My Comprehensive Spending Review… Review
Lots to like
Let’s start with what’s good. Because there’s a fair bit.
City Region Funding
The headline is the £15.6 billion for city regions to invest in local transport. That includes zero emission buses, trams and local rail, and will more than double city-region transport spending by 2029–30 compared to 2024–25, in real terms.
It’s proper, long-term money through the City Region Sustainable Transport Settlements, and it’s being given to people who are accountable for results. Exactly how it should be done.
Rachel Reeves deserves more credit than she’s been given for her changes to how infrastructure spending is treated in the fiscal rules. One of the more quietly damaging features of the old Treasury rules was that capital and revenue spending were not differentiated. When the Government needed to make savings, capital investment - often the most valuable - was the easiest thing to cut.
That’s now fixed. It sounds like a technical change but it isn’t. It finally removes the incentive to delay infrastructure just to balance the books.
I’ve described previously how productivity is held back by the lack of transport investment in the UK cities outside London. This finally creates an opportunity to start to change that.
What we mustn’t do is think this will finish the job. It increases the number of UK towns and cities with light rail from 8 to 9, compared with 28 in France and 48 in Germany.
Hopefully Leeds will finally get a tram, at third time of asking
It’s fantastic that Leeds will cease to be the largest city in Europe without mass transit, but that doesn’t mean we’ve finished.
Indeed, depending on how you define size, Bristol is a good candidate to take on that unwanted honour (others include Tirana, Chișinău and Vilnius). If you don’t count Merseyrail as mass transit, so is Liverpool. It’s certainly the case that Bristol (or Liverpool) will be the largest city in Western Europe without mass transit. We’re not done.
Rail
My wife is from Halewood, so I’ve spent a lot of time in that Merseyside suburb. It had its railway station restored in the 90s but there’s never been sufficient capacity for more than one train an hour. For an urban railway, this is so low as to be almost pointless. The trains are barely used.
The new Liverpool to Manchester railway will, hopefully, release capacity to give Halewood (and other stops on that line) a proper rail service. Though I do have some questions about the origins of the Liverpool–Manchester, which I will come on to later.
Potholes
There’s no mention of potholes! Thank the Lord…
Budget cuts
Even the 5% cut to the Department for Transport’s budget - the biggest of any department -might turn out to be a good thing. Costs are out of control, and sometimes a firm target is the only thing that forces the issue.
However, I have a Big But (no giggling at the back).
My Big But is to ask where these savings will come from. There’s a huge risk that GBR simply cuts services to balance the books. This is where the lack of accountability for GBR becomes such an issue. Think back to everything you’ve read about GBR and ask yourself what, as currently proposed, will stop GBR simply salami-slicing services down by 5%?
We need GBR to be incentivised to do the hard work to take costs out: challenging standards, broadening the supply base, reducing overstaffing – not simply reducing services for customers.
This is why I’ve emphasised the importance of proper accountability model for GBR. It may not be a very interesting topic (for you, that is. I’m fascinated) but I do encourage you to read my blog post on GBR accountability.
If you want an example of what’s possible when you innovate to control costs, take a look at Coventry Very Light Rail, which I’ve described here. I’ve visited the project team several times and can vouch for just how rigorous they’ve been in designing an entire system to be cheaper to build and cheaper to run. We need more similar lean innovation projects.
Questions
Liverpool - Manchester Railway
It’s great fun to be starting a new Liverpool to Manchester line in the 200th anniversary year of the first - but what exactly is it?
Does it include a new underground station at Manchester Piccadilly? If it does, it becomes even more baffling that we aren’t filling in the relatively short Birmingham–Manchester gap (over land that’s already been compulsorily purchased!) and delivering meaningful benefits of HS2.
If it doesn’t, it’s unclear how the scheme functions. Piccadilly is already at capacity.
And where did it come from? It wasn’t in the 2020 National Infrastructure Strategy. Of course, there’s been a change of government since then. But that’s the whole point of a national strategy - to prevent infrastructure priorities from swinging with each administration. Maybe this is the right project to unlock the Transpennine upgrade. Or maybe it’s a gesture to two Labour mayors. The lack of strategic rationale makes it hard to tell.
I'm not saying that it’s definitely the wrong project, but - as a contrast - Switzerland (yes!) has a multi-decade programme of rail investment designed to achieve a target end-state timetable. When I visisted a few years ago, I met the team working on the 2050 timetable. We seem to oscillate between mega projects that emerge from nowhere as a result of political pressure.
I think I’d prefer we tried the Swiss system.
Issues
Let’s start with the big one. This is a “Spending Review”. And that’s the problem. It does what it says on the tin: allocates money. But it does so in the absence of a national strategy. We still don’t have one. It’s great that a National Transport Strategy is to be published in the autumn but it’s a bit backwards that we’re allocating the spending first, and defining the strategy afterwards.
Buses
The bus fare cap is a good example of what happens when tactics replace strategy. It began as a three-month measure in January 2023. It’s now scheduled to run until March 2027 – so will have lasted for 17 times longer than planned. But with it never being announced for longer than 20 months at a time, it’s never been properly marketed and local fare structures have never been redesigned to make it logical.
Simple things like passes being disproportionately high have incentivised daily on-bus transactions, which has slowed down buses and prevented customers from signing up for loyalty products with shared data.
Moreover, the fare cap is a blunt tool.
I’m not keen on holding fares down artificially. I want public transport to be good enough that people want to pay for it. If the problem is inequality, fix it through tax and benefits: don’t distort the pricing of an entire sector.
I spend a lot of time in Folkestone. From Folkestone, if you want to go by public transport to Canterbury (roughly 15 miles north) then the bus will cost £3. But if you want to go by public transport to Deal (roughly 15 miles east), then the train will cost £12. I’m not sure how much sense this makes.
If the government wants to support buses, it should fund local authorities and let them decide whether to spend it on fares, frequencies or driver conditions. Clearly, it exists now and I’m not suggesting a sudden doubling of some peoples’ fares, so it should be ramped down. However, I also recognise the realpolitik – if it were taken away, Treasury would use it as a reason to claw back the funding. So, overall, it’s good it’s there.
There’s also the £750 million a year for buses. The document mentions that this includes franchising pilots in places like York and Cheshire. But is that the whole story? Or is franchising just a headline example? Without clarity, it’s hard to know what this money is really for. The bus industry has become dependent on BSIP funding, which was promised to transform bus services. The transformation is far from complete.
Roads
Then there’s the £24 billion for roads. A lot of local authorities have adopted clear modal hierarchies. National government hasn’t. I hope the forthcoming Integrated National Transport Strategy fills that gap.
But at this point, it feels hard to be optimistic when projects like the Lower Thames Crossing get approved, even though they’re like a fairy tale of induced demand (“Once upon a time, there was a tunnel. It filled with cars, so they built another tunnel. It filled with cars, so they built a bridge. It filled with cars, so they built another tunnel”).
The Lower Thames Crossing is a multi-billion sticking plaster for the fact that the only transport links between Essex and Kent are by road. Some people will always prefer to drive but, currently, even a non-driver from Thurrock will probably use an Uber to reach Dartford for lack of alternatives. No wonder the tunnels fill with cars.
Green Book Reform
We’ve also been promised Green Book reform. Again. That’s welcome - but only if it meaningfully happens.
Here’s what was said in 2020:
HM Treasury has therefore updated the Green Book to end the dominance of the BCR is decision making, starting with this Spending Review. Appraisals must give a comprehensive picture of cost and benefits, including non-monetisable, non-economic impacts. In particular, options will be assessed first and foremost on whether they deliver relevant policy objectives (for instance, the regeneration of a particular place). Any option which fails to do so cannot be considered value for money and will not progress to shortlisting stage. The government is also changing the guidance so it will no longer be acceptable for proposals to be ‘place blind’. Business cases should be developed to align with relevant local strategies and major interventions in the area. And for the first time, business cases for all proposals will have to set out how they will impact different places on a comply or explain basis.
Yet here we are, promising Green Book reform.
If Green Book reform happens, it mustn’t just be focused on inter-regional disparity. Yes, there’s a huge regional imbalance in spending, and, yes, the Green Book has played a key role in making that happen. But that’s a (massively important) symptom of the wider issue of a flawed assumption set. The Green Book assumes that speed improvement for lots of people is the best use of expenditure. A road scheme in the London commuter belt that saves two minutes will score better than a pedestrianisation scheme that transforms a town centre. That’s a policy failure hiding inside a technical framework. If all we do is move the road scheme to the Manchester commuter belt, we’ll just be entrenching car dependence in the Manchester suburbs.
Rail
The government says bringing services into public ownership will allow it to “remove duplication” and “create economies of scale.” In theory, maybe. But in practice? Most mergers don’t deliver the savings they promise. McKinsey found that 70% of corporate mergers fail to achieve their expected synergies. The public sector isn’t immune to those dynamics. In fact, it’s often worse: more politics, slower decisions, more layers.
TfL has just finished a gradual 15-year reorganisation to move from being multiple organisations bashed together (e.g. London Transport from central Government, DLR from Docklands Development Corporation, Public Carriage Office from Met Police, etc) to one single authority. It was explicitly designed to achieve synergies and economies of scale. The synergies have been achieved (there’s now one finance team, one marketing team, one procurement team, etc). But TfL employs more people than in any year since 2009 when the Tube Public-Private Partnership (PPP) collapsed.
Reorganisations often promise savings. But they come at the cost of pace and frequently don’t achieve the goals they’ve been set. I’ve written here about why I would strongly recommend GBR to skip the restructure stage, and focus on delivery. If we were able to run the counterfactual experiment, I would happily bet £100 that it would end up a cheaper organisation than one focused on “economies of scale”.
Issues for London
London is treated in this review - once again - as a cost centre to be contained, not as an economic engine to be backed. We only have one megacity in the UK. It is our only economic region to exceed average European productivity. We desperately need to level up the rest of the UK but this Government appears to be continuing the previous Government’s policy of finding it easier to level down London.
The Bakerloo line trains are the oldest trains in the UK and, I believe, the oldest working metro trains on Earth. There is no plan to replace them. The cheapest and most obvious solution is to piggyback on the Piccadilly line order, which is already in production. That keeps the production line open, avoids a procurement restart and gets new trains on the network faster and cheaper. If we’re not planning to permanently close an entire Tube line - and nobody is seriously suggesting that (are they??!?) then the trains will need to be replaced. Why make that more expensive than it needs to be?
Then there’s the DLR Thamesmead extension. The DLR is basically profitable. It only needs capital investment to deliver an entirely new housing region. But the government is still “exploring options.”
All this is in the context that TfL is chronically underinvesting in asset renewals. In its 2023 Business Plan, TfL said it needs around £1 billion a year just to keep the system in a steady state. For the past five years, it’s spent £400–600 million, building a huge backlog. The current business plan assumed £500 million a year in central government support, which would get TfL up to around £850 million. That’s what it’s getting. So we’re still underfunding the basics.
Maybe it’s a coincidence but I feel like I’m starting to feel it in my daily life. The Victoria line was once the flagship Tube line. I travel on it multiple times every week. It’s no longer reliable. I wondered if it was just my bad luck, so I checked the data. In the last two periods, just 83% and 86% (respectively) of scheduled kilometres were actually delivered. I’m not close enough to know why, but I suspect it’s linked to a chronic underfunding of TfL’s core assets.
And this is where the Mayor of London has to take some responsibility. The Mayor made a political decision to freeze TfL’s fares when the rest of the country saw increases. But he never had a clear answer to where the money was going to come from instead, other than central Government.
It’s hard not to feel a bit of sympathy for the Treasury. London is unusual in that the Mayor has significant revenue-raising powers himself, and he’s showing no sign of using them. Back in 2022, the Mayor asked TfL to investigate a pay-per-mile road user charging scheme. (By the way: that’s a terrible name for it. Much better to call it Streets Improvement Payment, or something. Why name it after the fact it costs money to the user?)
But, when faced with the prospect of losing an election to Susan Hall (a remote prospect!), he suddenly ruled it out. There are remarkable parallels between the way that Sir Sadiq ruled out his main avenue to raising revenue in a pre-election panic, and the way Sir Keir did the same when he ruled out income tax or VAT rises just before an election Labour was already set to win by a landslide.
However, the Mayor still has the ability to expand the Congestion Charging zone, introduce a different type of charge (by weight?) or increase tube fares.
If he doesn’t contribute to London’s funding needs, TfL is likely to continue to be stuck in the middle between regional and national Government.
A Very important issue still to come
The government says it will invest in infrastructure and land remediation to support new towns. That could be good news - or a repeat of historic mistakes.
What matters is design.
We know how this can go wrong: we’ve been doing it for decades. Car-dependent suburbs and inaccessible rail stations, if they exist at all. Take a listen to my podcast with David Milner of Create Streets.
It really doesn’t have to be like that. In Clamart, a commuter town south-west of Paris, new housing has been delivered around public transport. It’s high density, beautiful, desirable and sustainable.
Clamart, in the Paris suburbs, is an illustration of what a public transport-based suburb can look like
If we want these new towns to work, we need to do more than fund the housing. We need to make public transport central to the plan. Let’s all keep watching.
A Big overall Issue
This all reminds me of 2000.
In 2000, London got a Mayor with real powers and a transport system in need of urgent change. By 2004, bus ridership was rising, Oyster was live, congestion charging was in place and TfL had turned into a functioning delivery organisation. It wasn’t perfect - but it was fast. And it showed what’s possible when power, purpose and permission align.
This is a similar moment.
Combined Authorities now have long-term settlements. Great British Railways is being created to bring order to the rail network. In both cases, expectations have been raised. And in both cases, delivery will be the test.
If these new organisations can’t show results – quickly – the space for future funding will shrink, alongside public patience.
I spoke about this in my keynote at Interchange this year. If you have a few minutes, take a look:
As you can see, my point was that the 2000 TfL was success was driven by fast, focused decision-making. That’s how so much was done so quickly. The challenge this time will be to make that happen again.
That, by the way, is why I do what I do.
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