Transport and competitiveness

Speech by Transport Secretary, Alistair Darling, to the Confederation of British Industry concerning productivity, road pricing and the Transport Innovation Fund.

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Introduction

Good transport is vital to business. It is crucial to improving productivity. It's essential to underpin a successful economy.

It has a direct impact on the competitiveness of business and ultimately therefore on the competitiveness of the UK.

Transport is also essential for improving productivity. Businesses depend on being able to get people to work and their goods to wherever they are needed - reliably and on time, here and abroad.

So continuous investment is therefore essential - something that hasn't always been recognised in the past. It isn't just a case of catching up on failures to spend enough in the past, pressure continues to build.

As we become more prosperous, we want and need to travel more. And we will consume or use a greater choice of goods - all of which need to be transported by sea, road, rail and air.

That's why we need to spend money where and when it is needed, as well as managing the transport network effectively. And we are.

The global challenge

And the global context is important too.

Today about half of all world trade takes place between countries located within about 1,800 miles of each other. And for the UK, nearly 60% of our trade is with countries in Europe. That is why the health of other economies in Europe is so important to us.

But global economic activity is shifting. The size of the global economy is set to increase by 40% by 2015 and India and China will represent a quarter of the total world output.

This presents many challenges. We will face increased competition from new and dynamic sources of business internationally.

That's why we set out a framework for the future development of air transport back in 2003. And that's why we need to enable sea port development as well, bearing in mind that 95% of all the UK's international trade is carried by sea.

But all this also creates new opportunities - opening up access to new markets for business, allowing us to expand and benefit from new technology and innovation, as well as offering greater choice and variety to consumers. The key is to make the most of these opportunities.

Investing in transport

So how do we do this - and how do we respond to these pressures?

First we recognised the need to spend money on transport, where it is needed, year-on-year and decade-on-decade, something that other countries have done in the past and which successive Governments have failed to do.

Over the next three years, spending on transport has increased from £10.4bn this year to more than £12.8bn by 2007. That means that by 2007, transport spending - after inflation - will be over 60% higher than 1997. By 2015 it will be double 1997 levels again in real terms.

Putting more money into public transport - for example £87m a week in public money alone on railways, enabling us to upgrade the West Coast Mainline. Over a billion a year on buses. £40m a week on strategic roads this year leading to improvements on large sections of the M1 and M25. And plans to widen the M6.

The key, of course is to make sure that investment is converted into tangible improvements that deliver real value for money. Making the trains run on time, improving reliability of road journeys by tackling congestion, and of course better public transport.

International aviation

Before I take questions, I want to set out our approach on air travel, on ports, the railways and the roads.

We live in a global economy. So aviation is crucial to the UK - which is why we published a White Paper in 2003 which set out plans for the sustainable growth of the industry in the UK over the next 30 years.

This was essential for their long-term planning - and widely welcomed by the CBI (Confederation of British Industry) and others. And we are implementing that strategy now - alongside taking measures to address the environmental implications of air travel.

We are working together with the EU (European Union) to open up markets. That's essential for the long-term future of the industry - and vital to enable us to compete globally.

That is why the negotiations between the EU and the US on a liberalised Open Aviation Area on the North Atlantic are so important.

Opening up markets is the key to continuing prosperity. It is good for passengers, freight and operators alike. We need a deal which represents a real step forward in liberalising air services between these, the two largest aviation markets in the world.

But it has to be a good deal - something for something - and the key issue remains access for European carriers to the US domestic market.

So we need to get it right.

Ports in the South East

The rapidly growing economic significance of China means that we need to start discussions between the EU and China on creating the right framework for liberalised services. This is one of the items on the agenda of the December Transport Council.

The strength of the Chinese market is one key factor putting pressure on the capacity of our ports. Our prosperity as an island economy depends on our ports providing efficient gateways for international trade.

We will shortly decide on the proposals for new container ports in the South East. And for the longer term our review of ports policy through the next year will ensure that the market is given the strategic direction it needs to deliver port capacity in the right place at the right time.

More traffic through ports means more opportunities for rail freight. Traffic has grown almost 60% in the last 10 years, on a network that is also carrying more people than at any time since the Second World War.

Railways and the new structure

And on the railways, following legislation this year, we now have a structure to run the railways that will work - private and public sector working together.

The Government decides how much to spend, as well as the size and shape of the network.

Operations are for Network Rail , who own and manage the track are working more closely with the Train Operating Companies to deliver a better service - joint control centres to work more closely together on reducing delays and improving the service. And reliability has now reached over 90% on many services, as it should.

The possibilities of road pricing

But perhaps one of the biggest threats to economic expansion we face in the next 10 - 15 years is congestion on the roads in our towns and cities.

We've all talked about it for years, but now I believe that we can, with additional investment and using new technology, make real improvements.

We are adding new capacity where needed - and improving the way roads are managed. Everything from high-tech systems that manage traffic flows, like the system that will begin tomorrow on the M42, and the new traffic officers who are patrolling our motorways - to car pool lanes.

All of these steps will make a difference, as will better public transport - but they will not solve the underlying problem of congestion. Without locking in the benefits, our roads will continue to fill up.

That is why more and more people can see the possibilities that road pricing might bring.

It is encouraging that road pricing is increasingly being recognised as part of the solution to tackle congestion - and not just by local authorities, but increasingly by business as well.

A fund for innovative and transport

No, demand management won't work on its own. What is needed is an approach that looks at every aspect of transport and also looks in relation to the wider social and economic picture.

In June this year, I set out my view that we needed to look at the benefits road pricing might bring - and I said we intended to pilot that approach.

We set up the Transport Innovation Fund worth about £2.5bn when fully developed to support the delivery of schemes which promote our national productivity. This will include piloting a road pricing scheme.

Yes - we need to make sure that all the elements of the public transport system, rail, light rail and buses, park and ride, work together for the benefit of local people and business alike. And we will.

That is why we've identified £200m - and more if there are enough good schemes - from within the Transport Innovation Fund to support the development of innovative schemes, combining demand management such as road pricing with measures to improve public transport;

In July, we offered local authorities a chance to bid for development funding, to support early work on identifying and developing schemes;

The response from local authorities was good - underlining that they recognise that action planning to tackle congestion needs to start now. We had 33 bids, many with high quality ideas.

People see that we need to plan ahead, using new technology that will be commonplace in 10 years time to cut congestion and provide for reliable journey times on the roads. Satellite Navigation Systems, pay-as-you-go insurance. We need to build on that.

We are today announcing that we are funding seven areas to develop schemes - all exploring pricing to some degree: West Midlands, Tyne and Wear, Greater Manchester, Bristol, Cambridge, Durham and in Shropshire.

Because I want this to be part of a national scheme, we will work with these authorities to develop a coherent framework which will ensure a consistent approach across all schemes, on such issues as technical standards, design and scheme appraisal. Government will be in the lead - we cannot have a fragmented approach.

We want to make sure that what we are developing will work before it is rolled out more widely.

So I believe that can and will make a real difference to managing traffic on roads. There are many difficulties to overcome - but we are now facing up to what we need to do.

Transport, productivity and the longer-term

Doing nothing - as I have said before - is not an option. We cannot build our way out of this problem. We need to exploit new technology to help us.

And looking further ahead - we need to ask ourselves what more we need to do in transport to continue maintain our competitiveness.

That is why the Chancellor and I asked Sir Rod Eddington to advise us on the longer term impact of transport decisions on the UK's productivity, stability and growth.

As part of that, he will look at some of the different barriers we face in transport - sorting out delays in the planning system. We cannot afford years of delay. We have got to speed up the present system.

One of Rod's first priorities has been to speak to business leaders from across the UK to get their views on what they need from the transport network - both now and in the long term.

The CBI has played a key role in organising many of these meetings, and we hope that you will continue to do so.

Conclusion

Which brings me to my final point. A lot of what we are doing now will have a direct impact on business - sustained investment and better management of the transport network will bring greater competitiveness and open up new opportunities for trade both here and abroad.

The challenge for us together is to consider how we continue to make the most of the system we have - at the same time ensuring that planning and infrastructure is designed to meet the economic needs of business to support productivity and growth.

We now have a clear approach to our transport needs - Aviation, rail roads and ports. It will take time, and continued investment - but I believe we can deliver what is needed provided we work together.

Delivered: 28 November 2005

(This speech represented existing departmental policy but the words may not have been the same as those used by the Minister.)