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 Lincolnshire 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 Hampshire 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:
[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.
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 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.
9 LTD0037 paragraph 1.7. Back
10
Q3. Back
11
Q7. Back
12
Q9. Back
13
Q10. Back
14
Q99. Back
15
Q81. Back
16
Q94. Back
17
LTD0005. Back
18
See, for example, Surrey County Council (LTD0016) and Institution
of Civil Engineers (LTD0038). Back
19
Fifteenth Report, Session 2010-12, HC 1560, paragraph 14. Back
20
Qq103-4. Back
21
DfT (LTD0044). Back
22
Institute for Public Policy Research, Still on the wrong track: An updated analysis of transport infrastructure spending. Back
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