Public Accounts Committee publishes report on funding for public transport

• Report: Funding for local transport: an overview
• Report: Funding for local transport: an overview (PDF)
• Public Accounts Committee 

The Rt Hon Margaret Hodge MP, Chair of the Committee of Public Accounts, today said:

"The Department for Transport makes a substantial contribution towards the funding of local transport services, but has no clear way of controlling how this money is used.

The Department provided £2.2 billion to local authorities in 2011-12. But £1.2 billion of this, mainly for highway maintenance and transport projects, is not ring-fenced and the Department does not monitor whether it is actually spent on transport or achieving its intended purpose.

Local authorities are facing significant budget cuts but the Department does not have the information to assess the impact on transport services, or to make comparisons between local areas to identify councils that are underperforming.

It is also unclear how the Department would identify a failure or unacceptable deterioration in services, or when and how it would intervene.

Councils also raise funds from local people through parking charges. The Department should ensure that this money is actually used for local transport, and put in place transparent mechanisms for doing so.

We are not convinced that government has thought through the risks of devolving more control over the funding of major transport projects to a local level. For example, the Department is confident that local bodies will naturally cooperate to fund and implement projects. We believe this confidence may well be misplaced.

The risk is that local transport bodies, under severe financial pressure, will not take sufficiently strategic and joined-up decisions, threatening national or regional transport funding objectives."

Margaret Hodge was speaking as the Committee published its 25th Report of this Session which, on the basis of evidence from the Department for Transport, local government and academic representatives, examined the Department's funding for local transport.

The Department for Transport (the Department) works with local partners to deliver many of its policies. Local authorities play a key role in planning and commissioning transport services, such as bus and light rail, and providing and maintaining roads and other local infrastructure. They spent a total of £8.5 billion on transport in 2010-11. The Department provided around a quarter of this (£2.2 billion), with the rest raised locally from council tax, from the £411 million surplus raised from parking levies, or from the Department for Communities and Local Government formula grant.

In 2011-12 the Department provided £1.2 billion to local authorities for highways maintenance and small transport projects in the form of two un-ringfenced formula-based grants. Local authorities were free to spend these funds on any capital projects of their choice, including projects without any transport element. The Department does not monitor how un-ringfenced grants are spent and there is insufficient information to determine the impact of the Department's contribution on local authorities' spending decisions and therefore to achieving the Department's objectives.

The Department plans to devolve more control over its funding to the local level (raising the proportion of resources which are not ringfenced portion from 60% to around 80%); and new local transport bodies will take on some decision-making responsibilities previously held centrally. Full details of how the new system will work are still to be determined and there is uncertainty over how the arrangements will work in practice. The Department could not clearly define how it would ensure cross-boundary projects would be funded and agreed in the new landscape. It accepted that it will have to rely on local goodwill and departmental influence. The Department accepts that transparency of data will help make local accountability work, but it needs to define what information is needed to judge value for money, monitor transport risks including those arising from local budget cuts, and clarify under what circumstances it may intervene in response to poor performance.

Implementing these changes may weaken the existing limited accountability and transparency arrangements, and we are not confident that government has thought through these risks. The Department believes that local bodies will naturally work together to fund and deliver large transport projects. But there is a risk local transport bodies, in a period of substantial funding pressure, will not take sufficiently strategic and joined-up decisions, putting national or regional investment objectives at risk.