Connected, liveable city regions

The final session considered the question of how to pay for properly connected, liveable cities.

Setting the scene, KPMG associate partner and session chair Lewis Atter said that, with infrastructure reaching the limits of capacity, "behind the scenes, reform is in the air. The National Infrastructure Assessment is coming. Changes in appraisal are helping us to understand the role of infrastructure in growth, and the impact of infrastructure spending in one part of the county on other parts."

This work was also shedding light on "where, ultimately under the current tax system do the financial benefits of infrastructure end up, and how well are they captured? At present, not very well at all," he concluded.

Claire Haigh, Greener Journeys Chief Executive, said that the view from the National Infrastructure Commission was that "none of our infrastructure needs can be met by continuing with the status quo. Radical solutions are needed."

Considering the NIC's report on Carbon, Capacity and Congestion, she said: "Investment in buses is critical to all three."

For carbon, transport was the only sector in which carbon emissions continued to rise. Take-up of electric vehicles was being inhibited by barriers such as the lack of a charging network. With 5,000 low carbon buses in operation in the UK, she said, "buses have a critical role in the carbon reduction agenda".

Considering capacity, 300,000 new homes will be needed every year for the foreseeable future. A new report for the Transport Knowledge Hub by KPMG looked at how sustainable transport could unlock the benefits of new housing.

This had found that new housing developments in urban centres had 50% greater benefits than an equivalent development on the edge of the urban area, "but this is at risk if you can't control congestion. [Development] puts local roads under huge strain. If we don't put investment into additional public transport alongside new developments, it risks bringing local roads to a standstill," Ms Haigh said.

For congestion, "even the most optimistic forecast suggests the network is at breaking point", she said. Buses had a crucial role – each bus could take 75 cars off the road – but buses were most vulnerable to congestion, which was reducing bus patronage by 10% in each decade.

"Pricing, technology and demand management are all going to have a role to play in a solution," she said.

She called for long term investment in buses. Though there was a Road Investment Strategy and a five-year plan for rail there was nothing for buses, which carry more passengers than the rest of public transport put together. "If we're going to address our major challenges, we will need a new mindset and some radical solutions," she said. "A long-term bus investment strategy would be an excellent first step."

KPMG executive director for corporate finance Gerard Whelan outlined the findings of the new Transport Knowledge Hub report, Sustainable Transport – the Key to Unlocking the Benefits of New Housing.

He said that though there was consensus about the need for 300,000 homes annually to the mid 2020s there was less consensus about where to build them. It was necessary to consider the wider economic, social and environmental impact of new housing to make sure that the Government spends resources effectively, achieving outcomes that society values, and that those that benefit from the investment contribute to its delivery, where possible.

"To rebalance the economy and meet the UK's productivity challenge we need to move the dial on investment in infrastructure and we need to explore new ways to fund this investment," he said.

When looking at the benefits from investment in infrastructure for new housing, Ministry of Housing, Communities and Local Government guidance considers the increase in land value brought about by the investment; this is seen as a market-based approach but "land value uplift" is only part of the story.

It was also necessary to consider connectivity, he said. "Where people live, and how well connected they are economically and socially, has a major influence on life chances." If connected to employment, education and training opportunities, life chances improve. "We really must take that into consideration when making our investments," he said.

KPMG had worked with the David Symonds Consultancy, a specialist land use consultant, which had developed tools for simulation of land use and transport interaction and their relationship with economic growth.

This allowed the impact and benefits of a new mixed used development in a conurbation to be compared with the same development on the urban fringe. For the development on the urban fringe, the benefits were only 67p for each £1 of benefits from the same development in a regional centre. The research also found that in both cases the development would add about 10% to congestion, but that this could be mitigated against by a 10% improvement in how easily people could get about using public transport.

The MHCLG guidance on assessment does not include the wider economic benefits associated with increased agglomeration, or the importance of mitigating against the costs of increased congestion.

It needed to update its appraisal methodology to take account of these wider economic, social and environmental impacts; it also needs to think about the distribution of impacts associated with those investments, he said.

He added that when the current approach looks at land value uplift, the increase in value is likely to be bigger in areas of existing high demand. So the current appraisal methodology is not helping from the viewpoint of rebalancing the economy.

Mr Whelan ended by asking three questions:

  • First, how do we make sure that we get value for money from the £5bn Housing Infrastructure Fund, which is intended to help bring about investment in new homes and improve infrastructure capacity in growth areas?
  • Second, the scale of the investment needed should not be understated. Who funds, and who pays: should we be doing more to find new ways to fund investment, including asking those who benefit from investment to contribute to its delivery?
  • Third, if the focus is on building high quality, high density homes in urban centres, should investing in sustainable transport (public transport, walking and cycling) be a higher priority?

Vernon Everitt, Transport for London managing director for customers, communication and technology, made three observations.

First, "in December a huge new railway is going to turn up in London", he said. Crossrail 1 would overnight introduce 10% more rail capacity for the region "and trigger a whole bunch of benefits".

He saw that as "the newest illustration of what investment in public transport can deliver", just as the regeneration of Docklands, where the conference was held, was made possible by transport investment.

His second point was that "steady and sustained investment in the infrastructure we already have is equally important".

In the centre of London Bank station was being totally changed. David Waboso, who spoke earlier on the Digital Railway, had already been responsible for the installation of digital railway technology on the Victoria Line, Northern Line, and Jubilee Line, and it would now be introduced on the Circle, Hammersmith & City and Metropolitan and District Lines. "That overnight will introduce 40% more capacity on to the existing Tube network," Mr Everitt said.

That was important because it was predicted that by the early 2030s, London would be a megacity with 10 million people living there.

His third point concerned funding. Crossrail 1 had given some insights into how to fund projects, and a funding and financing review was currently examining how to make Crossrail 2 affordable. The mayoral Community Infrastructure Levy had partly paid for Crossrail 1; two-thirds of the Northern Line extension was being paid for through business rate retention and one third through Borough Community Infrastructure Levy and Section 106 contributions, allowing the regeneration of an area of Battersea that had been derelict for decades.

Other innovations in London had included the congestion charge and the ultra low emission zone.

"The reason London has been lucky in this regard is that the people who put together the mayoralty have utterly revolutionised transport in London, because it brought together spatial planning, economic planning and transport planning for the city. For years now we've been talking about housing, jobs and growth – not about transport strategy. Transport strategy enables those things but it's the lock-up of all of it that has benefited London immeasurably."

All these methods of funding and financing were a form of fiscal and financial devolution: more of this was needed elsewhere in the country.

He continued: "Transport investment isn't a zero-sum game. We are really supportive of colleagues around the country who are making business cases for transport investment, and we believe that it can all be paid for. It cannot be beyond our capabilities to be able to take that further and make sure we can afford Crossrail 2, Northern Powerhouse Rail and the key investments needed in all the other regions."