Back on track – or off the rails?A report by Stephen Glaister, Professor of Transport and Infrastructure, Imperial College Londonfor Development Securities PLC into the failings and future of urban transport in the UK

Report to Development Securities PLC

Stephen GlaisterImperial College London

With the assistance of

Dan GrahamImperial College London

Tony TraversThe London School of Economics

John Wakefield

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Urban Transport Infrastructure

Railways Roads

Metros Bridges

Trams Traffic management

Buses Car parking

Problems

Maintenance and repair

Provision of new facilities to cope with demand growth

Cities say their infrastructure is not adequate ……

but they are not empowered to improve it

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The overall argument

TWO requirements:

– more borrowing AND

– extra cash each year

Central government has rigid control but has failed on transport

– will not increase public borrowing

– will not find extra national tax cash (health, education, defence…)

So… either do nothing or reinvent UK local government

– Half the problem is already solved: new Prudential Borrowing regime

– The other half requires NEW LOCAL TAXES

– The two together imply much higher standard of local accountability

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What cities say they need

London

– historic under-investment

– growth in travel demand as economy grows

– 3 extra Nottinghams population growth in next 12 years

London First estimate: over £60 billion.

Manchester, Birmingham, Newcastle: £10 billion

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Central government does not trust local government

Extreme centralisation:

– Over 75% of LA spending is central government grant

– Capital projects over £5m must be approved by central government

– Central government sets criteria for “value for money”

– Central government sets the procurement rules (PFI/PPP)

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The present mis-match of incentives

Local communities

– do not think about what they would be willing to pay for

– just bid for maximum grant from national taxpayer

Treasury spends its life just saying “no”!

Paradoxically

– many communities might be willing to pay for better infrastructure

– but there is no mechanism to allow this (e.g. Crossrail?)

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The lack of commitment in central government

Since 1979 there have been

– three Prime Ministers,

– six Chancellors of the Exchequer

– seventeen principal transport ministers.

Average tenure of a principal transport minister is 22 months

DoE, DoT, DETR, DTLR, DfT…….

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Government has failed to meet its own objectives on transport

0

1

2

3

4

5

6

% o

f G

DP

Transport

Health

Education

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Government has not found a solution

The needs are1. More public borrowing2. More taxes each year to pay for the borrowing

Central government has failed on both counts:

1. Creation of convoluted devices to get round own rules

PFI, PPP, Network Rail, NATS etc

which hide public borrowing and disguise increased tax liabilities

2. The present public spending climate suggests that this

will continue

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Paris, New York… other major cities

They do better because the regional authorities

– issue their own debt

– raise local taxes.

Paris:

– local employment tax & a number of other local taxes

New York:

– municipal revenue bond financing

– bridge tolls and local sales taxes

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Solution: re-invent proper local government

New powers to borrow

New powers to levy local taxes

New accountability for

– meeting local needs (local value for local money)

– setting and agreeing a fundable capital plan

– prudence in managing the liabilities

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One half of the solution : Make Prudential Borrowing work

– As from April local authorities can borrow without permission

providing their debt stays within the Prudential Rules.

– An important step forward: LA’s must make it work

(no need to reform local government)

– Central government should let go

– maybe allow public borrowing to increase?

– no capping.

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The other half: new local taxes

Somebody has to pay!

– If national taxpayer will not then maybe local

communities can.

E.g. London Gross Value Added is about £160 bn pa

– 1% of that would provide at least £16 bn capital up front

How do we capture a small part of our wealth to

solve the problem?

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New local taxes

Domestic property tax – probably not

Extended Congestion Charge – has potential in London– other cities??

Land value capture – Tax Increment Financing – a good idea but will it produce enough money (£2bn to £3bn)?

Reform of the National Business Rate – dedicated local levy – increase the total national revenue?

New local taxes

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The bottom line

We can solve the urban transport

infrastructure problem

If, but only if

Local government is made more accountable for

1. Prudent capital plans and borrowing to finance them

2. New, local taxation.

Report prepared for Development Securities