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Spending and taxation on transport: a briefing for the Comprehensive Spending Review and Pre-Budget Report

5 October 2007
With the Spending Review and Pre-Budget Report due next week in advance of a possible election, this briefing sets out what this might mean for transport spending and taxation.

Transport has become an increasingly debated issue, especially with the political focus on climate change. This is the Government’s opportunity to set out its stall on transport priorities and policies. Transport has been listed with health and education as a priority by Gordon Brown and is seen as important to the economy. Last year’s report by Sir Rod Eddington underlined this and proposed road pricing, investment in city transport and support for international “gateways” of airports and ports, as well as planning reforms to cut delays in building them. The Department for Transport is planning a transport strategy document which will be a response to the Eddington report, but taking account of Sir Nicholas Stern’s report on climate change economics

 

What we might see

 

More spending for transport

Further spending on transport links through the “Transport Innovation Fund”, with possibly some announcement of railfreight and road schemes to ports to boost productivity. A 10-year spending profile for transport; the last spending review had this and the Treasury has said previously that it would continue this because of the need for long term certainty.

 

Climate change to be tackled?

Measures or moves to cut carbon emissions from transport. Transport Secretary Ruth Kelly committed the DfT to produce a carbon reduction strategy for transport, and we expect an interim report from Professor Julia King who is conducting a review for DfT and Treasury on “decarbonising road transport”. Campaign for Better Transport has argued for a Carbon Reduction Fund, to pay for transport projects and schemes that will cut carbon emissions. This could include local transport schemes, traffic management, workplace and school initiatives as well as clean vehicle projects

 

PBR: new green taxes possible

Some possibilities for the spending review include:

 

  • A purchase tax on new cars with high charges for gas guzzlers and low or even negative charges for low emission vehicles. The Conservatives’ quality of life commission have suggested this as a “showroom tax”, and a leaked paper in the Sunday Times said that this was being seriously considered by the Treasury
  • As an alternative to this, higher vehicle duty: previous budgets have raised the tax on high emission vehicles but only to £400 a year (the industry say it would need to be £2000 a year to make a real difference)
  • Aviation taxes: with pressure on to tackle aviation emissions, options include moving from passenger duty (increased in last year’s PBR) to a tax per plane (to promote low emission planes running full), putting VAT or fuel tax on domestic flights and taxing airfreight and transit passengers
  • More company car tax reforms, including changing car allowances for business use of private cars to reflect fuel efficiency and emissions

The Conservatives and Liberal Democrats have already committed to use green taxes to pay for tax reductions elsewhere, so this will be a key battleground.

 

 

Transport spending: a mixed bag

Rail: Spending on rail has already been decided with a Rail White Paper and “High Level Output Specification” in the summer, setting out what the Government wants the railways to do over the next five years. This included 1300 extra carriages and the go-ahead for the Thameslink scheme in London and the rebuilding of Birmingham New Street and Reading stations, as well as a “strategic freight network”. The Government has also just given the go-ahead for the Crossrail scheme. Critics have homed in on the increases in fares involved and the failure to plan for long term growth, with the absence of any commitment to high-speed rail lines, electrification and new/reopened lines/stations to serve housing growth areas

Roads and traffic: The roads programme is in trouble: two recent reports have highlighted the overspending and poor cost control of roads projects by DfT and the Highways Agency and local road projects have also gone over budget. The widening of 50 miles of the M6 alone is predicted by the Highway Agency to cost £2.9bn, and that’s before any detailed design or contracts. And on climate change grounds road building adds to traffic and carbon emissions. So cheaper alternatives may be promoted.

Local transport: The emphasis here is on promoting local road charging schemes, with a firm bid from Greater Manchester for a London-like cordon scheme but with £1bn of public transport improvements first. Other councils are still considering their position on this. Otherwise expect more funding for local public transport, though trams still seem to be out of favour following the Government’s rejection of schemes for Liverpool, Leeds, Sheffield and Portsmouth, and a new round of “regional funding allocations”, allegedly to allow more local decision-making on priorities. The Eddington report showed that lots of small local transport projects can sometimes be better value for money than big projects, so expect more on this, for example on cycling (which will help to tackle obesity too) and school travel schemes. The Government is also promoting a Local Transport Bill which aims to tighten regulation and planning for bus services and give councils more powers on road pricing, as well as setting up more Passenger Transport Authorities around the country.

London: The London transport budget has been messed up by the collapse of the underground PPP contractor Metronet, and reports have suggested that the Treasury have been threatening that Crossrail’s go-ahead means that the tube upgrade should now be stopped altogether. One to watch.

 

Campaign for Better Transport’s view

We see the spending review and pre-budget report as an opportunity to set a new direction in transport, funding schemes and projects that give people real travel choices and reduce carbon emissions. We will want to see further tax increases on high-emission vehicles and aviation, balanced by investment in alternatives: better and cheaper public transport, school and commuter travel initiatives, and investment in getting freight onto rail and water. A Carbon Reduction Fund to pay for some of these will show that the Government means business.