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Analysis | Would city leaders repeat five-year funding mistakes?

view from 1 st peters sq manchester cropped

Devolving major transport decisions for cities to metro mayors featured high among topics tackled in the National Infrastructure Commission’s (NIC) first assessment of the UK’s infrastructure needs.

Along with stand-out recommendations on limiting new nuclear schemes and boosting renewable energy generation, the NIC put forward bold plans on devolving transport decisions.

In the National Infrastructure Assessment (NIA) – a 30-year plan for how the country should address its infrastructure requirements – the NIC advised that cities should be given £43bn up to 2040, divided into five-year budgets beginning 2021-2026.

The NIC argued it would let metro mayors and local leaders use their specialist knowledge to tackle transport black spots and bottlenecks in their cities, boosting productivity. Currently every major city except Bristol is below the national average in terms of productivity, according to the NIA report, while London rises above the national average for productivity by 39%.

Highways England and Network Rail were held up as examples to follow. In its report, the NIC said: “Local transport authorities outside London should have stable, devolved infrastructure budgets, as Highways England and Network Rail have.”

But both bodies have had their problems: Network Rail’s Control Period 5 (CP5) has attracted criticism for its slow start and budgeting problems, while Highways England has announced sweeping changes for its Road Investment Strategy 2 (RIS2) following teething problems with RIS1.

Would city authorities deal with a five-year infrastructure budget any better?

Arup chief economist Alexander Jan believes that while the transport bodies have experienced problems, city authorities would not face the same challenges.

“This [the NIC recommendation] is a funding allocation but it’s not subject to a regulatory framework and process; it would be more about a five-year funding horizon rather than following a regulated approach to giving local authorities this money. So in a way the comparisons to be drawn with that model are relatively limited,” he says.

But Jan cautions that business rates should also be localised for residents to really feel the benefits of devolution.

He adds: “It’s fine as far as it goes but in addition to that the government should be pushing on with devolving fiscal powers to these authorities, as well to re-establish the taxes generated by economic growth and business and the receipt that local authorities receive directly.”

Think tank IPPR North senior research fellow Luke Raikes agrees that the problems experienced by Highways England and Network Rail would be “unlikely to carry over” to devolved city authorities as they are less centralised, and therefore do not experience the same issues.

However, Raikes would like to see the NIC go further in their recommendations for transport devolution.

“I think it probably would be better for these decisions to be devolved because they are probably better managed at a local level,” he says.

“In many ways, five-year funding is not long enough. I would say they need long-term especially for infrastructure, you need to be able to pay off these things over a longer period of time. Five years is probably a start, it’s a move in the right direction,” he says.

Arcadis UK cities director Peter Hogg believes it is a good idea in principle to give city authorities five-year budgets for transport schemes.

“It’s a good idea with some caveats,” he says. “I think that would drive a very healthy level of accountability for metro mayors and cause them to think carefully before making easy promises.”

Hogg adds that city authorities could look to the water companies for examples of how to manage five-year funding periods well, while taking on board lessons learnt by Highways England and Network Rail.

However, Hogg questions whether metro mayors in particular will have had time to set up all the controls and oversight necessary before the funding period begins in 2021.

“What’s the oversight and regulation that ensures that the expenditure being made represents value for money?” he asks.

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