National Road and Rail budgets go their separate ways
6 November 2017 | Author: Jim Steer, Director, Steer Davies Gleave

As the National Infrastructure Commission says in its current assessment, now out to consultation:

"It will be crucial to get more out of existing infrastructure, and technology, pricing and demand management will all have a role to play. But while these will reduce the level of investment needed in new capacity, they will not eliminate it".

This applies to energy systems and digital services as well as transport. On the question of the consequences of digital technology on road transport, the NIC concludes:

"Whilst new [connected autonomous and electrically powered] vehicles will be cleaner and safer, they will not solve the congestion problem. In fact, if... cheaper and more attractive, they may make it worse".

So, for the NIC, congestion is still a key issue, not soluble by new technological breakthroughs. And to emphasise the point, they have evidence: the European Commission found five years ago that of 20 European countries, the annual cost of traffic congestion was highest in the UK.

The Chancellor of Exchequer, in his upcoming budget, will surely talk about national productivity short-comings, rather than the inefficiency of congested transport systems. Yet there is a link.

Sir John Peace, Chair of the Midlands Engine, pointed it out, speaking on Radio 4's Today programme on October 26th. He said it "was important not to mix up productivity with efficiency", and went on to explain that, yes, the Midlands was home to many of the nation's major manufacturers (Rolls Royce, Jaguar Land Rover, JCB) whose productivity was world-class. But that didn't make them necessarily efficient, because poor connectivity added costs in the supply chain for these top-level businesses – just as it does for all parts of the economy.

Speaking alongside him, Tom Westley, Board Member of the West Midlands Combined Authority acknowledged that across the SME sector, while some companies were also highly productive, many were not: here the problem was lack of investment in skills and in equipment.
Poor connectivity, low skills and under-investment: issues the Chancellor will need to address if he is to see progress towards capturing the £40bn+ annual GVA available if the Midlands' economy is able to reach national average productivity levels. Similar calculations apply to all the other regions/nations outside the South East.

So, will the budget endorse the NIC's pitch for "a move to longer term funding in place of stop-start?", given the importance of tackling congestion and improving connectivity to addressing national productivity short-comings?

Things have moved on since the current Chancellor left DfT in 2011. Then, highways investment was at a low ebb, with occasional major schemes (the £2bn A14 project, for example) approved on a case-by-case basis, but no overall programme for what was then still the Highways Agency. Rail on the other hand was part-way through an agreed comprehensive 5-year investment programme, funded in the main, by Network Rail borrowing on the capital markets.
Six years later, it couldn't be more different.

For a re-named Highways England, there is a 5-year major roads capital enhancement programme worth £15bn with the prospect of increased spending ahead. For roads, it's the maintenance and renewal budget that's missing, with a current maintenance backlog on local authority roads – 89% of the UK road network – following relentless budget cuts (down 26% since 2009); a backlog estimated by the NIC to stand at £11.5bn.

Compare and contrast with rail. Here the recent 'statement of funds available' provides a budget for the next five years' operations, maintenance and renewals that at first glance looks favourable compared with previous provisions. But then the £47.9bn for the years 2019-24 includes 'some provision for funding of enhancements'. That'll be those pesky projects that are running well behind schedule and can now only be completed after 2018.

The OMR rail budget could still be tight, therefore, but at least it is still on a 5-year basis. Unlike rail enhancements, where none (other than those already approved) have been identified for 2019-24: they must be examined on a case-by-case basis, which, I suggest, we should take to mean very slowly indeed.

In short, there is a funded, rolling, 5-year major highways capital programme, but rail enhancements are on hold unless they are already underway. Road maintenance and renewals are being neglected, whereas rail maintenance and renewals remain on a 5-year programme. A messy starting point for the transport component of the Chancellor's Autumn budget.

To tackle congestion, we need to continue the trend away from car use that has characterised the 21st century thus far, with capital investment in rail and transit systems; and we need to get our road networks back to a high standard of repair suitable for autonomous vehicles, and greater levels of pedestrian and cycle movements. Current DfT spending plans won't reduce congestion, or increase efficiency and productivity.

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