A newcomer to Britain might have been puzzled in recent months by apparently contradictory headlines about transport.
In June, chancellor George Osborne promised, again, to spend billions of pounds on road and rail projects which would boost the economy, but in the previous month the Public Accounts Committee warned of local authorities’ budget shortfalls being so severe that some councils might soon be ‘unable to meet their statutory responsibilities’, which include areas such as highway maintenance.
Build or spend? Which turn on the road to growth
In May, the Department for Transport grabbed a share of the limelight by announcing £12m of grants, to help operators in England buy 213 low-carbon buses, in the fourth round of its Green Bus Fund. Anyone who saw that as a Whitehall vote of confidence in the future of buses might have been surprised a week later to read newspaper articles warning that one in seven bus services is at risk from cuts to Bus Service Operators’ Grant. In the event, Mr Osborne’s spending review reprieved BSOG in England, but the 10% cut in revenue funding for local authorities – on top of previous reductions – raised fresh concerns over the future of bus services.
Central Government’s actions over several years have conveyed the message that capital investment in infrastructure will create jobs and kick-start economic growth, while revenue spending is an economic burden which deserves repeated paring. Local government officers, however, believe revenue spending can be helpful – and sometimes vital – for local economies, because it supports jobs as well as access to facilities and services.
Local bus operators in Great Britain employed 124,000 staff in 2011-12, not concentrated in urban office developments but spread across the country and providing valuable work for residents in many deprived or rural communities. There is also evidence that many people depend on buses to get to work, training, education and job interviews. Bruce Thompson, head of transport coordination at Devon CC, says: ‘A survey by Passenger Focus identified that 27% of passengers on our supported buses are using the bus to go to work. We have to assume those people will be in the dole queue, in many cases, if the bus comes off.’
Jane Lorimer, national director of Sustrans Cymru, warns that bus cuts can also impact on employers, reducing the labour market to which they have access.
Matthew Lugg, in his last week as Leicestershire CC’s director of environment and transport, contrasts capital grants for new buses with the pressure on bus revenue support. ‘New buses are no good if you can’t afford to run them,’ he says.
‘Bus services are lifelines for people in rural communities who haven’t got a car, particularly the younger people. If you can’t have a reasonable bus service to get people to work, you’re not going to be able to help the economy. There’s not much work in the rural economy – people have to travel to places to work.’
Mr Thompson, speaking as chair of the bus executive of the Association of Transport Coordinating Officers, says central Government’s disjointed thinking on the issue filters down. ‘Government tells us we need to be more joined up with other agencies but when we talk to them, the brief they get from central Government isn’t joined up.’ The Department for Work and Pensions and the NHS are reluctant to fund transport which would help them achieve their goals, he believes.
Revenue cuts for buses have been worse in Wales than in England, with a 25% reduction in funding accompanying the launch of Regional Transport Services Grant, administered by local-authority transport consortia. Recent figures showing a decline in bus passengers across Britain last year also revealed that the sharpest decline was in Wales – as were the biggest fare increases.
Tim Peppin, director of regional and sustainable development at the Welsh LGA, says: ‘Buses are a lifeline in rural areas but also provide an important link between communities and job creation in the urban areas. In terms of helping the economy get back on its feet and addressing social inclusion, buses have an important role to play.’
On highways maintenance, however, Wales has led the way, in the eyes of the Institution of Civil Engineers and others. The Welsh Government, which receives a block grant from the Treasury, is obliged to respect the Treasury’s split between capital and revenue resources, although it can make some revenue contributions towards capital projects.
Welsh unitary authorities found themselves with so little leeway on revenue funding that they could not afford adequate repairs and maintenance of highways, their most valuable asset, following several harsh winters. The Welsh Government’s imaginative solution is to provide relatively small amounts of sustained revenue funding so that each local authority can access prudential borrowing for highways improvements. A total of about £170m will be borrowed over three years, after which the infrastructure should need significantly less expenditure on reactive maintenance. Mr Peppin says the Welsh Government’s funding constitutes the revenue stream against which local government can borrow.
Mr Lugg believes the Welsh borrowing initiative is a good one to emulate in England, where he feels there is no alternative as yet to conventional funding. ‘We still haven’t got any clarity about PF2,’ he says, referring to the proposed successor to the Private Finance Initiative.
Further cuts to revenue budgets for English highways could be a disaster, Mr Lugg believes. ‘On average, I would say 60% of local authority highway budgets are revenue and 40% are capital. If there are further inroads into the revenue, that will impact on jobs because there’s less money to spend on routine maintenance, which is labour-intensive.’
However, he says there’s a thin line between revenue and capital spending on highway maintenance. ‘It’s the overall amount of money that’s the problem, not the division between the two parts of it. A lot of councils quite creatively fudge things about how they report on capital and revenue. Is surface dressing a capital or revenue activity? It’s a fairly routine maintenance activity but it enhances the asset.’
Although road maintenance can be classed in part as capital investment, it does not give ministers, MPs or councillors the ribbon-cutting photo opportunities they crave – where investment has produced something new and additional. However, Mr Lugg believes the public concern over the state of the roads before the last council elections in England could be echoed before the next general election.
Ewan Wallace, who chairs the Society of Chief Officers of Transportation in Scotland, says local authorities in Scotland have more autonomy about how much of their funding they allocate to revenue versus capital. Although bus operators have been affected by issues such as changes to the way Bus Service Operators’ Grant is calculated, this has not resulted in a significant increase in tendered services. ‘Roundabout 75% of bus services are commercially viable,’ he says.
