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Devolved transport funding key to long-term economic growth, say city regions

Devolved transport funding key to long-term economic growth, say city regions

🕔19.Nov 2014

Birmingham has joined forces with other major English city regions to support new research which demonstrates how devolving transport funding could boost economic growth and create thousands of jobs.

Leaders from Birmingham, Greater Manchester, Leeds, London and Sheffield are backing a report commissioned by Transport for Greater Manchester and Transport for London, developed by economic consultants Volterra.

The report calls for fiscal devolution, a longer-term approach to funding that works across political cycles, a system which places greater weight on the economic pay back of transport investment and additional powers over transport services.

It found the current highly centralised approach to the evaluation and funding of transport projects was likely to lead to “damaging underinvestment”, and if changed it could lead to growth and additional jobs.

Those backing the research include Centro chief executive Geoff Inskip, Manchester city council chief executive Sir Howard Bernstein, London Transport Commissioner Sir Peter Hendy and the mayor of London, Boris Johnson.

It is likely that the findings will provide fresh impetus for the city regions devolution campaign and help to make the financial case for transferring budgets and powers from Westminster.

The report states that the current approach to the evaluation and funding of transport projects is likely to lead to “damaging underinvestment” unless it is tackled and that pay back in terms of economic growth and jobs would be optimised if the approach were changed.

It makes the case for reforming the current system of funding if the UK is to avoid “being left behind in the global race for creating jobs and growth”.

The report argues that transport investment in cities is pivotal to the country’s success and that a fresh approach is needed for deciding what transport infrastructure gets funded, where and when.

It calls for:

  • Fiscal devolution so that cities can keep and re-invest a greater proportion of the tax revenue generated by investment
  • A longer-term approach to funding that works across political cycles
  • A system which places greater weight on the economic pay back of transport investment
  • Additional powers over transport services so that they can be planned and delivered for maximum economic return.

The report goes on to state that the current system of evaluating potential transport projects wrongly assumes economic development is not connected to the development of the transport system. But, this approach was established in a period when cities were declining, whereas now it is cities that will drive future growth – with transport playing a crucial role.

It also recommends a new focus on both a project’s ability to create jobs and growth and the way it will pay back investment. A project capable of creating economic activity will lead to more people paying fares, more people and businesses paying taxes and larger contributions from private sector developers, all of which can be used to pay back the original investment. A project that can pay for itself through the creation of new growth is clearly different from one that cannot.

Mr Inskip said: “The report sets out the need for a new direction for transport, so that it integrates with city agendas for global competitiveness and provides the right levers to deliver a truly integrated transport network.

“We wholeheartedly agree with the report’s conclusions that devolved powers and funding from Whitehall will allow cities to strengthen their transport infrastructure and fulfil their true economic potential.”

Sir Howard Bernstein summed up the thrust of the report: “Greater devolution of transport powers is vital so that cities can better develop, fund and deliver transport improvements and fulfil their full economic potential.

“At present, the Government has a centralised system of funding with little integration at the city level. Just five per cent of taxes raised in Britain are controlled by UK cities, compared to 30 per cent in Germany and 37.5 per cent in the USA. The report states this should change.

“Changing the rules and providing cities with more economic freedom would allow new projects to get off the ground and deliver benefits far more quickly than is currently the case.

“The pipeline of infrastructure projects that could be created would then fill the order books of companies up and down the country providing more certainty over transport investment and more firms investing more in jobs, skills, apprentices and innovation for the long-run, something which existing short-term planning horizons work against.”

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