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Transport faces up to public spending axe

Local authority engineers were this week forced to accept that no new local transport schemes will get built without private investment.

The admission came after transport secretary Phillip Hammond said he had frozen development work on £5.2bn worth of schemes yet to get underway.

With “brutal” cuts expected in autumn’s Comprehensive Spending Review, engineers said the best case scenario was for councils to hang on to maintenance budgets. Cash for upgrades will have to come from private finance.

No assurances

The grim reality emerged after Hammond said that the government could give “no assurances” on funding support for any project still awaiting the final go-ahead, even if it has previously received conditional approval.
Hammond’s announcement affects £5.2bn worth of projects which had been conditionally approved but which have not started on site.

Hammond has put all these schemes up for review and told local authorities to stop working on them. He has cancelled public inquiries into the A5/M1 link near Milton Keynes, the A14 Ellington to Fen Ditton scheme near Cambridge and the A21 Tonbridge to Pembury upgrade in Kent.

“It’s going to be pretty brutal and we’ve got to be prepared for that,” said Matthew Lugg, vice president of the Association of Directors of Environment, Economy, Planning & Transport (Adept) formerly known as the County Surveyors Society.

“Any schemes that we’ve not got approval on are now unlikely to be funded at all.

“Frankly, it is far more important to protect maintenance budgets than to push for new infrastructure. There is no point in investing in new infrastructure if we cannot maintain the old.”

Matthew Lugg

“For capital schemes we’ve got to look more creatively at funding. We need a way of unlocking the potential of private sector investment, otherwise we really are going to come to a standstill.

“And that is not going to be good for local government, and local government spends a lot with consultants and contractors.”

Consultants agreed private funding mechanisms would be vital. Hammond himself said “consideration” will be given to schemes if there are alternative funding sources.

“It is up to us and contractors to be more creative,” said Capita Symonds chief executive Jonathan Goring.

“Either we get off our backsides and find some income streams or we switch our focus to maintenance alone. I’d rather find some more money.”

Goring added that funding could be generated through congestion charging schemes or any form of infrastructure that generates inward investment.

London mayor Boris Johnson is already pressing to use Tax Increment Financing (TIF) to fund an extension of the Northern Line to Nine Elms in Battersea via a levy on local businesses. He is also seeking to press businesses outside London to contribute to Crossrail via a supplementary business rate.

Treasury “needs convincing”

But Johnson this week told the London Assembly that the Treasury still needed convincing about the merits of the mechanism.

“I have talked to Hammond about it. It’s something that the Treasury has not yet, in my view, completely seen the wisdom of. It’s something they need to appreciate.

“I think it’s a brilliant idea and it’s the only way, frankly, that we’ll get the two new stations that we need on the Northern Line and we should be militating for it.”

Lugg agreed that more clarity on future private funding sources was urgently needed.

“At the moment there really isn’t a clear mechanism. We don’t even know what the new coalition government thinks of the private finance initiative,” he said.

The coalition government has said it will review the initiative, but gave no timescales. Hammond said the government will aim to provide a firm indication of the way forward later this year once the Comprehensive Spending Review is complete.

The ICE said that funding cuts would be disastrous, given the massive maintenance backlog, worsened by the severe weather this winter.

Its annual State of the Nation report, published this week, said that local roads were generally in poor condition and that there is a huge maintenance backlog.

Contractors are also concerned by the hiatus in project development work. The Civil Engineering Contractors Association (CECA) said it was unsurprised by the decision, but that it would be seeking an urgent meeting with the Department for Transport (DfT) on the matter.

“This puts a significant amount of potential work for contractors of all sizes in doubt. The industry will see this as an indication of the shape of things to come,” said CECA national director Rosemary Beales. “The DfT and the government must not lose sight of the critical role that transport infrastructure plays in delivering productivity, prosperity and quality of life.

“We are now seeking an urgent meeting with the DfT to discuss this. They must maintain a close dialogue with the construction industry throughout this process.”

Affordable options

The Campaign for Better Transport (CBT) said maintenance spending should be safeguarded as a priority but councils needed to start looking at more affordable options for upgrades.

“Councils should accept that their £100M road schemes just aren’t viable anymore,” said CBT roads and climate campaigner Richard George. “Instead, they should start looking into more affordable ways to solve their transport problems while working towards UK climate change targets.”

CBT wants all new road schemes permanently axed along with plans for high speed rail lines with the cash saved invested in cutting rail fares and improving bus services instead.

Hammond has stressed that the coalition government has made a commitment to reform the way decisions are made on which transport projects are prioritised.

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