Written evidence from Core Cities (LTD0035)

This response represents the collective view of the Core Cities, Birmingham, Bristol, Leeds, Liverpool, Manchester, Newcastle, Nottingham and Sheffield.

Core Cities are a unique and united local authority voice to promote the role of our cities in driving economic growth.  We represent the councils of the 8 largest city economies outside of London.

These cities drive local and underpin national economies. Working in partnership, we aim to enable each city to enhance their economic performance and make them better places to live, work, visit and do business.

The Core Cities group has a track record of 15 years as a cross party group, led by the city leaders. It is a self-selected and funded group.

Core City urban areas deliver 27% of England’s wealth and are home to one third of the country’s population.

The Cities are though punching below their weight – our second tier cities should be more economically successful compared with cities of similar scale and role in other European and OECD Countries.  For example just for Core Cities to punch their weight at the national average would provide the country with an additional £1.3 billion per annum.

Local Transport infrastructures require radical improvement to maximise economic growth and support improving quality of life and the local environment but our governance and services are fragmented. Our Capital City enjoys the benefits of a strategic transport body, Transport for London, with an integrated single set of policy and investment powers to plan for transport in the capital. Across our core cities there is no equivalence which can ensure that transport maximises economic, social and environmental benefits – Core Cities are operating under a structure that is heavily centralised to central government. Excluding recent changes to business rate local retention, which makes little difference in this respect, 95% of all tax raised in English Cities goes to national government.

The UK ranks only 34th in the world for its infrastructure, 6th in the G8 countries, and only spends 1.5% of GDP on infrastructure compared to 6% in Japan and 3% in France. Public transport investment in the capital now stands at £644 per head compared with £243 per head for the West Midlands and the North of England combined.  London’s performance is critical to the nation, but Core Cities are important too and in fact deliver more economically.  The capital has enjoyed very significant transport investment over the last two decades. Over the last 20 years London has benefited from the implementation of significant new transport infrastructure, including Thames link, Jubilee Line extension, upgrades for the Olympics, and HS1 we estimate this to be around £40bn. The rest of the country has on the other hand benefited from the West Coast Main Line upgrade, New Street Gateway, Birmingham and under construction the Northern Hub, around £12bn.

With HS2 most of our great cities will be connected, so they can become a single and powerful engine for economic growth. However to maximise this it is imperative to maximise connectivity within and between Core Cities. The Transport network has a crucial role in supporting growth and rebalancing the  economy. Independent forecasts demonstrate that our Core Cities have the potential to deliver an additional 1.16 million jobs and £222 billion into the national economy by 2030. Supported by Core Cities research Oxford Economics, Arup and Volterra have estimated that there is a potential for HS2 to deliver a further 400,000 additional jobs in the Core Cities and support the delivery of 1 million jobs in total across the wider urban area.

The Chair of the Committee, Louise Ellman MP, has said:

“There have been a number of changes in the arrangements for funding and delivering transport projects locally. We want to investigate the complex network of bodies involved in local transport decisions and find out how they work together both within and across local authority boundaries. We are also interested in hearing about the different funding schemes that are available and the extent to which these meet local needs.”

The Governments proposals were welcome, based as they were on the rationale that they can be focused on providing local areas with flexibility to ensure priorities meet local needs and be proactive to lever in economic development. Whilst it did not reduce the number of funding pots, Major Scheme, Integrated Transport ITB and Capitalised Maintenance blocks, local control over all 3 meant less silo based approach to transport funding and a more integrated approach to solutions.

The positive experience of devolution in the UK is also reflected in Europe where European Cities and Regions have far more influence over their local transport networks in terms of planning, managing and developing and running these networks than is the case in England outside of London TfL. In France for example a transport tax on salary is provided directly to the local authorities for transport and allows their Mayor to for example stand on a mandate to deliver a tram in their first 5 year term. A key reason why so many more cities in France are benefiting from modern urban transport systems.

Certainty of funding is also key, the initial allocation of 4 years is welcome however as part of their City Deal some Core Cities negotiated a 10 year deal (6 years fixed, 4 years indicative). This should be extended to all Core Cities. Such certainty of funding is a key requirement for the current ongoing review of future operating models for the Highways Agency.

The Assurance requirements required by the DfT have however effectively required the same assessment requirements and techniques, such as WEBtag, which has resulted in little or no saving in respect of scheme appraisals. It is not uncommon for the cost of appraisal to be upwards of 10% of the scheme construction cost.

For the period beyond 2015, Major Scheme funding and prioritisation was devolved to Local Transport Bodies constituted of LEPs, ITAs and other key stakeholders. However in 2013, the requirement of Strategic Economic Plans by LEPs, which includes Major Scheme and ITB funding within the associated Single Local Growth Fund, now leaves the role and function of ITAs and LTBs in this regard under question.

A single allocated pot comprising all capital funding streams should be made available to all Core Cities, based on the TfL model, as a 10 year allocation.

Advantages

A single pot of funding as outlined for a 10 year period will provide certainty over funding and appropriate planning, development and prioritisation. We believe this should become a permanent on-going arrangement, bring local transport for Core Cities into alignment with the national transport bodies and Transport for London.

Big improvement on previous process of annual Funding Settlement approach which left little time to plan accordingly

Allows for programme flexibility especially to react to external influences or opportunities e.g. ability to capture and support new development opportunity

Disadvantages

In 2010, the reduction in the number of funding pots available from the DfT was combined with major reduction in capital allocations. In 2009/10 for example the total West Midlands Metropolitan Area capital allocations via all funding streams was £77.062M. For 2011/12 the same capital allowances was £41.071M, a 47% cut.

Major Scheme funding devolution to LEP areas means the ability to fund larger strategic schemes is not seen to be feasible. A scheme of £20M approx. is now effectively the largest scheme which could be practically funded through the Major Scheme allocations for 2015-19

Devolution of Major Scheme funding to local areas could have been an opportunity for Local Areas to reduce development costs and speed up approval timeframes, however imposition of WEBtag based appraisal requirements by Government is likely to see such benefits minimised.

Governments original rationale of devolution was to empower local areas and allow flexible, dynamic transport government and delivery structures reflective of local economic geographies. However, Government does appear to have contradicted this approach by imposing new structures and bodies, Local Transport Body’s LTB’s, rather than allowing local determination towards transport through the exiting local authority processes.

Most of the Core Cities effectively have 8 different organisations undertaking similar transport functions: Core City, Integrated Transport Authority ITA, Passenger Transport Executive PTE as promoter and deliver of Passenger Transport schemes, LTBs prioritising Major Schemes, Local Enterprise Partnerships developing SEPs and promoting economic development which includes access to transport funding with the Single Growth Fund, Highways Agency, Network Rail and DfT for rail franchises. In practice, the differing remits, funding and covering geographies is likely to lead to inefficiencies between strategic planning, development and delivery of schemes and initiatives.

A model similar to London TfL for Core Cities would greatly simplify and streamline the system.

Whilst the significant cuts in Local Authorities is obviously having an impact, the ability for local authorities to determine their appropriate processes and structures together with certainty of funding, would greatly reduce the resource requirement. This together with a reduction in the overdependence of national government of competitive bids, 3 major bidding rounds in 2013 alone, would greatly assist with capacity.

In the Core Cities, strategic cross boundary transport planning across the travel to work areas is vital and reflects the realities of transport patterns and requirements of an urban area both for internal cross boundary movements and wider within the economic catchment of the metropolitan area.

Again, the differing bodies, organisation and authorities covering varying geographical areas with different responsibilities towards funding allocation, strategic planning and delivery is likely to lead to inefficiencies between strategic planning, development and delivery.

In the West Midlands for example, whilst the ITA is presently tasked by the Local Transport Act (2008) to undertake strategic cross boundary transport planning, decision making on Major Schemes is now undertaken by 3 separate LEP/ LTBs who have a specific focus on promoting economic development, covering different geographical areas to existing structures such as ITAs/ Shire Counties and their Metropolitan District Authorities. There is a danger such a focus misses other transport needs and priorities such as connecting people to jobs, addressing severe road congestion, reducing environmental impacts.

However a number of other Core City areas are moving toward a model similar to that of a Combined Authority which will see the Leaders directing Transport Strategy and Policy within the wider area.

To enable this model to work effectively however the Core City’s and their regions need a mechanism akin to ‘duty to cooperate’ not only with adjacent authorities but also with the Highways Agency and Network Rail and be involved in Policy development in respect of Rail Franchising, Aviation and Seaports.

Core Cities believe that local bodies largely do work well together, a number have or are implementing Combined Authority models. This reflects historical working processes and relationships. However, there does need to a stronger responsibility for national transport agencies, such as the Highways Agency and Network Rail, to work closely with local bodies such as ITAs and LEPs to ensure alignment between local needs and their investment programmes.

Core Cities itself has a Cabinet arrangement, led by Sir Richard Lease, Leader of Manchester with each of the Core Cities Leader’s having a portfolio. Sir Albert Bore having the Transport Portfolio. Supporting this are a number of working groups that share good practice and help make a collective case for better transport in their areas.

As previously stated there has been a significant cut in transport capital spend, although the significant proposed increase in the last spending review is acknowledged, notwithstanding that a significant proportion of this is not within the life of this parliament. For example the West Midlands has seen a significant reduction in capital funding blocks. In 2009/10 total West Midlands Metropolitan Area capital allocations via all funding streams was £77.062M. For 2011/12 the same capital allowances was £41.071M, a 47% cut.

In addition there is as previously stated a significant funding gap with London. Public transport investment in the capital now stands at £644 per head compared with £243 per head for the West Midlands and the North of England combined.  London’s performance is critical to the nation, but Core Cities are important too and in fact deliver more economically.  The capital has enjoyed very significant transport investment over the last two decades. Over the last 20 years London has benefited from the implementation of significant new transport infrastructure, including Thameslink, Jubilee Line extension, upgrades for the Olympics, and HS1 we estimate this to be around £40bn. The rest of the country has on the other hand benefited from the West Coast Main Line upgrade, New Street Gateway, Birmingham and under construction the Northern Hub, around £12bn.

Investment in any transport scheme is a highly efficient approach to supporting the economy as materials are purchased, jobs are created in building the scheme and it improves productivity of the wider economy. It is estimated that for every £1 invested in construction generates £1.86 to the economy. Whilst the Government has recognised this and has increased funding for national agencies to historical high levels for the period 2015-19, local transport funding (covering Major Schemes, Integrated Transport and Maintenance Blocks) for 2015-19 is only £2.244bn per annum compared to £1.968Bn in 2009/10 an increase of 14% or the equivalent of 1.9% per annum.

Ring fencing of concessionary fares budget is also helping to distort local transport support spending and can now account for around 50% of most authorities public transport spending.

The Single Local Growth Fund (SLGF) is an opportunity for the underinvestment in local transport to be addressed as discussed in previous answers. But it must be recognised that the majority of the funding is disproportionately from local transport pots, Major Schemes, ITB and Local Sustainable Transport Funding LSTF and as such adds another element in the local transport framework in an area and could possible lead to a democratic deficit.

Despite this the £2bn per annum pot is a welcomed start, however given the competitive nature of the fund, the government still retains control over funding allocations – against the premise of devolution. The original Major Scheme and ITB Funding was formulaic, a significant proportion of this, over 50%, is now competitive.

There is also a question re the future role of the LTB’s beyond 2019 that has yet to be addressed.

A more equitable solution would be for the complete devolution of this fund, and other transport sources, to Core Cities and their regions so that they can focus the resource on urban areas which are often the focal point of journeys, hubs of economic activity, population growth and therefore the location where investment in transport issues will generate the largest benefits.

Although the Government’s approach will allow for investment in smaller scale schemes l (<£20M approx.) and larger schemes (>£500M approx.) by the national agencies/ companies, the ability to fund ‘mid-range’ schemes i.e. £20M - £500M locally, vital for transformational changes to local area economies, is considerably more challenging. Mid-range schemes across conurbations largely cover rapid transit (light rail and bus), rail schemes or stations.

This means funding opportunities for these types of schemes will focus on sovereign/ private investment funds, EIB and general borrowing, with repayment through a mix of fare box, council tax levy increases (noting the Governments statutory requirements for a local referendum to facilitate such increases. Such a mechanism was agreed with Leeds City Deal only for it to be subsequently legislated against!), Workplace and Congestion Charging, Tax Incremental Financing or private sector contributions through mechanisms such as the Community Infrastructure Levy.

To maximise the Transport requirement to enable Core Cities to operate at their full potential in terms of Growth and GVA requires significantly enhanced flexibility, to the level enjoyed by TfL, in maximising public transport benefits, including reviewing Transport Levy Referendum arrangements and simplifying public transport contracting processes.

These funding approaches all require the promoting area/ authority to take on financial risks/ guaranteed investment returns not otherwise required by the public funding of the smaller scheme or national schemes identified above. Equally, such investment funds expose themselves to risk that result in projected patronage and revenues being optimistic. Such risk is therefore priced into schemes, inflating costs or returns.

With small schemes and nationally significant schemes not exposed to such risks, Government could expedite delivery through underwriting risk to provide a proportionate balance of risk between the public and private sector. For example, the DfT presently underwrites new rail services for a period of time until patronage, revenues and operating costs become established to inform further decision making.

If a similar approach was applied to mid-range schemes, the public sector funding could pump-prime a scheme with a long term concession then let after a pre-determined number of years. Once the public sector underwriting period was complete and revenues known, growth and operating costs could be modelled and valued with certainty. The capital raised from the concession could then be recycled to fund other mid-range transport schemes.

With such measures in place, the lower cost of risk built into financial models and decision making by local areas and the private sector would be reduced by creating an environment of greater funding certainty to unlock investment to create jobs and growth.

The Core Cities already consider there to be strong lines of local democratic accountability, however there is concern re the potential accountability in respect of LEP’s and SEP’s. For the Local Growth Fund it needs to be the case that democratic accountability is a key requirement. However in the spirit of devolution, local areas should be allowed to develop appropriate structures to undertaken government requirements rather than imposing structures.

It could be argued that at present the national governments organisational and technocratic hold over local transport decision – making in England outside of London is overriding the local decision making particularly in areas such as bus deregulation and train franchising to the local electorate to too greater degree.

England after all is recognised as having one of the most centrally controlled governance structures in Europe (Second Tier Cities in Europe – Professor Michael Parkinson)

December 2013

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