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Transport and the budget: a pre-budget briefing

16 March 2015

On 18 March, Chancellor of the Exchequer, George Osborne will deliver the Budget Statement – the final major set-piece statement of the present Parliament.

2015 Budget

Briefing by Campaign for Better Transport

Introduction

On 18 March, Chancellor of the Exchequer, George Osborne will deliver the Budget Statement – the final major set-piece statement of the present Parliament.

Until recently, little was expected from the Budget beyond an update on the economy. But the upturn in the labour market means the Chancellor could be in a position to relax the £30bn spending cut for departmental budgets announced in the Autumn Statement and consider eye-catching cuts to taxation.

For transport and related policy areas, the major areas of interest will be:

· Transport devolution
· Infrastructure spending
· Local transport
· Transport taxation

Transport devolution

The Budget is likely to include further announcements on devolving powers and funding in the North of England. This will include the establishment of “Transport for the North”, through which local authorities across the North of England would be able to plan their local road and rail networks. A business case for the initial phase of 'High Speed 3' between Manchester and Leeds is expected to be published. When complete the scheme will cut journey times between the cities from 45 to 30 minutes. It is envisaged as the first stage in a larger project offering inter-city services from Liverpool to Hull.

This may well be one of the centrepieces of the Budget; the Chancellor has favoured progress with devolution of spending and powers from Whitehall, including on transport, during the latter half of this Parliament. Political pressure has grown for devolution within England after the Scottish independence referendum, and the need to tackle regional inequalities, with London's economy significantly outperforming that of the rest of the country in terms of Gross Value Added (GVA) and employment rates (http://www.ons.gov.uk/ons/rel/regional-trends/regional-economic-indicato....
html).

The Chancellor has set much stall by his rhetoric on developing a Northern Powerhouse, including transferring transport and other powers to Greater Manchester, and may emphasise Treasury support for investment in the new franchises for Northern Rail and TransPennine Express, where new rolling stock to replace ageing diesel trains has recently been promised.

Although progress with devolution has been slower elsewhere, discussions have also begun with West Midlands local authorities and these may be given more control over rail services.

There may also be further progress with devolution of rail to the South West of England. This follows calls for strategic investment and a diversionary route after damage to the line at Dawlish led to the closure of rail services to the far South West.

There are also calls for rail infrastructure powers to be transferred to Cardiff as part of plans to shift management for the Wales and Borders franchise to the Welsh Government, which is due to happen before the end of the current franchise in 2018. The Welsh Government has blamed the absence of such powers for the slow progress with rail infrastructure investment including plans for new stations.

Labour is likely to counter by trying to outbid the Government on this – they have already pledged to devolve £30bn of funding to local groupings, and to give more powers over buses to local authorities. The Local Enterprise Partnerships (LEPs), which the Government has created to replace Regional Development Agencies and which are the channel for a lot of devolved funding, are in line for reform, since as voluntary groupings of businesses they can’t receive European funding and are not directly accountable locally.

Infrastructure spending

Roads

Spending on transport infrastructure has been one of the main themes of the current Parliament and it is likely to feature again in the Budget Statement, despite there not being much new to say.

A major programme of spending on the strategic road network over the next five years has recently been confirmed in the form of the Roads Investment Strategy (RIS). A re-structured Highways Agency (to be known as Highways England) will come into being on 1 April and will be responsible for implementing the RIS. The Chancellor is likely to take the opportunity to re-announce some of the main schemes Highways England will be responsible for. These include “smart motorways” with the hard shoulder opened up to general traffic, and there are a number of other schemes with significant impacts on heritage and environmental resources:

· Dualing sections of the A303 and A358 in the South West, with the very controversial short tunnel at Stonehenge
· A27 Arundel bypass within the South Downs National Park
· Additional lanes on the A628 in the Peak District National Park, including areas with the highest level of protection at European level
· Widening of the A47 Acle Straight through the Norfolk Broads National Wetland

As part of the “Transport for the North” plan, the Chancellor is also likely to point to commitments to study a Manchester-Sheffield road tunnel and upgrades to the roads across the Northern Pennines. He is also keen on an Oxford-Cambridge “expressway” and may mention that too.

Rail

With passenger numbers continuing to rise fast, the rail network has seen significant investment over the course of the current Parliament. The Chancellor may choose to re-announce some of the recent
commitments to promote investment in the franchises for Northern Rail and TransPennine Express, and the commitments to HS2 and HS3.

The Chancellor may follow this up with a commitment to implementing the findings of the Electrification Task Force, which identified 12 northern routes to be prioritised for electrification between 2019 and 2024 as part of an ongoing programme to electrify the entire northern network for both passenger and freight rail.

Local transport

Increased support for cycling and walking may be included in or around the Budget, with both the Government and Opposition making supportive statements on the subject recently. Plans to increase per person spending on cycling from £6 to £10 may be re-announced by the Government in response to recent pledges from Labour that they would increase support for cycling.

The Chancellor may announce an increased budget for the “Total Transport” pilot schemes, which are currently being developed. Total Transport works by pooling transport spending and expertise by the public sector across all departments including health, education and leisure. This enables enhanced local transport networks with bigger resources and better coordination to be developed, especially in rural areas, which is intended to address the problem of declining funding availability for local public transport such as buses. The initial budget for the trial announced in January was £4m, but this may be increased after more than 40 local authority areas bid to take part.

Transport taxation

In the 2014 Budget, the Chancellor announced that fuel duty would remain unchanged until at least 31 Aug 2015 and it is very unlikely that the Chancellor would consider any increase in taxation on cars and driving at this point in the election cycle.

This is despite the Government's continuing problems with air pollution limits caused by diesel engines (for example, see recent problems with the M4) and falling revenues from motor taxation because of cleaner,more efficient engines.

Declining oil prices, however, mean pump prices have also fallen in recent months and for once the pressure on the Chancellor to reduce fuel excise duty should be relatively easy to resist.

The Government is under pressure to cut Air Passenger Duty (APD), having agreed to devolve it in Northern Ireland and Scotland, to avoid disadvantaging English airports. The aviation industry has been running a strong campaign to abolish APD altogether and the Chancellor may signal sympathy if not actual reductions.
However, the industry is exempt from various other taxes (it effectively pays no fuel tax or VAT) and Governments have used APD to address this under-taxation. One Minister pointed out to the industry that if they really think that a £13 APD charge puts people off flying, they should cut their airport parking charges.

How the Budget is likely to be received

The focus will be on the coming General Election, but there are a number of welcome trends in recent transport announcements that should also be highlighted.

The decision to fund transformative investment in the north of England's rail network is a major strategic decision which the Chancellor may back up with the transfer of more powers over transport spending and planning to local authorities.

Campaign for Better Transport will also be looking for signs that people's everyday experience of the transport network will be prioritised alongside announcements of expensive new infrastructure. Investing in local transport,cycling and walking offers excellent value for money as well as making towns and cities more accessible, healthier and more enjoyable places to live.

Beyond this, the return to major road building is highly contentious, with a number of schemes likely to cause protests. Recent revisions to traffic forecasts https://www.gov.uk/government/publications/road-trafficforecasts-2015) by the Department for Transport also expose the limited strategic benefits such schemes often bring.