DfT maps out the next steps in transport’s devolution drive

The DfT’s director of local transport John Dowie gave an absorbing update on the Department’s progress implementing the localism agenda at last week’s LTT-sponsored ‘New Funding Mechanisms for Transport’ conference.

Dowie: local authorities will not face any more DfT "torture" over major transport scheme business cases

Dowie: local authorities will not face any more DfT "torture" over major transport scheme business cases

It will soon be two years since the coalition Government came to power with a localism agenda for England that entailed devolving power from the centre and dismantling the regional tier of governance created by Labour.

At the very end of last month the DfT took a big step down the localist path by publishing plans to devolve the funding for local major transport schemes to the 39 Local Enterprise Partnership areas from April 2015 (LTT 02 Feb). Last week’s LTT-sponsored conference on new funding mechanisms for transport therefore provided the DfT’s director of local transport, John Dowie, with a timely opportunity to explain the thinking behind the funding shake-up.

Dowie began by outlining how the funding reforms were part of the wider devolution drive within Marsham Street, briefly summarising some of the Department’s work in the fields of rail, bus and road.

“There’s quite a lot of very active conversations going on with the Northern PTEs in terms of the future of the Northern rail franchise – the possibility of an all-North devolution package,” he said. There was also the possibility of devolving to individual conurbations, such as the West Midlands, and this could be a “plan B” for the North.

“There’s also interesting conversations going on with individual authorities, sometimes Shires, about devolving the more secondary parts of the rail network and I understand the one that’s got most traction is potentially Cumbria and the coastal line [from Carlisle to Barrow],” he said.

The emerging picture was of different models of rail devolution in different parts of the country. “We’re moving to more of a ‘letting a thousand flowers bloom phase’,” he said.

On buses, the DfT was talking to operators and local authorities about a “kind of partial devolution”, which he later confirmed was a reference to Bus Service Operators Grant. The Department was acting cautiously, he said, “because the last thing we want to do in the current challenging circumstances for the bus sector is to up-end it and produce mass change in bus routes across the country. That’s not going to help passengers and it’s not going to help politicians locally or nationally.”

There was, however, scope for change. “There’s potential scope on the tendered bus market where local authorities already place the contracts. There’s the possibility of selected local authorities and bus operators working together in a more devolved arrangement and we hope to say a bit more about that probably in March.”

Dowie said there was also merit in rethinking how local authorities engaged with the Highways Agency on trunk road matters, though this area of work was at an early stage. He cited the Cook Review of the strategic road network, which has suggested that route strategies could provide the focus for new localised mechanisms for financing and delivering improvements and for improving co-ordination between the strategic road network and local roads (LTT 02 Dec 11).

“I think there’s a general recognition in the Department and certainly outside that we need to get smarter in handling growth pressures, often local growth pressures, about trying to work better across the strategic road network and the local road network,” he said.

Knitting it together

Dowie said there were some big challenges involved in bringing together the devolution work on individual modes and the devolution of major scheme funding. “I could stand here and justify till the cows come home what we’re doing on majors [major scheme funding devolution]. I think we’re developing quite a good story on buses, on rail I think something might be possible – something quite empowering for local government. But can we add them up in a way that actually makes sense, and makes sense at the local level? I think that is, to be frank, quite a challenge.

“It is probably easier to do on the capital side – in principle the devolution of majors  funding will create a pot that could be spent flexibly across different modes ... [and] could be a vehicle to work more cleverly with the Highways Agency,” he said.

“Trying to combine local authority funding with highways [HA] funding, maybe; trying to combine that with rail is much harder – it’s just set up on a completely different basis.”

The administrative integration of bus and rail posed challenges too. “Although in theory we can secure the holy grail of better integration between rail and bus ... local authorities, even probably post a kind of staged devolution of buses, will only control some of their bus routes, and they may not control all of their rail services because some of those are national.

“You could have a situation where a local authority has control over bus routes which are nowhere near rail and control over particular rail services which are nowhere near the bus services which they have control over.

“That’s going to be quite difficult to say the least. And of course large bits of this landscape are centrally mandated – the concessionary fares requirement for example. So there’s quite a challenge ahead of us which goes way beyond doing something sensible sector by sector.

“We’ve been talking to the Local Government Association and we’re quite keen on working through them with a number of local authorities to see, as the devolution agenda moves forward, if we can make progress on making it easier for local partners to take advantage of the new funding opportunities and new powers.”

Major schemes

Turning to the plans for the devolution of local transport major scheme funding, Dowie began with a quick review of the centralised decision-making process that has operated since the Regional Funding Allocation system was scrapped.

Centralisation had some advantages, he admitted. “It’s a good way of rationing a finite pot of money across all of England and deciding what gets funded and certainly with the influence of Philip Hammond we turned it into quite a useful tool for extracting larger and larger [funding] contributions from local government.

“But it does have downsides,” he added. “It’s hardly empowering, it’s bureaucratic and it’s quite confrontational.”

He explained the terms of the new “deal” with local government contained in the consultation document Devolving local major transport schemes, released last month.

“We will end up-front appraisal – so no more torture of local authority business cases; indeed, no more business cases to us, in return for local authorities and their Local Enterprise Partnership partners setting up joint decision-making processes at LEP level.”

The new ‘local transport bodies’, bringing together local authorities and LEPs, would be expected to challenge themselves in terms of what they build and to evaluate outcomes “with the possibility that evaluation might feed into future settlements”.

“We will be looking in particular at the extent to which... LEPs have influence,” he said. “We do envisage that local authorities will be the primary party … but we want LEPs to have real influence. We’ll be looking in particular at the extent of internal challenge – are they [the local transport bodies] ready to take on the disciplines of appraisal and mutual challenge that we’d like to see? We would like to introduce a standard template in terms of appraisal to the DfT five [business case] criteria, possibly to WebTAG – there are costs there – but that would allow consistency between areas and it’s actually going to be very difficult to evaluate if everyone has done it differently.”

The new system will sweep away the £5m major scheme threshold, allowing funding to be used for schemes of any size, no matter how small. But Dowie was keen to quash  fears that this could spell the end of the Integrated Transport Block that currently funds projects costing less than £5m. Following the release of the consultation document last month, LTT asked the DfT’s press office whether the reforms to major scheme funding had implications for the ITB, to which a spokeswoman replied: “It’s still to be decided whether we need the Integrated Transport Block or not” (LTT 02 Feb).

Dowie had seen LTT’s report and told delegates that the future of the ITB was not tied to the major scheme funding reforms. “I should stress that this is not going to jeopardise the Integrated Transport Block or the maintenance block or anything else.” 

Hard graft

The immediate reaction to the major scheme funding proposals has not been altogether favourable. Dividing the funding pot up between 39 LEPs, and giving district councils in two-tier areas the opportunity to be members of local transport bodies has led to warnings that this could spell the death of the big major transport scheme from people such as Tony Ciaburro, chairman of the transport board of the Association of Directors of Environment, Economy, Planning and Transport (ADEPT).   

“There’s been quite a howl about ‘this is the demise of the major project, the big local authority project’,” said Dowie. “There’s also been a slightly more subdued howl about local authorities having to work together with LEPs.

 “I think there is a really big challenge here, yes for central government but also for local government, for LEPs, for local partners. It’s a challenge you’ve been asking for for some time but it’s a challenge that is actually going to require some very hard graft locally. And it’s going to require real partnership working locally.

“I must admit that when some of the feedback on major schemes [funding devolution] is: ‘It’s the demise of the big scheme’, actually what I’m thinking is, are you just saying you’re too lazy to do the hard graft to stitch together all these different funding streams locally? To take the repatriation of business rates, the business rates top-up [business rates supplement], the Enterprise Zone tax concessions, wider Tax Increment Financing, New Homes Bonus – albeit county councils only get a small share [20%] – Growing Places Fund, making use of your assets, European Regional Development Fund, at least in some of the regions, [and] other Government funding streams.”

“Clearly… it’s a big challenge to stitch this together but where better to do it than locally?” said Dowie.

“It also in my mind reads across to the often low, quiet, private mutters about ‘Ooh LEPs, devil incarnate’. Well hold it: this blending together of local funding streams requires partners to work together. I can’t sort this for you.”

 During the Question and Answer session, Oxfordshire’s deputy director for growth and infrastructure, Martin Tugwell, asked whether it would not be better for central government to stitch together all the disparate funding streams for capital investment and give local authorities a single pot of money.

Dowie said devolving major scheme funding to the LEPs had been deemed preferable to devolving it to individual local transport authorities. But he conceded that, from a transport perspective, the LEP boundaries were not ideal.

“We’ve got LEP geography, that probably makes eminent sense from a number of different policy perspectives and I can actually see some of the economic benefits because they’re much clearer economic areas. But for the purposes of transport it’s quite challenging geography because it’s not co-terminus with local authorities but nor has it got the scale of the old regions. There’s relatively little other money [from Government] being given at that level.

“We could say … let’s just build on local authority geography but then we’re talking about 80 to 90-odd transport authorities. That’s quite a lot of subdivision of budgets. I could only see that really working if all of Government decided to do this in pure form, then you would build up critical mass. But if transport was to do it [alone] we’d be chopping up the funding into too small bits.”

The governance structures in England are giving the DfT plenty to think about. “We’ve got geography problems here,” he said, reflecting on a recent meeting he had in the north-east of England as part of the city deals initiative being driven by the Department for Communities and Local Government’s cities minister Greg Clark.

“We were having a conversation with Newcastle and Gateshead, which for the purposes of that exercise is the city, and of course [the discussions] referred to Tyne and Wear, which for transport purposes is the PTE [covering a larger area of five districts]. Of course, they’ve got an LEP for the North East adding in Northumbria and Durham. There are some real issues we need to work through about how to make sense of that geography.”

Dowie noted that the old regional arrangements for distributing major scheme transport funding had advantages in administrative terms. “Transport loved Regional Funding Allocations – for making big strategic decisions they made a lot of sense, we actually did devolve quite a lot of authority to them. But for other departments it didn’t – the Departments for Business, Innovation and Skills  (BIS) and Communities and Local Government (CLG) – they didn’t really get a lot from this, their heart wasn’t really in it, their geography was different. It’s flipped really, quite a lot of the current debate, so LEPs – some make more sense from a transport point of view than others.”

One delegate asked whether the DCLG’s desire for elected mayors in the 12 largest English cities might make the delivery of transport policy even more complex because their focus would be on only one part of the conurbation’s travel to work area.

“The focus on the core city rather than the city regions in transport terms is not helpful really,” said Dowie. “It doesn’t do a lot for us. I can see why other bits of Government are focused on that spatial level.

“It’s a bit of a conundrum really.”