Transport for the North 'faces challenge to sustainability' amid funding fears

The body set up to transform transport links across the North is asking for hundreds of millions of pounds from Chancellor Rishi Sunak to deliver vital projects amid fears that its finances have become unsustainable.

Tuesday, 1st September 2020, 6:53 am

Transport for the North (TfN) hopes to get as much as £900m in the Autumn's spending review for the early stages of the landmark Northern Powerhouse Rail scheme and around £200m for its smart transport vision.

But a report reveals that a lack of core funding from the Government and an inability to recover VAT like other similar organisations means the strategic body faces what it describes as "a sustainability challenge".

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It was described as a "cause for concern" by one northern councillor, who warned that TfN faced potentially being abolished amid what he described as a "bonfire of the quangos".

The future of TfN remains unclear after Transport Secretary Grant Shapps revealed plans to set up a new body, the Northern Transport Acceleration Council, to deliver major projects more quickly.

When TfN was given statutory status under Theresa May's government in 2017, Ministers said the strategic body would "transform transport across the North of England". But it remains reliant on central government for funding and is unable to levy taxes to pay for projects.

A report discussed last week by senior leaders sets out what TfN will ask for in the Comprehensive Spending Review to be delivered by Rishi Sunak amid reports that a number of government departments will be subject to spending cuts due to the state of the public finances.

Transport Secretary Grant Shapps, who has described Transport for the North as a "talking shop". Pic: PA

And it says the strategic body, whose proposal will form part of the Department for Transport's submission to the Treasury, "faces a sustainability challenge".

This is due to its core funding being set at £10m a year in 2015/16 and not increasing since then, despite costs rising with inflation. The report adds: "This is further compounded by the uncertainty that Transport for the North faces across its major programmes and the impact that curtailing one or more of these might have on the financial stability of the organisation overall."

Another problem is that TfN is unable to recover its VAT, despite this being the intention when the organisation was established, meaning 20 per cent of its non-staffing costs are retained by the Treasury.

According to the report, it could not be exempted from VAT because it does not raise local taxes, something that "has been further discussed with DfT without significant progress being achieved".

In its report, TfN sets out the other sources of funding needed to deliver its work. As well as core funding of between £32m and £34m it is asking for between £700m and £900m to aid its work on Northern Powerhouse Rail, the high speed scheme connecting the North's major cities.

This would pay for design and business case development, appraisals and assessments as well as capital funds for construction costs so work can potentially begin by the middle of the decade.

The report also outlines how TfN will rejuvenate its Integrated and Smart Travel Programme, which stalled when bus operators declined to support a scheme to offer London-style pay-as-you-go travel across different modes of transport across the North.

It reveals plans to "deliver some of the original aspirations of the Smart programme by a different route" and allow trains and other modes of transport to use certain types of bank cards for pay-as-you-go travel.

A meeting of TfN's scrutiny board last week heard that leaders were seeking a meeting with Mr Shapps, who recently described it as "by definition a talking shop", to find out about the Northern Transport Acceleration Council and how it would fit in alongside it.

But committee member Neil Hughes, a councillor in Cumbria, said: "This paper should give us all cause for concern. Is there not likely to be some kind of bonfire of the quangos in the relatively near future, given the huge extra expense in tackling coronavirus and the enormous debt the government has?

"Is it not highly likely that funding for regional transport bodies will contract rather than expand, indeed is there not the possibility of abolition of regional transport bodies given the centralisation agenda, there is no sign of that abating."

Finance Director Iain Craven told the meeting TfN had "done what we were asked to do" since 2017.

He said: "There is clearly a challenge around levels of funding and the case we have got to argue is that funding Transport for the North to do the work and discharge its statutory functions is a useful way of spending government money.