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

Report to Development Securities PLC Stephen Glaister Imperial College London With the assistance of Dan Graham Imperial College London Tony Travers The London School of Economics John Wakefield

Imperial College London 3 Urban Transport Infrastructure RailwaysRoads MetrosBridges TramsTraffic management BusesCar 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

Imperial College London 4 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

Imperial College London 5 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

Imperial College London 6 Large cities are the engine of the economy

Imperial College London 7 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)

Imperial College London 8 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?)

Imperial College London 9 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…….

Imperial College London 10 Government has failed to meet its own objectives on transport

Imperial College London 11 Government has not found a solution The needs are 1. More public borrowing 2. 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

Imperial College London 12 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

Imperial College London 13 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

Imperial College London 14 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: LAs must make it work (no need to reform local government) – Central government should let go – maybe allow public borrowing to increase? – no capping.

Imperial College London 15 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?

Imperial College London 16 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

Imperial College London 17 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