House of Commons Transport Committee Transport and the economy Third Report of Session 2010–11 Volume I Report, together with formal minutes, oral and written evidence Additional written evidence is contained in Volume II, available on the Committee website at www.parliament.uk/transcom Ordered by the House of Commons to be printed 15 February 2011 HC 473 Published on 2 March 2011 by authority of the House of Commons London: The Stationery Office Limited £0.00 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 associated public bodies. Current membership Mrs Louise Ellman MP (Labour/Co-operative, Liverpool Riverside) (Chair) Steve Baker (Conservative, Wycombe) Mr Tom Harris (Labour, Glasgow South) Julie Hilling (Labour, Bolton West) Kelvin Hopkins (Labour, Luton North) Kwasi Kwarteng (Conservative, Spelthorne) Mr John Leech (Liberal Democrat, Manchester Withington) Paul Maynard (Conservative, Blackpool North and Cleveleys) Gavin Shuker (Labour/Co-operative, Luton South) Iain Stewart (Conservative, Milton Keynes South) Julian Sturdy (Conservative, York Outer) The following were also members of the committee during the parliament. Angie Bray (Conservative, Ealing Central and Acton) Lilian Greenwood (Labour, Nottingham South) Angela Smith (Labour, Penistone and Stocksbridge) 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 Publications The Reports and evidence 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 www.parliament.uk/transcom. A list of Reports of the Committee in the present Parliament is at the back of this volume. Committee staff The current staff of the Committee are Mark Egan (Clerk), Marek Kubala (Second Clerk), David G Davies (Committee Specialist), Alison Mara (Senior Committee Assistant), Edward Faulkner (Committee Assistant), Stewart McIlvenna (Committee Support Assistant) and Hannah Pearce (Media Officer). Contacts All correspondence should be addressed to the Clerk of the Transport Committee, House of Commons, 7 Millbank, London SW1P 3JA. The telephone number for general enquiries is 020 7219 6263; the Committee’s email address is [email protected] 1 Contents Report Page Summary 3 1 Introduction 5 The challenge for transport 5 Our inquiry 6 2 Relationship between transport and the economy 7 The Eddington Transport Study 7 Analysis 7 Eddington’s recommendations 8 Changed economic conditions 8 Analysis still valid? 9 Integrating transport with economic development 11 Rebalancing the economy 14 The need for policy clarification 15 A coherent framework 15 Taking a selective view of Eddington 15 Calls for clarification 16 The case for a new Transport White Paper 18 3 Spending priorities 19 Support for investment in transport 19 Identifying priorities 22 Strategic economic priorities 22 Location 22 Transport modes 24 Within modes 25 Priorities depend on circumstances 26 Financial arrangements and distortions 26 Greater flexibility and certainty 26 Small schemes 27 Local contributions 28 Capital-resource spending balance 29 4 Appraisal and decision-making 30 Overall process 30 Appraisal 30 UK transport appraisal 30 New Approach to Appraisal 30 Criticisms of NATA 31 In defence of NATA 32 Non-trivial sums 33 Decision-making process 34 Policy considerations 34 2 Regional equity 35 The case for greater transparency 35 5 Local and regional transport planning 37 The regional level 37 A decade of regional planning 37 Abolition of regional plans and organisations 37 The strategic gap? 38 Sub-regional planning 39 Potential problems with Local Enterprise Partnerships 41 6 Conclusion 43 Conclusions and recommendations 44 Formal Minutes 46 Witnesses 48 List of printed written evidence 50 List of additional written evidence 51 List of unprinted evidence 53 List of Reports from the Committee during the current Parliament 54 3 Summary The Government has said that it is focusing its transport policy on contributing to economic growth and carbon reduction targets while reducing the fiscal deficit. Economic rebalancing—including reducing the “north-south divide”—is a primary objective. At the same time the Government has distanced itself from the last major study of transport and the economy—the 2006 Eddington Transport Study—and rejected a number of its key recommendations, particularly on road pricing, airport capacity and high speed rail. The Government has not provided an assessment of the implications of its decisions; nor explained how its investments will deliver the growth and rebalancing that it is seeking. Transport investment can enable and stimulate economic growth but it does not guarantee it. Transport investment intended to stimulate growth needs to be closely linked to a proactive approach to economic development. The Government has swept away the regional tier of planning and institutions, to be replaced by Local Enterprise Partnerships and other arrangements. Most of these are at the early stages of formation, or yet to be established. With regard to transport functions, these may not be in place until the end of this Parliament. We call on the Government to: • publish a White Paper on transport and the economy, clarifying the nature of the economic solutions that it is seeking to deliver through transport spending and how the schemes that it is supporting will achieve these aims; • ensure that transport investment and economic development are properly integrated; • provide greater transparency in the appraisal and decision-making process with regard to new schemes, and • ensure that the institutions and arrangements required to plan and prioritise sub- national transport schemes are developed and made effective as soon as possible. 5 1 Introduction The challenge for transport 1. The UK’s economic situation has changed dramatically over the past three years. Steady GDP growth in the period 2000–2007 has given way to low or negative growth, an increased fiscal deficit and higher levels of unemployment. Following the general election in May 2010, the Coalition Government stated that reducing the government deficit was its most urgent task and that it would “support sustainable growth and enterprise, balanced across all regions and all industries, and promote the green industries”.1 2. Transport was expected to play a key part. The Secretary of State for Transport, Rt Hon Philip Hammond MP, told us that the Government’s priorities for transport were to support sustainable economic growth and to contribute to the Government's 2020 carbon reduction targets, within the overarching constraint of reducing the deficit.2 Supporting the economy has long been an objective of government transport policy. This Government, perhaps more than most,3 appears to be focusing on it more sharply, no doubt due to the precarious state of the economy. 3. Investment in transport infrastructure was prioritised in the October 2010 Spending Review, reflecting the Government’s view that long-term investment in transport infrastructure was essential to competiveness and economic growth. Whereas the resource budget for the Department for Transport (DfT) was cut by 21% (the average across government departments), the capital programme was reduced by only 11% compared with an average of 29%. According to HM Treasury, in 2014–15 DfT capital investment will be higher in real terms than in 2005–06.4 4. As well as supporting overall growth, the Government has made clear its intention to use investment in transport, particularly in high speed rail, as a means to rebalance the economy and to reduce regional inequalities: Our vision is a transport system that is an engine for growth [...] to radically reshape our economic geography [...] to help bridge the North-South divide that has limited for too long growth outside the South East.5 5. We welcome the Secretary of State’s focus on using transport to support and stimulate the UK economy and to reduce the economic disparities between different parts of the country and we call on him to explain how his policy will achieve that end. 1 HM Government: The Coalition: our programme for government, 20 May 2010 2 Transport Committee, Secretary of State’s Priorities for Transport, oral evidence, 26 July 2010, Q 3 3 Under the previous Government, the DfT had five strategic objectives, including supporting economic growth. (DfT, Annual Report and Resource Accounts 2008-09, HC454, 16 July 2009, p 14) 4 HM Treasury, Spending Review 2010, Cm 7942, October 2010, pp 10, 11 and 46 5 DfT, Business Plan 2010-11, November 2010, p 1 6 Our inquiry 6. We believe that supporting sustainable economic growth should be the overriding objective for the DfT. We have, therefore, decided to inquire into how best transport can support this objective. In particular: • Have the UK’s economic conditions materially changed since the Eddington Transport Study in 20066 and, if so, does this affect the relationship between transport spending and UK economic 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? • What should be the balance between resource spending7 and capital investment? • Are the current