Speech

Transport futures seminar

Explains government's transport plans and the role the north east of England could play in economic growth.

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

The Rt Hon Philip Hammond MP

Thank you, Brian, for that introduction. It’s a pleasure to be with you all in north Tyneside this afternoon.

If I may, I would like to address you at 2 levels today (18 November 2010).

Of course you care about the north east and its transport, but you are also business people with an interest in the reputation and performance of UK Plc.

I want to explain to you why I think the north east has a key part to play in the economic recovery, and what I am doing to contribute to it.

Why I think the north east should be talking itself up - not doing itself down.

What we as a government will be doing to build the balanced and low-carbon economy that’s essential for our future prosperity, and what I as transport secretary am doing to ensure that transport contributes to that agenda.

The long and proud industrial heritage of this region is well known.

During the 18th and 19th centuries the north east was the cradle of the industrial revolution.

And in transport heritage, it bows to no one as the home of the first public steam railway in the world, between Darlington and Stockton-on-Tees.

Then in the first half of the last century, this region went on to establish a world class reputation in everything from building ships, to mining coal, to brewing beer.

Of course, the last quarter of the 20th century presented major challenges to the heavy industrial base as the world economy began to globalise. And I am extremely conscious that the trauma of that change is still felt today.

But if we fast forward to the 21st century, and science and research, information technology, knowledge-based companies and high-tech manufacturers have become the hallmarks of the new north east economy.

We see that today, the region is one of the UK’s top performers in attracting foreign direct investment, with an automotive sector worth close to £1 billion in local gross value added, a third of this country’s total pharmaceutical production and nearly two thirds of the UK’s petrochemical industry.

And, again as Martin highlighted, from wind and solar power generation, to biotechnology and carbon capture, the north east is fast emerging as a national centre and a global leader in the key areas of green growth.

These are all achievements of which you can rightly be proud and on which you can build for the future.

Of course, I recognise that getting our economy back on a sustainable track is going to involve some very hard slog - here in the north east, and across the UK as a whole.

But at least we are now talking about getting back on course; a year or 2 ago, we were talking about how close we were to the abyss.

And now that our economy is on the road to recovery, Britain must face up to an unprecedented fiscal crisis.

We inherited the biggest budget deficit in the G20 and had just limped out of the longest and deepest recession in our peacetime history.

Every single day we were adding £400 million to our national debt.

Had we kept to the spending plans we inherited, we would be paying out nearly £70 billion a year in debt interest alone by the end of the parliament.

That’s more than we spend on schooling our children and defending our country put together.

Letting those debts carry on rising would have led to higher interest rates, undermined confidence in Britain and put the recovery at risk.

If we were now where Ireland is, paying interest rates of about 6% for UK gilts, we would be looking not at £70 billion a year of debt interest, but more like £180 billion - or 12% of our GDP.

So we had to take tough decisions to get the deficit under control and keep interest rates low.

By cancelling £6 billion worth of planned public spending this year.

By setting out, in our emergency budget in June (2010), an ambitious 4 year plan to eliminate entirely our structural deficit and get debt falling as a percentage of GDP.

And a month ago, we delivered the conclusions of the spending review, with firm and fixed spending totals for each government department for the rest of this parliament, and far-reaching reforms to welfare and our public services.

Already we’re seeing the rewards.

AAA credit status confirmed, Britain almost a poster-child of the bond markets and accolades from economic forecasters and business organisations alike.

The independent Office for Budget Responsibility projects falling unemployment and positive economic growth in each of the next 4 years.

And more good news yesterday with national employment up nearly 170,000 net over the last quarter, despite public sector cuts.

In the north east, an additional 47,000 people are in work compared to a year ago.

Fiscal consolidation and the confidence that discipline in the public finances brings has been a necessary condition for Britain’s recovery. But it is only part of the story.

Our really big challenge is 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 years ahead.

Building a strong, competitive economy for the longer term, while delivering on our climate change targets.

The chancellor made clear in his budget speech that infrastructure investment will be a vital part of our approach.

We are determined to avoid, at all costs, repeating the mistake of the recent past of spending too much but investing too little.

And we will not repeat the mistakes of successive British governments by trying to fix the public finances by slashing capital spend. We have made the tough choice to tackle waste, inefficiency and to tackle head on welfare to protect infrastructure investment.

In science and technology; in power generation; in skills - but above all, in transport.

Demonstrating the coalition’s commitment to prioritising the projects that will put Britain - and this region - back in the game.

Over the next 4 years, we will invest over £30 billion in road, rail and local transport projects right across Britain - more than was invested in the last 4 years.

Our plans for a high speed rail network lie at the heart of the coalition’s transport policy and our strategy to re-balance and rebuild Britain’s economy.

This ambitious and exciting project would allow the economies of the Midlands and the north to benefit directly from the global pull of London and the south east, tackling the north-south divide in economic growth rates more effectively than half a century of regional policy has done, as we expand labour markets and merge the travel to work areas of our major conurbations.

Providing better connections not just to London, but between the Midlands and the north as well.

The journey time between Newcastle and Birmingham will be cut from 3 hours to around 2 hours 20 minutes.

From London to Leeds, reduced to 80 minutes.

In short, high speed rail would deliver transformational change to the way Britain works and competes in the 21st century. In many respects as profound a change as the coming of the original railways delivered in the 19th century and the advent of motorways did in the 20th.

So since we came to office in May, we have pressed ahead with our plans.

At the beginning of October, I announced that our preferred option for high speed rail north of Birmingham was for 2 separate corridors - the ‘Y’ option.

One direct to Manchester, and then connecting onto the West Coast main line, and the other to Leeds via the East Midlands and South Yorkshire- with stations in both areas - before connecting onto the East Coast mainline north of Leeds to deliver improved journey times to the north east and Edinburgh.

And in the next few weeks I will launch the detailed proposals that we will consult on in the new year - which will include a preferred route between London and the West Midlands, and a corridor preference to Leeds and Manchester.

The new capacity high speed rail delivers will be vital in addressing the rail capacity challenges that are facing our most congested inter-urban routes.

Freeing up capacity to enable the continuing shift of freight from roads and onto rail, reducing carbon emissions and cutting congestion

But there’s a problem. In Britain, we have one of the most expensive railways in Europe. More expensive to build, less efficient to maintain, and more expensive to ride on compared with other European systems.

That is not acceptable.

So we will review and reform the way the rail industry functions. The way Network Rail operates. And the way franchises are let and run.

Building on the work of Sir Roy McNulty’s value-for-money study, to drive efficiency in rail investment and operations, so that the railway can play its crucial part in delivering sustainable transport for the future and offer a fair deal to passengers and taxpayers alike.

I want to say something about the Intercity Express Programme (IEP), which would provide new high-speed trains for the East Coast and Great Western Main Lines.

I recognise how important this project is to this region and, as you know, we have been carrying out further value for money analysis of the programme following the review published by Sir Andrew Foster in the summer.

We are now considering a revised proposition from Agility Trains, as well as the alternatives to the IEP identified by Sir Andrew Foster.

We will take into account the huge benefits Hitachi’s proposed factory in Newton Aycliffe would bring to this area, placing Britain at the heart of the European rail industry.

But, in the wake of Sir Andrew’s findings, we must also be mindful of the importance of ensuring whatever decision we make delivers the best possible value for taxpayers’ money - and that the commercial, legal and technical case for the decision we take at the end of the process is a robust one.

I know you are eager for a decision, and I can assure you that I will make an announcement on the future of the programme to the House of Commons at the earliest possible opportunity.

But, exciting as all the new rail investment is, a balanced and sustainable transport strategy cannot just be about rail.

We should also remember that over 80% of journeys are made by car, with our roads representing our greatest investment in national transport infrastructure.

Roads and cars have had a bit of a bad press since the focus has been on climate change, but they remain the only practicable mode of transport in many areas.

So this government is committed to decarbonising motoring so that, while we work to meet our climate change obligations, we can ensure the car remains an integral part of Britain’s future transport plans

That is why we are supporting the ultra-low emissions technologies that will see the carbon output of cars plummet over the next 2 decades

Our Plug-In Car Grant will give a generous consumer incentive of up to £5,000 towards the purchase of a next-generation ultra low emission car.

Our commitment to this generous subsidy, even in the face of severe public spending restraint, to kick-start the market for low-carbon vehicles has ensured that Britain will be a principle launch market for global manufacturers. Bolstering our status as a leading player in green vehicle technology.

Order books for the first new generation, all-electric vehicle - the Nissan Leaf- opened in Britain in the summer and the first vehicles will be delivered early next year.

Imported from Japan in the first instance, yes.

But with government support, by 2013 they will be rolling off the production lines in Nissan’s plant in Sunderland.

Building on the pioneering work already being done in the north east on electric vehicle development - such as by the likes of Smith Electric Vehicles in Washington.

Meanwhile, our Plugged-in Places programme - rolling out public charging infrastructure for these next-generation cars - will allow us to gather important information about the way people use electric cars.

As 1 of 3 pilot areas, the north east is playing a key role in this exciting project.

The pilot will mean that 1,300 charging points - located on streets and in car parks, and near retail and leisure facilities - will be rolled out across the region. I saw one of them in action in Newcastle city centre this morning.

Cementing the north east’s position in the vanguard of the green motoring revolution.

Investments in north east region

But besides those major national infrastructure investments, we’re also giving the green light to a number of key local and regional transport schemes that will directly benefit local commuters and businesses.

The improvements to the East Coast Main Line that will result in faster and more reliable rail services.

The £350 million upgrade of the Tyne and Wear Metro.

The £37.5 million we’re investing in accelerating delivery of the Tees Valley Bus Network.

A £2.25 million grant from our Green Bus Fund to Stagecoach North East for 26 diesel-electric hybrid buses to run on routes in Newcastle.

Over £2 million in grant funding to help establish a public transport smartcard.

And today, I can announce a £2.8 million investment to increase the traffic capacity of the A19 Silverlink interchange in the short term.

This will be completed next summer, ready for the opening of the second Tyne Tunnel and work will continue in parallel on the £108 million of A19 upgrades.

Localism / funding devolution

All these projects will give the local economy, and the local community, a vital shot in the arm. But if we are truly to unleash the growth potential of our regions, the way we deliver investment funding also needs reform.

And for this coalition government, the preferred reform is localism.

We want to devolve as much responsibility and funding as possible to local level - with far fewer civil servants sitting in Whitehall monitoring progress and setting targets.

In transport, that means scrapping the multiple streams of transport resource funding for local government and replacing them with just 2 - a formula grant which will go to all authorities to allow them to set their own priorities.

And a local sustainable transport fund, worth some £560 million of capital and resource, which will consolidate the remaining money in a single pot for which local authorities can bid to support their plans for their areas.

More widely, our local growth white paper, published 3 weeks ago, takes forward proposals for our £1.5 billion Regional Growth Fund, which will be used to support projects which have significant growth potential and create sustainable private sector employment. In areas which are heavily dependent on the public sector - including transport projects.

And, we have approved the formation of 24 local enterprise partnerships across the United Kingdom; bottom-up partnerships between local authorities and businesses that will give local areas the opportunity to be the masters of their own economic destiny.

I am delighted that the Tees Valley Partnership has been given the green light in the first wave of local enterprise partnerships to be announced and I hope that further partnerships in the region can be taken forward in the coming months.

From a transport perspective, I want to see how local enterprise partnerships can play a role in my department’s local capital funding allocation.

I will seek to work with them and local authorities to establish a way of delegating decision-making to them to allow them to develop truly innovative transport solutions.

Helping to deliver the growth and the jobs that will get this area open for business again.

The prize - business investment and entrepreneurship

The north east should view these challenges with confidence. It has all the right ingredients for a strong and prosperous future:

Its geography, with seaports perfectly positioned to exploit Britain’s prevailing trade patterns with continental Europe

A transport infrastructure that we will continue to develop and improve, reducing journey times and cutting congestion.

And most of all, its people: a skilled and educated workforce and extensive collaboration networks where cutting edge research institutions and internationally respected universities work hand in glove with industry.

Of course, attracting the big iconic inward investors - the Nissans of this world - is crucially important.

But much of the growth, the organic growth, will come from the north east’s own entrepreneurs; from the sole traders, from home grown small and medium sized businesses.

Less glamorous, perhaps, than those major overseas investments, but just as crucial to the future of UK Plc.

And this growth is real. It’s happening already.

Which city has the fastest growing rate of increase of new business start ups in the UK, according to a recent Royal Mail study?

Not London. Not Birmingham. Not Manchester. But Sunderland.

Concluding remarks

So the north east is a region with a great story to tell - one of entrepreneurship, resilience, and dynamism.

Of course, there are tough times ahead, for all of us, as we seek to readjust to this new economic reality.

But this is an area that’s already demonstrated - in spades - that it can reinvent itself, in the face of adversity, to respond to change.

Continual re-invention as the world changes around us is likely to be a key hallmark of success in the global economy of the future.

And I have no doubt that the north east can, and will, rise to that challenge in the years ahead and play its part in returning Britain to the path of sustainable economic growth and lasting prosperity.

Published 18 November 2010