Growth Fund have?

• How can local authorities attract greater investment from the private sector for the delivery and maintenance of local transport infrastructure? What scope is there for the use of alternative funding streams?

• How clear are the lines of accountability for local decision making on transport expenditure?

3. We received almost 40 written submissions in response to the call for evidence and heard oral evidence on 10 March from a wide range of interested parties, as well as Baroness Kramer (the Minister of State for Transport) and Stephen Fidler (Deputy Director of Local Transport Funding, Growth and Delivery). We would like to thank all those who provided evidence to this inquiry.

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4. This report provides an overview of the arrangements for local transport expenditure. In Chapter Two, we outline the recent changes to funding arrangements. In Chapter Three we consider whether the new arrangements successfully devolve decision making to a local level. Chapter Four addresses issues about accountability for local transport expenditure and also whether there is sufficient strategic direction for major transport schemes that cross local authority boundaries. Finally, we assess alternative funding in Chapter 5.

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2 Local transport governance and finance

6. The focus of this inquiry is on local major transport schemes. In its written evidence to us, the Government said that:

Local major transport schemes (i.e. those costing over £5m) are not readily affordable for most local authorities, and so have traditionally been funded by central Government as individual projects through various bidding processes, unlike the other main local transport funding streams which are distributed by formula such as the Integrated Transport Block and Highway Maintenance budgets.1

7. Prior to the 2010 General Election, the then Labour Government sought to increase the regional voice in transport decision making, building structures around the pre-existing Government Offices for the Regions. The three overarching bodies in each region (outside London) were the Government Office, the Regional Assembly and the Regional Development Agency. Local authorities themselves were generally responsible for implementing transport schemes (except rail and trunk road schemes, which are the responsibility of Network Rail and the Highways Agency).

8. There were two main ways in which the Government provided financial support to local authorities for transport: revenue support (through the Revenue Support Grant) to support day to day expenditure; and, financial support for capital investment on the basis of Local Transport Plans.

9. The Coalition Government determined that the system of local transport organisation and finance that it had inherited was overly centralised and unnecessarily complex. Consequently, it announced plans to devolve powers to local bodies to plan and fund their own transport developments, using both grants from central government as well as money raised from elsewhere, including the private sector. The Government expected major transport schemes to be delivered by Local Enterprise Partnerships (LEPs) and local authorities, either alone, or as part of new governance arrangements, such as Combined Authorities2 and City Deals.3 The various streams of funding were consolidated into four main grants or allocations after the 2010 election.

1 Dft (LTD0019) paragraph 2. 2 Combined authorities are a legal structure that may be set up by local authorities in England, following a governance review. They may take on transport and economic development functions, have a power of general competence and can be passed functions by the Secretary of State under the Localism Act 2011. The was established in 2011. Combined authorities were established in , Sheffield and Liverpool on 1 April 2014. 3 A City Deal is an agreement between the Government and a city that gives the city powers to generate economic growth and decide how public money should be spent. The first wave of City Deals included the 8 largest cities outside of London. For further details of the City Deal scheme, see HM Government,

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10. In January 2012, the Government published a consultation document setting out how it intended local authorities, LEPs and other bodies to work together after 2015 to deliver major transport schemes. The outcome of the consultation was published in September 2012 and the Government announced the key features of the new scheme for funding major local transport schemes. The primary decision making bodies on the use of devolved funding would be Local Transport Bodies (LTBs), voluntary partnerships of local transport authorities, LEPs and possibly other bodies.

11. The Department for Transport (DfT) told us that the establishment of LTBs was a “key element” in the system and that it had decided against devolving directly to local authority level on the basis that “the funds would be spread too thinly to be able to fund all but the smallest schemes.” The DfT went on to note that the LTBs “were not to be permanent staffed organisations but voluntary groupings of local authorities and LEPs and possibly others.” These were to be based “broadly on existing LEP geography.” In terms of membership of the LTB, the DfT indicated that this was for local decision, provided that all Local Transport Authorities and the LEPs in the relevant area had a right of LTB membership and that democratically elected bodies formed a voting majority on LTBs.4

12. Despite this proposal, it is now envisaged that funding for major local transport projects will be devolved to LEPs from 2015, as part of the Single Local Growth Fund, as recommended by Lord Heseltine in his report No stone unturned: In pursuit of growth.5 In its submission to us, the DfT stated that Lord Heseltine’s report had recommended the pooling and devolution of various funding streams across Government and that this recommendation had been accepted in principle by the Government in March 2013.

13. The Spending Round announcement in June 2013 confirmed local authority major schemes as one of the funding streams that would make up the Local Growth Fund. This means that while LTBs would, in the immediate future, continue to prioritise and develop schemes as had been planned, the funding from 2015 would be devolved in a different way that had been envisaged up to that point.

14. The major changes would be that:

• Instead of being allocated solely by formula, a large proportion of Local Growth Fund allocations would be competitive, on the basis of Strategic Economic Plans submitted to Government;

• There would be a more distinct policy focus on economic growth for the Local Growth Fund; and,

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/221009/Guide-to-City-Deals-wave- 1.pdf, July 2012. The maps contained in the annex to this report show the location of the various Combined Authorities and City Deals. 4 Dft (LTD0019) paragraphs 7-8. 5 Lord Heseltine, No stone unturned: In pursuit of growth, October 2012, p184.

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• The decision makers for the devolved funds would be LEPs, as opposed to LTBs, although LTBs might continue to have a role depending on local arrangements.

It has been suggested that the competitive nature of the funding and the inclusion of other funding streams will provide successful bidders the opportunity to fund much larger schemes than would otherwise have been possible.6

15. In oral evidence Baroness Kramer summarised the impact of the proposed changes, stating that:

A large part of the current structure leaves decision making in the hands of, effectively, Whitehall. If I were to look at one of the largest programmes, the local major projects programme, which for 2015 is put in for £819 million—a very substantial programme—at present the decisions for that programme are largely made by Whitehall Ministers. They are responsible for the individual schemes, the decisions, the funding and the grants.

As we look forward, we are stepping away from that structure in two ways. One is how the underpinning of direction—the lens through which we look at a large piece of transport funding—contributes to economic growth. That means two things. First, there is the breaking down of traditional silos between Departments—say, transport, housing and skills—because very often a process of trying to build economic growth involves blending all three rather than looking at separate silos. Secondly, there needs to be a lot of devolution of the drivers behind that towards local communities. Initially, we looked at doing that in the form of devolving the money for major projects to local transport boards, but those will be subsumed into the LEPs. That has been somewhat superseded by the local growth fund, and that is where we are today, essentially.7

However, doubts have been expressed about whether all LEPs will have the capability to take on responsibility for administering public funds.8 Indeed, it may be that some LEPs will need to work together to deliver strategic transport schemes.

16. Schemes for funding for local transport expenditure have undergone considerable change in recent years. While the evidence we have received suggests that there is probably no perfect model, suitable for all areas, the Department for Transport must ensure that the repeated changes do not lead to delay in the delivery of transport schemes nor any diminution of accountability for transport spending.

6 Dft (LTD0019) paragraphs 14-15. 7 Q67. 8 Public Finance, March 2014, p6. Also see Funding and structures for local economic growth, National Audit Office, HC (2013-14) 542.

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3 The new funding landscape: devolution and competition

Devolution of decision making

17. The underlying rationale behind devolving transport decision making was broadly agreed by all of our witnesses. Although the Government has stated that it believes communities are better placed than central government to make decisions that affect their local area, questions are still posed as to the extent to which recent reforms constitute true devolution of power.

18. Evidence about the Government’s reforms was mixed. For example, the Chartered Institute of Highways and Transport wrote that the current arrangements have already resulted in a better basis for local investment priorities to be determined and implemented with partners.9 However, the Local Government Association (LGA) said that it did not think that there had been genuine devolution. Richard Willis, from Greater LEP, told us that:

Previously, the priorities were set by local authorities and the financial decisions ultimately were taken by the Secretary of State, and, effectively, that has not changed much.10

A number of witnesses suggested that while there might be greater local input in terms of formulating local priorities, the need to compete for money and create a bid effectively means that “although we have had devolution, there are still central decisions at the end of it.”11

19. It is questionable whether bidding for pots of central government money that will be allocated via rules set by central government amounts to genuine devolution.

Competition for funding

20. The issue of competing for funds was controversial. Stuart Jarvis, the Director of Economy, Transport and Environment at County Council, argued that competition would not be helpful in terms of devolution “because of the abortive costs”; namely, “for every successful bid, there will be ones that are not successful in a competitive environment.”12 Both Mr Wills and Mr Jarvis recognised that from the private sector viewpoint, competition was good as it helped the strongest projects emerge; however, Mr Wills made the point that:

9 LTD0037 paragraph 1.7. 10 Q3. 11 Q7. 12 Q9.

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[T]here must be sufficient chance of success. In conventional bidding and tendering you do not want to be one of 12 tenderers all the time [...] so it will partly depend on the amount of money in the total pot as to what the competitive process gives us in terms of effectiveness.13

21. Given that it was plain from Baroness Kramer’s oral evidence that additional funding would not be made available for the design of projects,14 this might have an adverse impact on large scale projects which could require considerable unfunded preparatory work.

22. In response to queries about competing for funds, Baroness Kramer said:

When you look at the competitive part of this, the criteria have been very clear. It is going to require LEPs to come forward with transformational projects. We are looking to them to bring in investment from other sources in order to leverage up the money that the taxpayer is putting in directly through the fund. We want to see how those projects tie into and support the overarching picture of economic growth that the LEPs have put before us, and also we need to make sure that governance and risk management are in place.15

She added that:

The distribution will not be on a head-count basis. One of the things we want to do is make sure we get the best use of the money involved. Other than the pre-allocated funds, we did not want to get back to the situation where you just get money by head count.16

23. The Local Government Association argued that if growth is prioritised over other elements that previously informed the funding of transport bids, this could mean that councils could struggle to secure funding for transport projects designed to promote sustainability, air quality or healthy living.17

24. Competitive bidding for funds could potentially lead to considerable wasted expenditure on bids. It is a centralising process which may favour better resourced authorities. We recognise that competition can be a creative process which can be used on occasions where the benefits of the creativity associated with competition are likely to outweigh the costs. We recommend that the DfT ensures that the arrangements for bidding mitigates these problems as far as this is practically possible.

13 Q10. 14 Q99. 15 Q81. 16 Q94. 17 LTD0005.

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Criteria for funding and funding for regions

25. In terms of competing for funds, concerns were also raised about whether different regions would receive a fair share of funding. It is worth noting that these concerns run in parallel with complaints from a number of witnesses about the scale of funding available for local transport more generally.18 This is an issue that we have raised on previous occasions. For example in our report Counting the cost: financial scrutiny of the Department for Transport 2011-12, we said that the DfT could do more to ensure that its expenditure plans involve a fair allocation of resources across the nation and that major new spending announcements should be accompanied by a comprehensive analysis of their regional impact.19

26. We asked Baroness Kramer how bids for the Local Growth Fund would be judged and whether the Department would be focusing predominantly on a cost-benefit analysis, or on evidence about economic growth. She responded that “value for money is one of the criteria but it is not a sole criterion”, and said that:

We are trying to stay away from the formulaic; we want to be able to see that, as the LEPs work on their projects, they are looking for value for money. We have also made it clear to them that we want to see what the outcome is in terms of economic growth: for example, if putting in a project brings three or four small businesses into a particular area, if it provides housing which gives capacity for growth in yet another area, or if it is going to provide an opportunity for young people, or even older people, to acquire new skills, because skills are a key part of this. There is going to be an element of judgment in all of this, rather than trying to do it on a purely formulaic basis, weighting it by this and that process. We will have to be fair and explain ourselves, which is properly important.20

27. Baroness Kramer and Stephen Fidler told us that London would not be bidding for funds via the Local Growth Fund (although the remainder of the South East, not covered by Transport for London, would be bidding). In response to our questions about regional variation in transport expenditure, Baroness Kramer wrote to inform us that: “In 2012/13, the estimated spend per head on transport in London was £545 compared to an average £216 in the regions outside the capital.” She justified this disparity, in part, by noting that: “Recent comparisons between London and other parts of the UK have […] reflected significant capital investment in Crossrail which is not typical of the long term funding patterns.”21 The Institute for Public Policy Research has identified even greater disparities in regional transport spending. It observed that “where transport infrastructure projects

18 See, for example, County Council (LTD0016) and Institution of Civil Engineers (LTD0038). 19 Fifteenth Report, Session 2010-12, HC 1560, paragraph 14. 20 Qq103-4. 21 DfT (LTD0044).

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involve public sector spending (solely or in partnership with the private sector), the spend per head of population is £2,595.68 in London but just £5.01 per head in the North East.”22

28. Far less money is spent on transport projects outside London than in the capital. We recommend that the Department aim for a more equitable distribution of transport funding when making awards under the Local Growth Fund.

29. Given the Government’s focus on LEPs bringing in outside investment to supplement taxpayer funding we are also concerned that regional economies, which may not have a sufficiently well-developed private sector to provide alternative investment, may end up losing out.

22 Institute for Public Policy Research, Still on the wrong track: An updated analysis of transport infrastructure spending.

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4 Accountability

Accountability to stakeholders

30. The rapid changes in structures and responsibilities for local transport expenditure raise questions about who is accountable both to the general public and to Parliament for decision making in this area.

31. A number of witnesses acknowledged that repeated changes made for a confused picture. In terms of accountability to the public, Cllr Heather Kidd argued that the general public do not understand who all of the relevant organisations are and where their responsibilities lie. She said:

They do not even know they exist. The buck always stops with local government, and that is what they understand. They understand who they elect, who is in the county council, the unitary council or whatever. If you asked most members of the public what a LEP was, they would not have a clue.23

32. This view was supported by Jonathan Bray of pteg, which represents metropolitan passenger transport executives. He argued that:

We are in a devolutionary process in England, outside London, but it is very slow, messy and complicated. In a city region you may have one or more LEPs, one or more elected mayors, a PTE, an ITA, district councils and a local transport board—I may have forgotten some other entities. In a city region the people who actually run the buses are private companies, and rail services are mostly the products of decisions taken in Whitehall, so it is quite a confusing picture.24

We heard similar comments from industry groups during our recent inquiry into access to ports.25

33. Baroness Kramer initially suggested that LTBs would be “subsumed into the LEPs”, but when questioned further on the issue, Stephen Fidler said that there would be actually be some “flexibility”:

The decision that the Department and Government have taken is to ask each LEP to set out very clearly the governance arrangements it is going to put forward to make sure that the outcomes we want to see on governance are achieved. They have the freedom and flexibility to do that either by maintaining the local transport body as part of their own structure or, in some cases, broadening it so that it covers local transport; the same kinds of

23 Q44. 24 Q46. 25 Transport Committee, Eighth Report, Session 2013-14, Access to Ports, HC 266, paragraph 12.

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rules apply to housing or to other initiatives. In some areas they are changing the arrangements quite considerably. The core principles of wanting to have a clear system for how decisions are going to be taken and accountability by the LEP will stay, but it may well vary from place to place.26

34. Devolution of decision making on major local transport projects to a local level should not ignore accountability. Repeated changes in structures will hamper the ability of the public and interested stakeholders to engage with proposed projects. The fact that the recently created Local Transport Bodies may be reincorporated into Local Enterprise Partnerships makes the picture all the more confusing.

Accountability for public money

35. In terms of accountability for public money, the picture was not much clearer. One issue that concerns us is that there is no guarantee that transport spending arising from Local Growth Fund allocations will be commensurate to the money paid into the Fund by DfT.27

36. When asked which Government department was taking the lead responsibility for economic growth, Baroness Kramer said that:

This is very much a cross-party body. The Cabinet Office with Greg Clark as the cities Minister has been playing a leading role in this; BIS is also playing an absolutely key role, and also DCLG and the Department for Transport. We are major contributors to this fund, because we have chosen to put a lot of our funding into the growth fund as the mechanism to get it out into projects.28

37. When pressed further on this issue, it emerged that the relevant Cabinet Sub Committee, the Local Growth Cabinet committee, was chaired by the Cabinet Office, yet a very significant amount of the money going into the overall growth fund has come from the DfT (Stephen Fidler suggested a figure of 50% of the fund “or just over” in the first year).29 Baroness Kramer argued that:

[w]e see it as the way in which to leverage the value out of the significant amounts of money we put into transport. It is recognition that transport and growth are really interlinked.30

26 Q71. 27 We have previously raised concerns about the lack of ring-fencing for transport expenditure – see Fifteenth Report, Session 2010-12, Counting the cost: financial scrutiny of the Department for Transport 2011-12, HC 1560, paragraphs 16-18. 28 Q73. Also see Also see Funding and structures for local economic growth, National Audit Office, HC (2013-14) 542. 29 Q88. 30 Q87.

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38. Finally, we are concerned that there is confusion about the extent to which the DfT may seek to influence or challenge decisions by LEPs about transport priorities. We asked Baroness Kramer, as an example, about a case where there might be need for a new local road to ensure access to a port, but where this was not being prioritised by the LEP, because local people would not benefit from the development. She replied:

If a LEP decided, “We will not go this way”—presumably in taking that decision it would have the support of the local authority, because they are closely integrated and working together, and others—theoretically and hypothetically, we would not impose it.31

39. It is not clear how this approach ties in with the Government’s Ports Strategic Partnership plan, which gave the impression that it would deal with such issues on a strategic basis and ensure that “new local transport planning structures provide for regionally significant port access schemes.”32 Indeed, in its reply to our Access to Ports report, the Government said “DfT will … be ready to challenge LEPs should it appear that they have insufficiently prioritised port access.”33

40. Given the significant funding that the Department for Transport is putting into the Local Growth Fund—some £6 billion from 2015-16 to 2020-21—it is unfortunate that there is no clarity about how much of that funding will be used for transport projects.34 DfT must make sure that LEPs implement transport projects for which they receive money from the Local Growth Fund. We recommend that the department publish an annual assessment of the progress LEPs are making in this area.

41. We are also recommend that the Department demonstrates how it will balance strategic oversight over spending and locally determined priorities. It is essential that strategic development is not overlooked simply on the basis that it does not immediately benefit a LEP or local authority. In particular, the DfT must clarify whether or not it will be prepared to challenge LEPs if they have not prioritised port access or other nationally significant, but locally delivered, transport schemes.

31 Q91. 32 See: Transport Committee, Eighth Report, Session 2013–14, Access to Ports, HC 266, paragraphs 28-29. 33 Transport Committee, Thirteenth Special Report, Session 2013-14, Access to ports: Government Response to the Committee's Eighth Report of Session 2013-14, HC 1083. 34 Department for Transport, Local Sustainable Transport Fund -Guidance on Applications for Revenue Funding in 2015/16, paragraph 2.

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5 Alternative funding methods

Alternative sources of funding

42. Local transport has traditionally relied heavily on straightforward public sector grant funding. With the reduction in such resources available for local transport, alternative sources of funding are likely to grow in importance.

43. In their written evidence, the DfT gave a number of examples of ways in which local authorities could obtain investment from the private sector. These included:

i) Developer contributions (or Section 106 agreements).35 These have been widely used for many years to fund transport infrastructure. The Community Infrastructure Levy (CIL) provides similar opportunities;

ii) Prudential borrowing has been available to local authorities for a number of years;

iii) The Government has recently published a revised approach to PFI (entitled Private Finance 2, or PF2).

44. As part of our inquiry we asked whether there was scope for the use of alternative funding streams. Some examples provided in written evidence included direct investment by pension funds, or municipal bonds. However, there was also scepticism that alternative funding could replace reductions in public funding in the short- to medium-term. As an example, the Institution of Civil Engineers warned that “the ability and willingness of developers to contribute in a difficult economic climate mean that Section 106 is unlikely to assume much greater importance in future” and that the “introduction of CIL (as with Section 106) appears to favour economically stronger locations where there is more development interest and value.”36

45. Professor Francesca Medda, Professor of Applied Economics and Finance at University College, London, told us that although there was a certain amount of liquidity in the market that might be spent on transport infrastructure, this would require LEPs and other bodies to have capacity to run potentially complex financial instruments. Her evidence suggested that this would require a significant shift in capabilities.37

46. As an alternative, Professor Medda also gave the example of “crowd sourcing” of funding for cities.38 Although she submitted written evidence, giving examples of crowd

35 Planning obligations under Section 106 of the Town and Country Planning Act 1990 (as amended), commonly known as s106 agreements, are a mechanism which make a development proposal acceptable in planning terms, that would not otherwise be acceptable. 36 LTD 0038 paragraph 7.4. 37 Q49. 38 Crowd sourcing is the practice of soliciting contributions from a large group of people, especially using the internet.

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sourced projects,39 this seems unlikely to us to be a way of funding major infrastructure projects at present.

47. Jonathan Bray gave some examples of other alternative funding models, such as “road- user charging in London and the workplace parking levy in ” but he recognised that it “is always a challenge to bring in any of these additional revenue sources.”40 The Institution of Civil Engineers noted that attempts to introduce road user charging or tolls (such as in Manchester and Edinburgh) had failed and that Bristol had shelved plans for its own work place parking levy.41

48. None of the evidence provided to the Committee suggested that there are significant sources of additional funding which could be easily tapped by LEPs. Witnesses gave examples of some innovative schemes, such as “crowd sourcing”, which may prove significant in the future. However, it does not seem likely that these could be an immediate way of funding significant transport infrastructure projects at present.

39 LTD0043. 40 Q53. 41 LTD 0038 paragraph 7.10.

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6 Conclusion

49. The system for allocating funding for local major transport schemes is in a state of flux. The arrangements planned to begin in 2015, based on competition for Local Growth Fund allocations, are novel and untested. There are significant concerns about the capability of LEPs to bid for and administer this funding. There is a risk that some areas will be left behind, or that funding provided by the DfT will be spent on other priorities. Increased reliance on competition as the basis for allocating funds could lead to significant wastage of resources because of failed bids. The DfT will continue to have a significant say in which projects are funded, but there is also concern that strategically significant schemes could be overlooked.

50. Despite these challenges, it is important for local authorities and businesses for the new system to get underway and for there to be a period of stability in how local major schemes are funded. Continual churn and uncertainty helps no-one. However, the new arrangements must be reviewed well before the end of the next Parliament to ensure that they are efficient and effective in providing funding for the most urgent transport priorities.

51. A crucial test for the new funding arrangements is that they secure a fairer allocation of transport funding across England. The under-funding of transport projects outside in recent years cannot be allowed to continue. Ministers must use the new funding arrangements, via the Local Growth Fund, to ensure that there is a fairer allocation of funding to transport projects beyond London, and not just in city regions, City Deal areas and current enterprise zones. No area across our nation should be second class in relation to the allocation of transport infrastructure funds.

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Conclusions and recommendations

Changes in funding for local transport expenditure 1. Schemes for funding for local transport expenditure have undergone considerable change in recent years. While the evidence we have received suggests that there is probably no perfect model, suitable for all areas, the Department for Transport must ensure that the repeated changes do not lead to delay in the delivery of transport schemes nor any diminution of accountability for transport spending. (Paragraph 16)

Competition for funding 2. It is questionable whether bidding for pots of central government money that will be allocated via rules set by central government amounts to genuine devolution. (Paragraph 19)

3. Competitive bidding for funds could potentially lead to considerable wasted expenditure on bids. It is a centralising process which may favour better resourced authorities. We recognise that competition can be a creative process which can be used on occasions where the benefits of the creativity associated with competition are likely to outweigh the costs. We recommend that the DfT ensures that the arrangements for bidding mitigates these problems as far as this is practically possible. (Paragraph 24)

Criteria for funding and the regional dimension 4. Far less money is spent on transport projects outside London than in the capital. We recommend that the Department aim for a more equitable distribution of transport funding when making awards under the Local Growth Fund. (Paragraph 28)

5. Given the Government’s focus on LEPs bringing in outside investment to supplement taxpayer funding we are also concerned that regional economies, which may not have a sufficiently well-developed private sector to provide alternative investment, may end up losing out. (Paragraph 29)

Accountability 6. Devolution of decision making on major local transport projects to a local level should not ignore accountability. Repeated changes in structures will hamper the ability of the public and interested stakeholders to engage with proposed projects. The fact that the recently created Local Transport Bodies may be reincorporated into Local Enterprise Partnerships makes the picture all the more confusing. (Paragraph 34)

7. Given the significant funding that the Department for Transport is putting into the Local Growth Fund—some £6 billion from 2015-16 to 2020-21—it is unfortunate that there is no clarity about how much of that funding will be used for transport projects. DfT must make sure that LEPs implement transport projects for which they receive money from the Local Growth Fund. We recommend that the department

Land transport expenditure: Who decides? 21

publish an annual assessment of the progress LEPs are making in this area. (Paragraph 40)

8. We are also recommend that the Department demonstrates how it will balance strategic oversight over spending and locally determined priorities. It is essential that strategic development is not overlooked simply on the basis that it does not immediately benefit a LEP or local authority. In particular, the DfT must clarify whether or not it will be prepared to challenge LEPs if they have not prioritised port access or other nationally significant, but locally delivered, transport schemes. (Paragraph 41)

Alternative funding methods 9. None of the evidence provided to the Committee suggested that there are significant sources of additional funding which could be easily tapped by LEPs. Witnesses gave examples of some innovative schemes, such as “crowd sourcing”, which may prove significant in the future. However, it does not seem likely that these could be an immediate way of funding significant transport infrastructure projects at present. (Paragraph 48)

Conclusion 10. The new arrangements must be reviewed well before the end of the next Parliament to ensure that they are efficient and effective in providing funding for the most urgent transport priorities. (Paragraph 50)

11. The under-funding of transport projects outside Greater London in recent years cannot be allowed to continue. Ministers must use the new funding arrangements, via the Local Growth Fund, to ensure that there is a fairer allocation of funding to transport projects beyond London, and not just in city regions, City Deal areas and current enterprise zones. No area across our nation should be second class in relation to the allocation of transport infrastructure funds. (Paragraph 51)

22 Land transport expenditure: Who decides?

Annex–Maps

City Regions/City Deal Areas

Key wave 2 (21) wave 1 (7)

Newcastle Sunderland & North East Leeds City Region

Preston, South Ribble and Hull &

Liverpool City Region Sheffield City Region Greater Manchester Nottingham Greater Norwich Stoke-on-Trent & & the

Greater Greater Ipswich

Coventry & Milton Keynes Oxford & Greater Cambridge Bristol and Southend-0n-Sea Swindon & Thames Valley Plymouth & the South West Peninsula

Greater Brighton Bournemouth &

© Crown copyright. All rights reserved. House of Commons Library. (OS) 100040654 and (OSNI) 2085 (2014)

Land transport expenditure: Who decides? 23

Enterprise Zones

Enterprise Zones Local Enterprise Partnership (LEP) LEP Boundary 1 Black Country 2 Thames Valley Local Authority in overlapping LEPs 3 and 4 Coast to Capital 25 5 and the 6 and Warwickshire 7 8 , , Nottingham and 7 9 34 10 Enterprise M3 11 39 12 Greater Birmingham and Solihull 13 Greater Cambridge & Greater Peterborough 19 14 Lincolnshire 20 15 Greater Manchester 18 16 Heart of the SW 17 18 Humber 15 28 19 Lancashire 22 20 Leeds City Region 14 3 21 Leicester and Leicestershire 22 32 8 23 Pan London 24 New Anglia 25 North Eastern Local Enterprise Partnership 36 21 24 26 12 13 27 Oxfordshire 1 28 Sheffield City Region 26 29 Solent 31 30 South East 38 6 31 South East Midlands 11 32 Stoke and Staffordshire 27 2 17 33 Swindon and Wiltshire 34 Tees Valley 35 Thames Valley Berkshire 37 23 36 The Marches Enterprise Partnership 35 37 West of England 38 33 10 30 39 and 4 (Sandwich) and (Harlow) 29 16 9

5

Isles of Scilly

Produced by Neighbourhoods Analysis Division, DCLG Data Sources © Crown copyright and database right 2012 025 50 100 Km OS Boundary-Line Ordnance Survey 100018986 2012.

24 Land transport expenditure: Who decides?

Combined Authority Areas and Integrated Transport Authorities

Key Combined Authority Area Integrated Transport Authority

Tyne and Wear

Liverpool City West Yorkshire Sheffield

Greater Manchester

West Midlands

© Crown copyright. All rights reserved. House of Commons Library. (OS) 100040654 and (OSNI) 2085 (2013)

Land transport expenditure: Who decides? 25

Formal Minutes

Tuesday 13 May 2014

Members present:

Mrs Louise Ellman, in the Chair

Sarah Champion Mr Adrian Sanders Jim Fitzpatrick Chloe Smith Karen Lumley Graham Stringer Karl McCartney Martin Vickers

Draft Report (Local transport expenditure: Who decides?), proposed by the Chair, brought up and read.

Ordered, That the draft Report be read a second time, paragraph by paragraph.

Paragraphs 1 to 51 read and agreed to.

Annex and Summary agreed to.

Resolved, That the Report be the Seventeenth Report of the Committee to the House.

Ordered, That the Chair make the Report to the House.

Ordered, That embargoed copies of the Report be made available, in accordance with the provisions of Standing Order No. 134.

[Adjourned till Monday 9 June at 4.00 pm

26 Land transport expenditure: Who decides?

Witnesses

The following witnesses gave evidence. Transcripts can be viewed on the Committee’s inquiry page at www.parliament.uk/transcom.

Monday 10 March 2014 Question number

Richard Wills, Greater Lincolnshire Local Enterprise Partnership, Jerry Blackett, Greater Birmingham and Solihull Local Enterprise Partnership, Stuart Jarvis, Director of Economy, Transport and Environment, Hampshire County Council, and Councillor Andrew Fender, Chair, Transport for Greater Manchester Committee Q1-42

Professor Francesca Medda, Qaser Lab, University College London, Councillor Heather Kidd, Deputy Chair, Local Government Association Economy and Transport Board, Jason Russell, Chartered Institution of Highways and Transportation, and Jonathan Bray, Director, pteg Support Unit Q43-64

Baroness Kramer, Minister of State, and Stephen Fidler, Deputy Director of Local Transport Funding, Growth and Delivery, Department for Transport Q65-111

Land transport expenditure: Who decides? 27

Published written evidence

The following written evidence was received and can be viewed on the Committee’s inquiry web page at www.parliament.uk/transcom. INQ numbers are generated by the evidence processing system and so may not be complete.

1 Federation of Small Businesses (LTD0001) 2 The Association of Democratic Services Officers (LTD0002) 3 Cycle Forum (LTD0003) 4 Qaser Lab, University College London (LTD0004) 5 Local Government Association (LTD0005) 6 Susan Hedley (LTD0006) 7 Enterprise M3 Local Enterprise Partnership (LTD0007) 8 Civil Engineering Contractors Association (LTD0008) 9 TravelWatch NorthWest (LTD0009) 10 EEF - The Manufacturers' Organisation (LTD0010) 11 County Council (LTD0011) 12 ChiCycle (LTD0012) 13 Northamptonshire County Council (LTD0013) 14 Guide Dogs (LTD0014) 15 Local Government Technical Advisers' Group (LTD0015) 16 Surrey County Council (LTD0016) 17 BVRLA (LTD0017) 18 Stagecoach Group Plc (LTD0018) 19 Department for Transport (LTD0019) 20 Newcycling (Newcastle Cycling Campaign) (LTD0020) 21 Association of Directors of Environment, Economy, Planning & Transport (ADEPT) & the Planning Officers Society (LTD0021) 22 Passenger Transport Executive (LTD0022) 23 South East Local Transport Board (LTD0023) 24 Transport for Greater Manchester (LTD0024) 25 Centro on Behalf of Strategic Transport Officers Group (LTD0025) 26 Kent County Council (LTD0026) 27 Hertfordshire County Council (LTD0027) 28 Hampshire County Council (LTD0028) 29 Transport for London (LTD0029) 30 Greater Birmingham & Solihull Local Enterprise Partnership (LTD0030) 31 pteg (LTD0031) 32 Sustrans (LTD0032) 33 FirstGroup (LTD0033) 34 Rail North (LTD0034) 35 Core Cities (LTD0035) 36 Wheels to Work Association (LTD0036) 37 Chartered Institution of Highways and Transportation (LTD0037) 38 Institution of Civil Engineers (LTD0038)

28 Land transport expenditure: Who decides?

39 British Ports Association (LTD0039) 40 Essex County Council (LTD0040) 41 Greater Lincolnshire Local Enterprise Partnership (LTD0042) 42 Qaser Lab, University College London (LTD0043) 43 Department for Transport (LTD0044)

Land transport expenditure: Who decides? 29

List of Reports from the Committee during the current Parliament

All publications from the Committee are available on the Committee’s website at www.parliament.uk/transcom. The reference number of the Government’s response to each Report is printed in brackets after the HC printing number.

Session 2013–14

Seventeenth Report Land transport expenditure: Who decides? HC 1140 Sixteenth Report National Policy Statement on National Networks HC 1135 Fifteenth Report Better roads: improving England’s strategic road HC 850 network Fourteenth Report Putting passengers first, disruption at Gatwick, HC 956 Christmas Eve 2013 Seventeenth Special Land transport security–scope for further EU HC 1192 Report involvement?: Further Government Response to the Committees Eleventh Report of Session 2012–13 Thirteenth Report Forging ahead?: UK shipping strategy HC 630 Twelfth Report Future programme 2014 HC 1143 Eleventh Report Safety at level crossings HC 680 (HC 1260) (HC 274) Tenth Report Ready and waiting? Transport preparations for HC 681 (HC 1139) winter weather Ninth Report High speed rail: on track? HC 851 (HC 1085) Fifteenth Special Cancellation of the InterCity West Coast competition: HC 1086 Report Government update on the Laidlaw and Brown reports Eighth Report Access to ports HC 266 (HC 1083) Seventh Report Local authority parking enforcement HC 118 (HC 970) Seventh Special Report The new European motorcycle test: Government HC 656 Response to the Committee’s Sixth Report of 2009–10 Sixth Report Flight Time Limitation: Follow-up HC 641 (HC 795) Fifth Report Access to transport for disabled people HC 116 (HC 870) Fourth Report Cost of motor insurance: whiplash HC 117 (CM 8738) Third Report The work of the Vehicle and Operator Services HC 583 (HC 678) Agency (VOSA) Second Report Future programme: 2013–14 HC 438 Fifth Special Report The European Commission’s 4th Railway Package: HC 439 Government Response to the Committee’s Twelfth Report of Session 2012–13 Third Special Report Rail 2020: Rail Delivery Group and Passenger Focus HC 81 responses to the Committee’s Seventh Report of Session 2012–13 Fourth Special Report Land transport security—scope for further EU HC 177 involvement?: Government Response to the

30 Land transport expenditure: Who decides?

Committee’s Eleventh Report of Session 2012–13 Second Special Report Marine Pilotage: Government Response to the HC 79 Committee’s Ninth Report of Session 2012–13 First Report Aviation strategy HC 78 (HC 596) First Special Report Cancellation of the InterCity West Coast franchise HC 80 competition: Government Response to the Committee’s Eighth Report of Session 2012–13

Session 2012–13

Twelfth Report The European Commission’s 4th Railway Package HC 1001(HC 439) Eleventh Report Land transport security—scope for further EU HC 875 involvement? Ninth Special Report Rail 2020: Government and Office of Rail Regulation HC 1059 Responses to the Committee’s Seventh Report of 2012–13 Tenth Report The Coastguard, Emergency Towing Vessels and the HC 1018 Maritime Incident Response Group: follow up: Government Response to the Committee’s Sixth Report of 2012–13 Ninth Report Marine Pilotage HC 840 Eighth Report Cancellation of the InterCity West Coast franchise HC 537 competition Eighth Special Report Plug-in vehicles, plugged in policy?: Government HC 884 Response to the Committee's Fourth Report of Session 2012–13 Seventh Report Rail 2020 HC 329 Sixth Report The Coastguard, Emergency Towing Vessels and the HC 647 Maritime Incident Response Group: follow up Fifth Report Future programme: autumn and winter 2012–13 HC 591 Fourth Report Plug-in vehicles, plugged in policy? HC 239 Third Report Competition in the local bus market HC 10 (HC 761) (Incorporating HC 1861–i–iii) Fifth Special Report Flight Time Limitations: Government Response To The HC 558 Committee's First Report Of Session 2012–13 Fourth Special Report Air Travel Organisers' Licensing (Atol) Reform: HC 557 Government Response To The Committee's Seventeenth Report Of Session 2010–12 Second Report Road safety HC 506 (HC 648) Incorporating HC 1738 First Report Flight time limitations HC 164 Incorporating HC 1838 Third Special Report Sulphur emissions by ships: Government Response to HC 87 the Committee’s Sixteenth Report of Session 2010–12 Second Special Report Counting the cost: financial scrutiny of the HC 15 Department for Transport 2011–12: Government Response to the Committee’s Fifteenth Report of

Land transport expenditure: Who decides? 31

Session 2010–12 First Special Report Draft Civil Aviation Bill: Pre-Legislative Scrutiny: HC 11 Government Response to the Committee’s Thirteenth Report of Session 2010–12

Session 2010–12 Seventeenth Report Air Travel Organisers’ Licensing (ATOL) reform HC 1798 Sixteenth Report Sulphur emissions by ships HC 1561 Fifteenth Report Counting the cost: financial scrutiny of the HC 1560 Department for Transport 2011–12 Fourteenth Report Cable theft on the Railway HC 1609 (HC 1933) Thirteenth Report Draft Civil Aviation Bill: Pre-Legislative Scrutiny HC 1694 Twelfth Report Cost of motor insurance: follow up HC 1451 (HC 1934) Eleventh Report Thameslink rolling stock procurement HC 1453 (HC 1935) Tenth Report High Speed Rail HC 1185–I (HC 1754) Ninth Report Out of the jam: reducing congestion on our roads HC 872 (HC 1661) Eighth Report Bus Services after the Spending Review HC 750 (HC 1550) Seventh Report Taxis and private hire vehicles: the road to reform HC 720 (HC 1507) Sixth Report The Coastguard, Emergency Towing Vessels and the HC 948, incorporating Maritime Incident Response Group HC 752–i (HC 1482) Fifth Report Keeping the UK moving: The impact on transport of HC 794 (HC 1467) the winter weather in December 2010 Fourth Report The cost of motor insurance HC 591 (HC 1466) Third Report Transport and the economy HC 473 (HC 962) Second Report Financial Scrutiny of the Department for Transport HC 683 First Report Drink and drug driving law HC 460 (Cm 8050) Tenth Special Report The proposal for a National Policy Statement on HC 1598 Ports: Government Response to the Committee Fifth Report of Session 2009–10 Third Special Report The performance of the Department for Transport: HC 549 Government response to the Committee’s Fourth Report of Session 2009–10 Second Special Report Update on the London Underground and the public- HC 467 private (PPP) partnership agreements: Government response to the Committee’s Seventh Report of Session 2009–10 First Special Report The major road network: Government response to HC 421 the Committee’s Eighth Report of Session 2009–10