How well did transport really do in the Spending Review? The fine print analysed

c. Images_of Money on Flickr. Used under Creative Commons

A clearer picture on Spending Review outcomes is emerging, but important questions remain.

The 2013 Spending Round (commonly referred to as the ‘Spending Review’) announced a step change in infrastructure investment , backed by an impressive array of specific commitments .

But although the key transport capital budgets have emerged as obvious winners, the picture is less clear when it comes to some of Department for Transport’s (DfT) smaller grants.

At the same time, the unexpected decision to pool a substantial proportion of local transport capital funding into the Single Local Growth Fund (SLGF) makes the long term outcome uncertain.

A clearer picture is unlikely to emerge until the DfT clarifies its detailed spending plans for 2015 onwards and the results of the first SLGF competition emerge in the second half of 2014. The key points from the Spending Round are summarised below.

Treasury big picture:

  • The June Spending Round did not entail any net change in overall government spending relative to the March budget.
  • In reality, the annual year-on-year growth in total government capital spending between 2014-15 and 2017-18 will most likely fall below the rate of inflation.
  • The Spending Round did include some new capital funding commitments beyond 2018, with HS2 and the Highways Agency emerging as the big winners.
  • Although overall capital expenditure will be higher in 2014/15 than originally set out in the 2010 Comprehensive Spending Review (CSR), this will be at the expense of resource budgets, which will be 8.5% below original plans. This is of particular significance to local government funding, which has been the main source of savings.

DfT budget:

  • In 2015-16, the DfT’s budget will be 4.5% lower than in 2014-15 (as set out in the March 2013 budget).
  • Although DfT capital funding will increase by 6.7% (from £8.9 to £9.5 billion), its resource budget will go from £4.4 to £3.2 billion. The largest chunk of the saving will come from Transport for London’s (TfL) resource grant and assumed efficiency savings in Network Rail spending and DfT’s rolling stock procurement.
  • Our previous analysis of the 2010 CSR and subsequent budgetary announcements up to Autumn 2012 provides additional background information.

Local transport:

There will be a significant boost to key local transport capital grants in 2015-16:

  • +28% in real terms, relative to the 2014-15 budget
  • +16% in real terms relative to Labour’s 2010-11 budget

However, the unexpected decision to route a large proportion of local transport grants into Local Enterprise Partnerships (LEPs) via competitive growth deals makes it difficult to anticipate what proportion of this money will end up funding transport schemes in PTE areas.

The Spending Round said nothing about what will become of smaller competitive grants such as the Pinchpoint Fund, the Green Bus Fund, the Cycle Ambition Grant or the DfT’s contribution to the Regional Growth Fund. However, even if these were to be scrapped altogether, local transport capital funding would still increase by around 15% (in real terms) between 2014-15 and 2015-16.

On the revenue side, the current rate of Bus Service Operators Grant (BSOG) has been protected until 2015-16 and we also know that the DfT will manage a considerable Local Sustainable Transport Fund (LSTF) resource grant in 2015-16.

You can read our full analysis of the Spending Review on the pteg website.

Pedro Abrantes

The Spending Review: Everything to play for

The last spending review gave local transport spending outside London a good hiding. It lacked the political clout and built-in funding commitments that applied to London and national rail – the evidence base for the benefits of local transport spending also had too many gaps. Worse for the big regional conurbations was that by accident or design a significant shift has also taken place within local transport spending as decision after decision on funding formulas redistributed funding from congested urban areas in the regions (where it would do most good) to quieter rural areas – or the wider London commuter belt.

Will June’s spending review be more of the same? Well if it is it won’t be because of the evidence base – which we have systematically upgraded since the last spending review, and encapsulated it on the www.transportworks.org website.

Transport Works website screen shot

We’ve encapsulated the case for investing in transport on the Transport Works website at http://www.transportworks.org

From our report from Jacobs on the benefits of small public transport schemes to our recent ‘Case for the Urban Bus report’ we have made it our business to build a defence of local transport spending that George Graham would have been proud of. If there’s some big gaps in the evidence base for local transport spending then neither HMT nor DfT has told us what these are.

Resource spending: a three-way dogfight

Which brings us back to politics. On resource spending there’s a three-way dogfight. The cash avalanche from Whitehall into London’s transport system started when London showed it was willing to put its hand in its own pocket with the congestion charge. Since then The UK’s resident world city has been adroit in ensuring the national public funding that has headed TfL’s way has been well spent in renewing the fundamentals whilst making some transformatory and decisive shifts in the whole direction of transport policy – not least of which is on cycling.

But the public spending squeeze has led to a change in approach from London with a stress on the potential for the capital to raise more of its own funding from its pumped up, city state tax base. This is also to demonstrate to Whitehall that London ‘gets it’ that when public spending is being squeezed London needs to get its own round in at the public spending saloon bar.

Meanwhile national rail’s resource spend could only be reduced through unpalatable ideological choices on the current structure of the industry or unpalatable political choices (booking office closures, service cuts or strike-provoking moves on staff numbers, pay or conditions).

All of which puts BSOG (Bus Service Operators Grant) for the rest of the country in the firing line. In the past support for bus services would have been a soft touch but the case for public spending on bus subsidies is robust and new alliances are being forged in its support – as our recent Westminster ‘Case for the Urban Bus” event showed.

Speakers from the pteg Urban Bus event

New alliances are being forged in support of bus, as our recent ‘Case for the Urban Bus’ event showed. Pictured (L-R): Konstanze Scharring, Director of Policy, SMMT; Stephen Joseph, Chief Executive, Campaign for Better Transport; David Brown, Chair, pteg; Pedro Abrantes, Economist, pteg; Claire Haigh, Chief Executive, Greener Journeys; Dr Janet Atherton, President, Association of Directors of Public Health; and Tony Travers, Director, LSE. Picture by Andrew Wiard andrew@reportphotos.com

Capital spending: small is beautiful

Meanwhile on capital funding there’s a more secure consensus around the importance of capital spending on transport to support growth. The question is what kind of capital spend? There’s something primal in politicians’ brains that triggers an urge for road building whenever there’s a recession. Perhaps it’s the trace memories of the 1930s and the heroic images of the New Deal where you could go down to the labour exchange and give men picks and shovels and send them off to build an Interstate. Whatever it is, this urge can be clearly seen in the transport spending figures where after an initial big cut in national roads spending in 2010 there was a change of mind in the 2011 Autumn Statement when spending on national roads suddenly shot up again.

But as alluring as big new roads are to national politicians, the economy’s faltering progress and with planning horizons shrinking towards the next election – the case for local transport spending outside London could benefit. This is because small can be beautiful when you want schemes that can be up and running quickly. Road maintenance, bus priority, station improvements, cycle schemes – they can all create and sustain jobs right now to make them happen, and they can deliver rapid benefits in reduced congestion and better access to employment. Plus many of these schemes formed part of rejected competition bids which were ready to roll and can therefore be easily reanimated if funding becomes available.

The big questions

So the big questions that the spending review will answer or fudge: Will the primal political appeal of new roads lead to a further splurge in national roads spend at the expense of local transport? Will national rail remain the great untouchable of transport spending? Will the Treasury wake up to the fact that whilst government talks up spending on cities the memo isn’t getting through when it comes to decisions on funding distribution formula which are actually taking cash out of congested urban areas. Will having a now largely uncontested evidence base for local transport spending outside London result in the better funding deal it deserves? Will London pull it off again?

And of course there’s a longer game beyond this spending review. Whatever happens this time round, the evidence base and the credibility of public spending on buses and wider urban local transport spend is now in a much better place. Plus London’s moves towards greater financial independence could also benefit Britain’s other urban areas. It’s been two steps forward, one step backwards and one step sideways on devolution of funding and decision making for the regional cities so far – but Boris Johnson can go toe to toe with HMT on funding freedoms in a way that the regional cities just can’t. Everything to play for!

Jonathan Bray

The biggest bargain in transport policy?

Bus crossing tram line in Manchester

The urban bus – a highly effective social and transport policy

Is the urban bus the biggest bargain in transport policy? There’s certainly a strong case to be made – as our new report (‘The Case for the Urban Bus – The Economic and Social Value of Bus Networks in the Metropolitan Areas’) shows.

The key to the exceptional value for public money that the urban bus represents boils down to the fact that the urban bus is a highly effective social policy which also has economic and transport benefits. And looking at it from the other end of the telescope it’s a highly effective transport policy which at the same time has considerable social benefits.

There’s not so many forms of public expenditure that achieve so many multiple and overlapping policy objectives for every pound spent. A policy that gets young people to education, the jobless to jobs, and tackles isolation for older and disabled people. Part of the solution to problems like these that will ultimately incur major costs to society if not tackled. And at the same time as it does this it, it also reduces congestion for motorists and provides the access that city centre employers and retailers rely on. Not bad!

Over £2.5 billion in economic benefits

The report sets out all these inter-linked benefits in detail – and, crucially, puts some hard numbers against those benefits. It finds that in PTE areas alone bus networks are estimated to generate over £2.5 billion in economic benefits by providing access to opportunities; reducing pollution and accidents; and improving productivity.

The report also finds that specific bus funding streams generate significant economic benefits:

  • BSOG generates at least £2.80 of benefits for every £1 of public money spent – over a quarter of these benefits go to other road users due to buses’ role in reducing road congestion.
  • The national concessionary fares scheme generates £1.50 of benefits for every £1 of public money spent – a high return for a social measure.
  • The non-commercial bus services that local authorities support can generate benefits in excess of £3 for every £1 of public money spent. Most of these benefits are to the bus users who depend on these services to access opportunity (like jobs, education and healthcare).

The report also finds that because of the local nature of bus services and operations, much of the bus industry’s turnover (in excess of £5 billion a year) is ploughed back into regional economies through the supply chain, and because the people who work on local bus services live and spend in their local areas.

The report highlights the key role that urban bus services play in tackling social exclusion – from linking jobseekers to jobs, to getting young people into education and training, to providing a way out of social isolation for older people.

Without the bus the report finds that ‘our cities would be more divided, the poorest and the most vulnerable would be more isolated and severed from the opportunities that many take for granted, and so much talent that dynamic and prosperous cities need would go to waste as training, education and jobs would be unreachable for many young people.’

Although this report focuses on the largest urban areas it should absolutely not be inferred that this means that there is a not a strong case for supporting rural bus services. Many PTE areas contain substantial rural hinterlands and we know just how important the rural buses we support are for keeping communities connected, for the rural tourism economy, and to tackle major problems of social exclusion in rural areas. However, this report we concentrates on the specific urban case because a good bus network is so important to urban areas it deserves this detailed analysis of the specific benefits that urban bus services bring.

A strengthened evidence base

Since the last spending review (where the collective failings of the bus industry, the DfT, and local government on assembling the evidence base on buses were exposed and punished) there has been a concerted effort, led by Greener Journeys, Campaign for Better Transport and pteg, to systematically fill the gaps in that evidence base through a series of complementary and overlapping reports. There’s more to come but the evidence base has now been thoroughly transformed. It is robust and battle ready and my sense is that decision makers are now taking it more seriously. However, there’s a long way to go. Public funding for the bus has some unique challenges in that it comes from a variety of sources, and in some ways the Department for Communities and Local Government (CLG) is more important for bus funding than the Department of Transport as CLG take the decisions on local government funding which ultimately determine a big slab of bus funding. And the bus is far from the forefront of CLG thinking. Bus funding is also highly revenue dependent at a time when capital rather than revenue spending is favoured by Government.

However the evidence base is there for the bus. The task now is to continue to take it to key decision makers and to find some collective asks of Government on bus funding whilst accepting that there will remain fundamental differences between many incumbent bus operators and local government on the deregulation / regulation issue. It can be done and it needs to be done if we are going to get a better result from this Spending Review for the bus this time, than we did last time around.

Jonathan Bray