On track for growth?

The Eddington report was long awaited. As is all to common with government reports, the deadline slipped and slipped until it finally emerged in December, a good six months after the initial expected publication date. Now that the weighty tome of 366 pages, with a separate 62 page ‘case for action’ and lengthy online appendices has arrived, there are mixed views within industry about whether it was worth the wait.

For the most part, the report has been received well by business because it emphasises the crucial relationship between efficient transport and economic growth a connection. As Tom Riordan, the chief executive of Yorkshire Forward, the regional development agency put it, ‘Eddington stresses that transport is essential for economic growth and that has not always been recognised by government. The cost benefit analysis process for transport schemes has not always been right because the effect on the overall economy has not been sufficiently taken into account.’

Eddington makes five broad recommendations to the government which are all broadly within that theme. He argues that the government needs to deploy a ‘sophisticated mix of pricing, better use and investment’ and that policymaking requires ‘a systematic and transparent approach’. He also wants to ‘ensure the delivery system, including planning and governance arrangements are [sic] ready to meet the future challenges with the right tools, capacity and funding at its disposal’. OK, so none of this is particularly groundbreaking and, indeed, Eddington occasionally lapses into the banal, such as the assertion that ‘well-targeted transport investment reaps economic benefits’. However, that is to miss the point: the importance of Eddington’s report lies in its provenance. This is a document published by the Treasury, rather than by some ivory tower professor (many of whom could have done the job rather quicker!) and therefore carries far more weight than previous statements of what might be taken to be fairly obvious within academic circles. Eddington was keen to emphasise that his report was well-grounded and based on the experience of business leaders around the country: ‘the people I listened to most were those I met going around the country, who ranged from business leaders to train drivers’. He did, in fairness, also have a team of ‘academic friends’ to give his report intellectual legitimacy.

In an interview with Business Voice, Eddington expressed regret that the media had focussed so much on road pricing, which he had not intended to be the centrepiece of his report. He was therefore keen to highlight other aspects of his work, notably on planning where the report went somewhere beyond his remit which was to look at Britain’s long term transport needs in relation to their effect on the economy particularly post 2015. He set out a detailed critique of the planning system – rather trampling on the territory of Kate Barker whose report on planning came out a couple of days after Eddington – because, as he told Business Voice, ‘I knew it was very bad, but it is actually far worse than I realised. Indeed, Eddington seems to be most proud of this part of the report and suggests a number of recommendations that will ‘really shake up the system’ and provide a far faster process for transport infrastructure schemes through the creation of an independent planning commission which would act within clear policy guidelines set by ministers.

Another section of the report that received little coverage was the view that ‘all users, including air travellers, should pay the full costs of their travel, whether those are the costs of congestion or environmental damage’. Eddington was keen to dismiss criticism that he did not consider the environmental issues. He had worked closely with Sir Nicholas Stern who wrote the report on the economics of climate change and who was one of Eddington’s ‘academic friends’, which is why the two reports accord with each other on this issue: ‘My report has used as a basis that the price of a tonne of carbon is $70, but whether that is the real cost is a good question. The Stern report is not the end of the debate on climate change but the beginning’.

However, Gordon Brown seems to have ignored Eddington’s ‘user pays’ recommendation, in the short term at least. In his pre-budget statement, he announced the doubling of air passenger duty and an inflation level increase in fuel duty, neither of which meets the objectives set out in both reports. While these changes mark the first rises in five and three years respectively, suggesting that Gordon Brown may partly have listened to Stern and Eddington’s advice, there will have to be considerable further rises before he can lay claim to have made the radical shift towards the greener taxes that both men recommend.

Eddington concluded, perhaps surprisingly, that Britain has a relatively good transport network: ‘The UK transport network provides the right connections, in the right places, to support the journeys that matter to economic performance’. That is not, however, he emphasises, a recipe for complacency: ‘Yes we have a good network and business people say that London is well connected. However, there is the problem of capacity – will it continue to be as good. Business people are most concerned about transport congestion and about it getting worse’. Indeed, Alan Wood, chief executive of Siemens stressed that Britain had built up its role as an economic hub for many industries and ‘we risk jeopardising that pivotal economic role if we allow our transport infrastructure to deteriorate and indeed grind to a halt’. Hence Eddington’s analysis is based on improving transport facilities for three key types of journey that are crucial for business: urban commuter networks, inter urban journeys and gateways.

It is the latter which provided a surprising emphasis in his report, its stress on the importance of ports. He said: ‘It was one of the biggest surprises, finding out just how important ports are and realising that they do not feature sufficiently on the agenda. People who buy almost anything from fruit to washing machines don’t realise that in most cases these items have come through ports.’ It might sound obvious but the capacity of ports could be a key constraint on economic growth. Mark Brownrigg, director general of the Chamber of Shipping was predictably delighted by this rare endorsement of an industry that is often taken for granted and especially the fact that Eddington highlighted congestion on routes to ports as a potential barrier to growth: ‘Eddington stressed that there must be a focus on “surface access routes” to ports. The Chamber has long argued that the Government must consider the long term infrastructure requirements – the way in which our ports are served – that will come with the continuing growth in trade volumes’.

Tom Riordan, of Yorkshire Forward, is equally adamant about the importance of ports which he sees as a neglected resource: ‘Eddington is right to identify gateways. We have underused ports in the North even though we have the biggest complex in Britain on the Humber and another big facility at Teesport. Yet, 50 per cent of the goods produce north of the line between Hull and Liverpool travel to ports in the south by road, clogging up the motorways. That can’t be right.’

Riordan is equally impressed with the emphasis on inter urban corridors in Eddington’s report: ‘Eddington seems to recognise that if you only invest in cities themselves, then the strong will get stronger and the weak weaker. You have to invest in the links between them. He points to the M62 and the adjoining rail line through the Pennines as a major constraint on growth in the North: ‘When they let the Transpennine franchise, they expected no growth and yet we have had 20 per cent in two years, and that is set to continue. We need the sort of small investment schemes, such as sorting out the odd junction or station, that can lead to major improvements which Eddington suggests.’

David Begg, the former chairman of the Commission for Integrated Transport who has carried out research on the importance of inter urban corridors points to the importance of reducing congestion to create what become large agglomerations: ‘In Scotland, where they have lots of money available for transport spending, they are talking about a bullet train linking Glasgow and Edinburgh. That would increase the size of the labour market, both for skilled and unskilled people.’ By contrast, the connections between Leeds and Manchester are poor, with an overcrowded motorway and a relatively slow rail line. Congestion then limits the size of the potential labour market as it is time, not distance, which sets the limits of where people are prepared to work: ‘As Eddington points out, improving those links would free up the labour market’, says Begg.

Riordan recognises the importance of links with London as vital for any regional centre but, surprisingly perhaps, is not too disappointed that Eddington has effectively ruled out a high speed north south rail line: ‘We can already get to London from Leeds in two hours ten, and making better use of the existing system seems sensible.’

It is not only the high speed line, whether using conventional or maglev technology that gets short shrift from Eddington who concludes ‘a new nationwide very high speed train network [is not] likely to be a priority’. He expresses antipathy towards French style ‘grand projets’, publishing a revealing table which shows that small projects (those costing below £1bn in his definition) normally have a better benefit to cost ratio than bigger ones. Indeed, that is why Eddington puts a lot of faith in making small incremental improvements to the rail network rather than pushing forward these schemes which he dismisses as ‘the pursuit of icons’. He points to rail’s record of projects that have lost control of costs, such as the refurbishment of the West Coast Main Line which attempted, initially, to use a new signalling technology that proved unworkable and had to be dropped in favour of a traditional system, pushing costs up from the original estimates of £2-3bn to nearer £9bn. Nor is Eddington impressed with rail’s environmental credentials. He told Business Voice: ‘it may be that if cars get cleaner, building an extra lane on the M1 would be a better option in terms of carbon emissions than a new railway line. Building a high speed line from London to Scotland at cost of £30-5 bn to save perhaps 0.1 per cent of carbon emissions from people who fly is simply not worthwhile.’ Tram schemes, too, get short shrift with very little mention of them in the report and he sets a very high threshold, of 6,000 people per hour as being the minimum likely to deliver an economic scheme.

As a result it is hardly surprising that the rail industry was probably the business sector least impressed with Eddington’s findings. Although Network Rail was broadly supportive, perhaps relieved that it does not have to attempt to deliver a high speed line, the pan-industry body, the Railway Forum was deeply disappointed. Its director general, Paul Martin, said: ‘The Eddington Study report is in danger of being a missed opportunity for Britain. If we are serious about improving Britain’s economic prospects, relieving congestion and minimising the impact of transport on our environment we need to be thinking more positively about high speed rail.’

The one scheme major rail scheme which Eddington appears to support, without giving it a full endorsement, is Crossrail and that is because he reckons it is essential to boost public transport capacity in London: ‘Crossrail is expensive, just as a high speed line is expensive, but there is big difference. Crossrail has a strong business case and I could not really see one for the North South line.’ Moreover, he points out that most people in London travel to work by public transport, unlike in the rest of the country.

Another big project which does attract Eddington’s support is the continued expansion of Heathrow, for much the same reasons. Heathrow is seen as the key gateway for UK business travel and therefore he sees its growth as essential to the economy, despite the environmental objections. Here he appears to be totally in accord with Gordon Brown who has expressed support for a third runway at Heathrow, the transport project that would undoubtedly cause the biggest clash with the environmental lobby.

Eddington is sceptical, too, of any technological fixes. He emphasised to Business Voice that that there is no ‘silver bullet’ which would solve all or even most of the country’s transport buildings. Showing he had done his historical research, Eddington said: ‘there were transport revolutions in each of the past three centuries. In the 18th century it was the canals, in the 19th the railways and in the 20th the motor car and the aeroplane. I can’t see that happening in the 21st century. It is more like to be innovation in a communications system, such as broadband, that will have the most influence on the way we live. He does not accept the view that demand for transport would be reduced by the universality of new technology and broadband, through say greater homeworking and reduced need for meetings through teleconferencing. He told Business Voice: ‘The demand side is not going to go down. Even if people work more at home, they still take the same number of trips. People do not like sitting in a house all day.’

The focus of the media’s attention, Eddington’s support for road pricing was, in fact, little more than an endorsement of existing government policy. He did, however, try to take the issue a little bit further by offering some hints of the road map for how pricing might be introduced within his ten year timeframe. He wants to see early decisions made on pilot schemes and on transport investments, both before and after the introduction of schemes, and he points to the series of difficult decisions that have to be made by government on a whole complex range of issues such as technology, geography and design. Road pricing, he argues, is an ‘economic no-brainer because it is the only way of squeezing the best use out of a limited resource and it is central to his vision: ‘You have to ensure as much as possible that it is business as usual, that people have the freedom to travel within the constraints set by climate change. And that will be delivered by road pricing.’

However, Eddington did not comment on the vital question of whether the scheme should be revenue neutral – replacing existing taxes – or cash generative, in order to reduce the environmental damage caused by car use and to pay for alternative forms of transport remain in some far-off minister’s in-tray. The CBI initially supported the road pricing only on the basis that it would be revenue neutral but, according to Michael Roberts, its Director of Business Environment, the organisation is now questioning whether that is feasible: ‘One reason is that it would be almost impossible to prove that this was the case, but also the CBI is very keen to see increased expenditure on transport infrastructure and we would like to see any extra revenue from road pricing spent on that’.

That is a view echoed widely in industry. While there is broad support for the principle of road pricing, the payback must be in terms of better transport infrastructure. The view of Alan Wood, chief executive of Siemens is typical. He told Business Voice: ‘With 89 per cent of the delay caused by congestion occurring in urban areas, it is true that road pricing may well be an inevitable part of the solution. However, in order to implement a successful road-pricing scheme it will be imperative that road-users, including industry, see direct benefits for the additional costs they are asked to bear. There must be viable alternatives to road transport, for example investment in affordable, convenient and efficient rail transport, high speed links between airports and city centres and fast, environmentally-friendly transport links connecting our cities in the regions.

Overall, Eddington carried out the job he was asked to do which was to look at Britain’s transport needs within the context of the economy and, to a great extent, within the constraints of what could be delivered. There is some disappointment among business leaders that he did not come up with a figure for how much needed to be spent on transport infrastructure. Currently, around 1.6 per cent of GDP is spent by public spending on transport schemes, ranging from roads and cycle lanes to railways and buses. Clearly, given that congestion is growing and demand for transport shows no sign of abating, that is not enough, but Eddington does not offer a suggestion on what a reasonable amount might be.

Ultimately, therefore, Eddington’s report begs more questions than he answers. He equivocates on several key issues, and ducks such fundamentals as overall transport spending. And he is highly antipathetic to large expensive schemes. But that is hardly surprising. His report was written by a team of ten civil servants, half from the Department for Transport and half from the Treasury, with one of the latter actually compiling the final report.

Therefore, it is hardly surprising that there is nothing much in Eddington’s work which might trouble Gordon Brown, though he barely mentioned the report in his pre-budget speech given just five days after its publication. All he said was ‘we must invest in a sustainable infrastructure that will contribute to the future prosperity of the country.’ While he boasted that ‘investment in transport, just £4 billion in 1997, will be £9.6 billion next year’, virtually all that has been absorbed by the extra public support of the railways which has soared from around £1bn before privatisation to five times that figure today. The key question about Eddington, therefore, is not whether he has made the case for more investment, but whether it will, as has occurred so many times before, fall on deaf ears. As Michael Roberts put it, ‘the key question is what happens next?’ Gordon Brown’s pre-budget report suggested that the answer may be not a lot.

Christian Wolmar is an author and commentator specialising in transport matters. His articles can be found on www.christianwolmar.co.uk.