Speech

Local Enterprise Partnerships Network: 19 September 2011

Speech detailing the importance of transport, transport infrastructure, budget saving measures and Local Enterprise Partnerships.

This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

The Rt Hon Philip Hammond MP

Government agenda

Thank you David.

And thank you ladies and gentlemen. It’s a great pleasure to join you today (19 September 2011).

When the coalition was formed last May, we knew we faced perhaps the toughest and most challenging agenda of any government in modern British history.

But from day one, we were absolutely clear about our priorities:

Tackling, first and foremost, the record budget deficit we inherited from our predecessors

And rebuilding and rebalancing our economy, after a decade of lopsided growth, followed by one of the longest and deepest recessions in our history.

We are now working to put Britain back on the path towards sustainable growth and prosperity, while delivering on our commitment to carbon reduction.

We have set out a clear and credible plan to eradicate the structural current deficit during this Parliament and get debt falling as a percentage of GDP. We are clear that this is the right course for Britain, and we will stick to it.

Our economy, while delivering deficit reduction measures, has, in the first six months of this year, outperformed the US economy - despite Obama’s massive fiscal stimulus package.

Our market interest rates have fallen, while other countries’ have soared; our credit rating is secure while others’ have faltered; and Britain, despite the choppy recovery that was always predicted, is being hailed as a safe haven in a global economic storm.

But of course there is more still to do.

Despite the tough global economic climate, we must continue to build on the foundations that sound public finances provide to secure the growth, the jobs, and the private sector investment that will drive our prosperity in the coming years.

Transport key to growth

Infrastructure investment - and transport infrastructure in particular - is a key part of our plans to drive economic recovery. It provides not just welcome demand stimulus in the short term, but a vital improvement in productivity over the long-term.

Modern transport networks are the arteries of commerce, moving people to the workplace and goods to the marketplace. They connect communities, support businesses and enhance social mobility.

And as we modernise our infrastructure, and encourage more sustainable forms of travel, transport can help us cut carbon emissions, improve air quality, and offer a cleaner, greener gateway to a better quality of life.

That is why transport emerged as a major winner in last year’s spending review.

Despite a tough public spending climate, £30 billion of capital funding was announced over the spending review period - more than was invested in the previous 4 years.

Our commitment to transport means we can invest in ambitious national infrastructure projects like high speed rail, that can help transform our economic geography and spread prosperity right across the country.

But we also recognise that, if we are to unleash the growth potential of our regions and to get maximum value from our strategic infrastructure investments, we cannot afford to neglect the local transport networks that connect to them.

And we should never forget that the vast majority of journeys Britons take are under five miles.

Transport and localism

Or that many of the most important transport issues are local in nature. Sometimes very local.

Roadworks. Local road congestion. Reliability of bus services.

Local issues that are understood by local people.

And local transport problems that are best solved by local people.

The best-value transport investments are often in smaller-scale projects - ones that help tackle congestion, and improve connectivity, road safety, and accessibility.

Yet for far too long in this country, important decisions about local transport have been taken, and monitored, centrally - by ministers and civil servants sitting in Whitehall, ticking boxes and second guessing.

For years, the top down, ‘Whitehall knows best’ approach has perpetuated a system that is not only bureaucratic and inefficient, but which also hampers local enterprise and competition.

So it is time for reform.

And for the coalition, that preferred reform is localism.

To give local communities and businesses real control over their own destiny.

To unlock the growth potential of our cities.

To support economic regeneration from the ground up.

And to move towards a more transparent, accountable and responsive way of designing and providing public services.

Progress so far

You have already heard today from Greg Clark about the significant progress we’ve made in re-designing the old top-down structure of delivery.

Whitehall has been slimmed down. Quangos have gone. Government Offices for the Regions have closed their doors.

In their place we have announced a massive transfer of power to councils, communities, and individuals.

The Localism Bill should receive Royal Assent at the end of this year, and many more reforms will follow.

And I, for my part, am determined to place the local role in the delivery of transport projects centre stage.

In rail, for example, we are exploring how we can devolve more responsibility and budgets for commissioning local and regional services away from the centre to more local bodies - where there is greater accountability to local communities and passengers, and a better understanding about the local consequences of the decisions they take.

And in local transport, we have radically overhauled the way grant funding is delivered - to get the best results for communities, and the best value for taxpayers.

We have already slashed the number of separate local transport grant streams from 26 to just four, giving local authorities much greater flexibility and freedom to decide their own priorities.

Next steps to localism

But I want to go further. I want to explore how we can devolve the capital funding for local major transport schemes - those with a value greater than…

These transport projects are not just key to economic growth - they are also essential to our decentralisation strategy.

Previously they were managed through Labour’s Regional Funding Allocation process, which had a veneer of decentralisation, but little of real substance.

Initial decisions were taken by unelected and unaccountable regional bodies.

And their role was purely advisory. Central government remained the ultimate decision-maker.

Now the regional tier of government is being dismantled, we have the opportunity to develop a fresh, and genuinely decentralised, approach that is fit for the future.

One that genuinely shifts power away from the centre, to allow the businesses and communities who depend on transport infrastructure, to shape it, making decisions accountable at the sub-national level, and responsive to local economic conditions.

Any change we make will be effective for the next round of local authority major schemes funding, covering the period 2015-2018.

But local major transport schemes can take around four years to move from business case to the start of construction. That means, if we are to maximise the potential of decentralisation to kick-start sub-national and local economic growth, we must act now to put these new freedoms in place.

And because some of the local authority major schemes are indeed ‘major’, sometimes £100 million plus, any formula-distributed grant needs to flow in a way that ensures that even the largest projects could get funded over a number of years. That means that, in most cases, distribution by formula to a single LEP or local authority would not deliver the desired result. A larger effective unit, reflecting real economic and transport geographies, but ‘chunky’ enough to deliver worthwhile sums of capital through the formula, has to be devised.

So today (19 September 2011) I am announcing my intention to launch a consultation on what that structure might look like - on how we can fully devolve decisions and funding for local capital transport improvements to a number of, what I will call for shorthand, ‘Local Transport Consortia’, each made up of a number of LEPs and their constituent local authorities.

Such an approach, if correctly designed, will ensure more local decision making without losing the essential focus on the strategic needs of a sub-national economy.

Allowing focus on decisions that place higher weight on local priorities and needs, while maintaining the focus on generating maximum economic growth.

And saving a huge amount of time and effort that was previously wasted at the interface between local project promoters and Whitehall.

Local enterprise partnerships, designed around functional economic geographies, are an obvious starting point. But the Consortia, like the LEPs themselves, must be ‘bottom up’ creations.

And the scale, geography and structure must be right for local circumstances: we do not have to adopt a standardised approach.

LEPs are uniquely placed to contribute to strategic decisions which best align transport investment with growth potential, while local authorities can bring significant transport expertise - and local accountability - to the table.

A successful local transport consortium must be able to integrate major scheme transport investment with wider plans for growth, including planning, housing, skills and training, enterprise, health and the environment.

In some areas, this will mean building on existing arrangements, while others will wish to explore opportunities with new partners.

The consultation will invite thoughts on the structure, optimum size, configuration, governance and accountability arrangements that would be most appropriate to ensure the proper use of public money and the delivery of value for money, while achieving genuine local ownership of the prioritisation and delivery of sub-national transport investment projects.

Challenges

Of course, there will be challenges. The purpose of the consultation will be to explore the different options and establish a consensus on the best way to take this agenda forward.

The decisions that consortia make must be seen to be transparent and scrupulously fair if they are to win the confidence of local people.

And there are other, wider challenges that cut across the government’s localism agenda.

None more pivotal than accountability.

As ministers, we rightly expect to be held accountable for the delivery of a national agenda by the electorate.

With power and responsibility should come accountability.

As we progress with decentralisation, we recognise that there will be some tension between seeking to encourage genuinely devolved decision-making and an ingrained instinct on the part of the electorate to hold ministers accountable for all but the most local spending decisions.

But we will get nowhere unless we are prepared to meet this challenge head-on.

So local transport consortia will need to be able to put in place measures that demonstrate accountability; proper financial management and propriety; an ability to deal with cost overruns and delays to schemes; and a commitment to delivering value for money.

Rather than civil servants spending hours monitoring and appraising individual schemes, the role of central government should be to ensure that local transport consortia are ready, and able, to maximise value for money and to make decisions which best support the economy and promote sustainable development. And that arrangements are in place for them to be held accountable by the communities and businesses they serve.

Some consortia may progress more quickly than others. Some may be able to ‘go it alone’ with the management and delivery of budgets and projects straight away.

Others may prefer to walk first, with a shared approach to project appraisal and prioritisation, to make sure schemes are based on robust evidence, and meet sub national and local growth priorities.

While I am clear that my department’s long-term role does not lie in individual scheme appraisal or management of delivery, we will be ready to adopt a flexible approach to the transition, if that is what local transport consortia wish.

So while we will play a light-touch role with local partners - and, let me assure you, that role will be as light as I can possibly make it - we will also be there to help you find effective working solutions to whatever challenge you face.

We will work closely with local transport consortia so each is able to adapt to the changes - ensuring the end result is a decentralised decision-making system that genuinely unleashes local growth.

Conclusion

So as soon as Parliament reconvenes after the party conferences, I will launch a 3-month consultation to seek your views on these proposals and the best way to proceed with them.

I hope as many of you as possible will take part.

This will be a learning process - no doubt about it.

That is inevitable when we’re transforming the way local infrastructure is planned, funded and built.

The experience of previous governments has taught us that real, meaningful localism is easier to talk about than deliver.

But when this government talks about localism, we mean it.

For us, localism isn’t an essentially centralised decision making structure dressed up in a localist wrapper.

Real localism, genuine localism, means a culture change across central and local government, to drive a radical shift in power away from Whitehall, and into the hands of local people, local businesses and local communities.

It requires local authorities, LEPs, businesses and communities to work together in partnership - and be prepared to accept compromise and necessary trade-offs to unlock barriers to growth.

In relation to capital projects, it will require a high degree of political maturity to pursue sub-national priorities: this process will not succeed if capital funds are divided into penny packets for each constituent part.

And it requires a local commitment to transparency and accountability, to engender trust and confidence.

Together, we will meet these challenges.

And I’m convinced that we will emerge with a robust model of decentralisation that will transform local transport delivery for good.

That way, we can deliver the world-class networks that will set Britain back on the path to sustainable growth and lasting prosperity.

Thank you, and I look forward to working with you to take this agenda forward.

Published 19 September 2011