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EJTIR
Issue 9(3)
September 2009
pp. 259-276
ISSN: 1567-7141
www.ejtir.tbm.tudelft.nl
Overcoming Financial Barriers
Anne Binsted
Transport Research Laboratory, UK
1
Neil Paulley
Transport Research Laboratory, UK
2
The funding process and the availability of both revenue and capital funding can create a
barrier to the effective design, implementation and maintenance of sustainable transport and
land-use schemes. The DISTILLATE Funding Project therefore sought to identify the nature of
these barriers, how they are being experienced by local authorities, and the ways in which they
could be overcome. This paper provides an overview of the findings of this project. The
methodological approach included a series of consultations with transport practitioners and their
counterparts in public health, environmental strategy, land-use planning and corporate policy
units, three literature reviews, semi-structured telephone interviews with transport practitioners,
two workshops and continual engagement with five case-study partners. The results of these
research activities have been encapsulated within a Funding Toolkit, which has been designed to
enable significant improvements in the way in which local authorities can manage, and
overcome, funding barriers. Other research products include a guidance note for the funders of
transport schemes, which provides stakeholders with an overview of the barriers faced by local
authorities and recommendations about how they can be alleviated. This paper gives an
overview of the research findings and details the role that both local authorities and the funders
of transport and land use schemes can play in alleviating the impact of funding barriers.
Keywords: barriers; funding; local transport plans; scheme delivery; sustainable transport
1. Introduction
1.1 Background
This paper is one of a series on a UK research programme, DISTILLATE (Design and
Implementation Support Tools for Integrated Local Land use, Transport and the Environment),
which carried out research into six barriers deemed of particular importance to UK local
authorities, and developed a series of products designed to support local authorities in their
decision-making. The DISTILLATE research programme was funded under the UK Engineering
1
Crowthorne House, Nine Mile Ride, Workingham, Berkshire, UK, RG40 3GA, T: +441344770568,
F:+441344770356, E: abinsted@trl.co.uk
2
Crowthorne House, Nine Mile Ride, Workingham, Berkshire, UK, RG40 3GA, T: +441344770171,
F:+441344770356, E: npaulley@trl.co.uk
EJTIR 9(3), September 2009, pp. 259-276
Binsted and Paulley
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Overcoming Financial Barriers
and Physical Sciences Research Council’s Sustainable Urban Environment initiative, which
placed a particular emphasis on research which met the needs of practitioners. It also sought
research proposals which were multi-disciplinary, reflecting the complex nature of the problems
to be tackled, and multi-institutional, given a concern that no one institution might have the
critical mass of research skills needed.
The DISTILLATE programme responded to these challenges by involving local authorities and
related actors directly in the research programme and by bringing together the research skills of
two interdisciplinary transport research groups, a planning school, a policy-oriented research
centre, and a national research establishment. It was designed to help overcome those barriers to
decision-making which were judged to be most serious, and most amenable to research-led
solutions. It set itself a vision of helping to achieve a step change in the way in which sustainable
urban transport and land use strategies are developed and delivered. Further details of the
programme as a whole, and of the role of the project reported in this paper, are provided in the
overview paper (May, 2009).
Identifying and obtaining appropriate funding both for capital investment and for operation is a
recognised barrier for the effective planning and implementation of transport and land-use
schemes by local authorities. This issue was addressed within the DISTILLATE Funding Project,
which is one of seven projects that comprised the DISTILLATE research programme. It sought to
identify and examine the barriers faced by local authorities when identifying and using funding
for transport and land use projects. Its key objectives were to:
• Understand the funding procedures which affect transport and land use projects and how
these procedures affect project design and implementation;
• Develop improved methods for dealing with different funding barriers and suggest how
issues should be handled during the planning stages;
• Understand how constraints relating to funding provision may affect the project’s
outcomes;
• Produce a toolkit and guidance documents encapsulating these findings and the resulting
recommendations.
This paper gives an overview of the findings of the DISTILLATE Funding Project research.
Barriers to obtaining funding, the implications that these barriers can have for transport schemes,
and the ways in which these barriers can be overcome are discussed in turn within the following
sections. Section 2 provides an overview of the funding issues and barriers identified by the
research, which are referred to throughout the paper. Section 3 describes the impacts that these
barriers can have on transport schemes. Section 4 outlines the guidance developed to help
minimise the impact of funding barriers. Section 5 details some of the ways in which local
authorities have effectively overcome or managed these barriers, and Section 6 presents some key
conclusions that can be drawn from the research.
1.2 Transport funding in the UK
Transport projects in the UK have traditionally been financed by the state, and capital and
revenue allocations from central Government remain the largest source of funding for UK local
authorities.
3
3
In the UK a distinction is made between capital and revenue funding. ‘Capital’ can loosely be defined as a fixed
investment, for example the acquisition or extension of an asset. Revenue, on the other hand, refers to
maintenance and operational costs, such as staff time.
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Overcoming Financial Barriers
In England, capital funding allocations are informed by Local Transport Plans
4
(LTPs), which
most local transport authorities (county councils, unitary authorities and partnerships in
metropolitan areas other than London) are required to produce and maintain under the
Transport Act 2000. The exception to this is Transport for London
5
(TfL), for whom central
Government allocations are instead based upon measures contained within the Mayor of
London’s Transport Strategy, which outlines proposals for improving transport in London. LTPs,
along with associated Annual Progress Reports on the delivery of their strategy, are used to
inform decisions on capital funding.
Revenue funding is received separately via the wider local government financial settlement. The
main transport element of this is allocated for highway maintenance, although none of the
revenue funding is ring-fenced for transport. The transport sector must instead compete with
other local authority services, such as education and health, making it necessary for transport
practitioners to make strong internal cases for support for the local transport networks.
The private sector also plays a large role in the financing of transport projects. The benefits to be
attained from securing private sector finance, particularly for schemes that are relatively large-
scale and complex, are recognised by local authorities across the UK (see DfT, 2006; Eddington,
2006; HoCTC, 2006). Private sector investment is typically delivered through Public Private
Partnerships
6
(PPPs) and to a lesser extent the Private Finance Initiative
7
(PFI). Local authorities
are also becoming increasingly adept at matching central Government capital and revenue
allocations with finance from external sources (DfT, 2006). Alternative sources of funding have
evolved as traditional funding mechanisms have become increasingly unable to bridge the
growing gap between operating expenses and revenues or to satisfy increasingly complex and
diverse transport needs.
Table 1 below contains examples of these relatively innovative sources of finance, and also
examples of more traditional sources of transport funding. Some of the more innovative sources
of funding are being used in the UK, although others are still in the early stages of development.
Details of each of these sources of funding can be found in Binsted and Brannigan (2008a).
2. Characteristics of the funding process which affect transport and land
use projects
The research and consultation activities conducted within the project identified a range of
institutional, technical and political issues which have created barriers to the effective delivery of
transport and land use projects. A questionnaire survey that was developed and administered
amongst UK local authority partners as part of the DISTILLATE Organisational Behaviour and
Barriers Project in 2004 (see Hull 2009) was instrumental in helping to identify the issues faced by
local authority practitioners.
4
LTPs set out each authority’s local transport strategies and policies for a five year period. They detail how
authorities will deliver the key transport objectives of central Government in the context of Regional Transport
Strategies.
5
TfL is a statutory body created by the Greater London Authority Act 1999. It is directed by a management board,
whose members are appointed by the Mayor of London.
6
The term PPP can be used to describe any collaboration between public and private bodies.
7
A PFI refers to a partnership in which contractors pay for the construction costs of infrastructure and then rent
the asset back to the public sector.
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Overcoming Financial Barriers
Table 1. Examples of more traditional and more innovative sources of funding
Examples of more traditional sources of funding for
transport
Examples of more innovative sources of funding for
transport
Authority's own capital resources (e.g. local taxation,
special levies)
European Union Objective One/Two
Local Transport Plan settlement (Basic Credit
Approval)
Private Finance
Section 106 agreements
8
Single Regeneration Budget
9
Other local regeneration funds
Business Improvement Districts
10
Business rate levy
11
Land value taxation/
site value rating
12
Local authority business grant incentive
13
Local sales tax
14
Transport Development Areas
15
Work Place Parking Levies
16
The Behaviour and Barriers Project conducted two questionnaire surveys, one in 2004 and the
other in 2007, and a series of follow up interviews with transport practitioners and their
counterparts in public health, environmental strategy, land-use planning and corporate policy
units in 2006. Respondents were asked to comment on the perceived importance of, and their
satisfaction with, numerous elements of the design and delivery process for Local Transport
Plans (LTPs). The results of the consultations clearly highlighted that practitioners felt that
financial barriers compromise the effective delivery of transport policy.
The consultations were conducted over a four year period, throughout which funding
mechanisms were perceived by both transport practitioners and officers from other service
sectors to distort transport scheme selection and choice. The respondents stated that there are
insufficient resources available (particularly revenue), and that procedures to access funding to
support the design and implementation of sustainable transport solutions are inadequate (Hull,
2009). The experience of practitioners with individual sources of funding was also explored by
the surveys. In 2004 private sources of funding, major highway grants and regeneration related
8
A legally binding form of planning obligation made by a landowner under Section 106 of the Town and Country
Planning Act 1990 in conjunction with granting planning permission. The Agreements require developers to
secure provision of, or improvement to, existing infrastructure to meet the needs of, and alleviate the problems
generated by, the new development.
9
Funding from UK Regional Development Agencies for investment in local regeneration projects.
10
A BID is a form of public-private partnership where businesses in a defined geographical area volunteer to pay
an additional tax to invest collectively in local improvements, thereby enhancing their trading environment.
11
A levy can be charged on businesses valued based upon the value of their premises. Levies can be raised within
a defined geographical area.
12
A means of raising revenues from land uses by charging land owners in relation to the benefit that they will get
from increases in land value that result from changes in transport provision.
13
Introduced in 2003 the Local Authority Business Growth Incentives (LABGI) scheme is a form of business tax. It
gives local authorities an incentive to increase their non-domestic rate by enabling them to keep any increase in
the rateable value (as opposed to giving it to central government).
14 A sales tax can be levied on the purchase of consumer goods. Revenue from this tax can then be allocated to
transport improvements. It is sometimes referred to as a ‘consumption’ tax.
15
A TDA is an integrated land use/transport planning approach. TDAs are well designed, higher density, mixed
use areas situated around points that are well served by public transport. They enable the promotion of more
sustainable transport choices.
16
Introduced by the Transport Act 2000 the levy allows local authorities to charge companies and organisations
for each commuter car parking space provided in a specified work place.
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funding streams were all linked to severe delays (Hull and Tricker, 2006), whilst in 2007 major
scheme funding,
17
Section 106 Agreements and EU grants were perceived to be the sources of
funding most likely to cause delays to scheme delivery and to hinder scheme objectives (Hull,
2009). The surveys also identified that many local authorities have little awareness of the wider
range of funding sources, particularly relatively innovative funding mechanisms.
The Organisational Behaviour and Barriers surveys highlighted the existence of a number of
funding barriers to the delivery of land-use and transport projects, each of which was later
confirmed by subsequent research activities, which included extensive literature surveys and
further in-depth consultations with local authority partners. The significance of these barriers has
recently been reinforced by a number of key policy drivers, such as the Eddington Review
18
(2006) and the Lyons Inquiry
19
(2007). These barriers are briefly summarised below.
2.1 Inconsistencies Between Local Objectives and Those of Funding Agencies
The current funding framework means that Local Authorities only have a limited control over the
types of scheme which are implemented as they are constrained by the availability of specific
funding streams and the eligibility criteria of the available sources of funding. This is viewed by
some practitioners as a form of Government centralisation, which is undermining the bottom-up
approach advocated for LTPs.
Priorities and targets set by central Government for the development of LTPs, and the financial
penalties for missing those targets, can have undesirable effects at the local level (see also
Marsden and Snell, 2009). Transport officers from one local authority stated that they were
unable to support transport schemes which would enhance local quality of life and economic
development because they did not correlate well with the key priorities of central government.
This sentiment was echoed by others who stated that scheme prioritisation has to be based upon
the funding available, rather than on schemes which would have the most positive impact.
The requirement to bid for certain funding streams was seen as an aspect of government
centralisation as the eligibility criteria for such funding did not necessarily represent local
objectives (see Page et al., 2009). A number of transport authorities consulted made specific
reference to the need for bids for some funding sources to be ‘innovative.’ One local authority,
for example, stated that it had been unable to meet a number of basic needs of its transport
network and that it had instead devised ‘innovative’ bids that would be of less direct benefit but
that would be more likely to receive funding.
2.2 The ‘Capital Rich Revenue Poor’ Mismatch
One of the key barriers to the effective delivery of transport and land-use schemes is the
mismatched availability of capital and revenue funding. In the DISTILLATE organisational
behaviour and barriers survey a lack of revenue funding was outlined by all stakeholders as
being a ‘pressing’ issue. The survey found that the poor availability of revenue funding for public
transport schemes was of particular concern (Hull, Tricker and Hills, 2006). The Commission for
17
Grant funding can be awarded by the DfT to help finance accepted major road or public transport schemes.
Schemes normally need to cost in excess of £5 million to qualify.
18
The Eddington Review was jointly commissioned by the Chancellor of the Exchequer and the Secretary of State
for Transport to examine the long-term links between transport and the UK's economic productivity, growth and
stability. The Review recommended a number of reforms to the planning, funding and delivery of transport
interventions.
19
The Lyons Inquiry is an independent inquiry commissioned by the Chancellor and Deputy Prime Minister. It
examined the role, function and funding of local government and considers the current and emerging strategic
role of local government and how it should be funded.
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Integrated Transport
20
(CfIT) (2005) identified that 75% of local authorities are dissatisfied with
the level of revenue funding available to them as it has not matched the increased provision of
capital funding. This has raised issues over how the operation, servicing and maintenance of new
capital assets will be funded, and also over the implementation of certain types of policy.
The capital-rich revenue-poor problem is caused in part by the fact that revenue funding
provided to local authorities is not ring-fenced for transport and must instead compete for
resources with other services, such as education and health. A DfT review found that 84 of the
106 authorities and districts surveyed spent less than the allocated Standard Spending
Assessment
21
(SSA) amount on transport, with revenue funding having been transferred to other
services (DfT, 2005). CfIT (2005) identified that there was a correlation between the performance
of a local authority and whether its transport allocation was being diverted to other areas.
2.3 Lack of Staff Time and Resources
The resource intensive nature of identifying, bidding for and managing separate funding streams
and the lack of available staff and skills are often cited as being significant obstacles to obtaining
finance. This is an issue of particular prominence given the increasingly wide variety of
competitive funding sources which are available to supplement the LTP capital allocation and the
rate at which they change. Local authorities can incur significant costs when identifying
appropriate and available sources of funding, and when preparing bids for this funding. All
funding streams require time consuming proposals and appraisals to be carried out to ensure that
the often extensive eligibility criteria are fulfilled. The UK Department for Transport
22
(DfT) does
not meet any revenue costs incurred in preparing bids, which means that the bidding process can
form a barrier.
The experience of one local authority in securing funding for a shared space route demonstrates
how resource intensive the funding process can be. The authority had to acquire funding from
over 25 different sources to finance a route that cost just over £2 million. Many of the applications
made needed to be tailored to the sources being pursued, which itself required a considerable
level of staff commitment, and, whilst this is thought to have increased the success rate, some
applications were rejected. This led to the implementation of a scheme of a lower quality than
had originally been proposed, which will ultimately have revenue implications associated with
the higher cost of maintenance likely to be required.
2.4 Narrow Leadership Interests and Political Will
Political will at a number of levels is a key factor in the acquisition of funding and in the
implementation process.
In the UK political will has a direct impact upon the amount of revenue funding allocated to the
transport sector. Revenue is allocated to local authorities as a lump sum, and local political
decisions dictate the proportion that is allocated to transport.
Political will can also have a direct impact upon the types of project that are approved and
developed. One local authority stated that the pressures and agendas of politicians, parish
councils, other members and business groups routinely have an impact upon the transport
projects that are implemented, and therefore need to be considered during the early stages of
20
CfIT is an independent body, established in the 1998 Integrated Transport White Paper, which advises the
Government on integrated transport policy and reviews progress towards meeting objectives.
21
SSAs are used to distribute the revenue support grant (RSG) to local authorities. It represents the Government’s
view of what each local authority needs to spend to deliver a standard level of services. It is calculated based
upon the demographic, physical, economic and social characteristics of each authority.
22
In England, the DfT is the government department responsible for setting and delivering the national transport
strategy.
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Overcoming Financial Barriers
scheme design. It proposed a series of enhancements for a section of a major road, with an
emphasis on bus priority. However, subsequent political decisions led to the scheme
implemented focusing on enhanced road capacity with elements of bus priority significantly
downgraded.
Political support also needs to be evidenced across the life of a project, which in the case of
transport projects can span many years. The consistency in leadership between tiers of
Government and at each level over time can be poor, and without continued technical and
political support the available finance for, and effectiveness of the infrastructure may diminish.
The role of political support is demonstrated through the experience of a case-study partner of
developing a rail link. Technical and bureaucratic processes have resulted in the scheme being in
preparation for over 20 years, and continued scheme development and financing would not have
been possible for this length of time without continued political support. Another local authority
consulted did not experience similar support. It also developed a large scale transport scheme
over a period of several years and, whilst central government initially appeared keen to support
the project, priorities changed whilst the project was still in the process of being approved. This
resulted in the scheme being rejected, with the loss of considerable amounts of investment on the
behalf of the local authority.
Political will to implement certain funding mechanisms can be influenced by perceived public
acceptability. This is particularly the case in relation to revenue streams which would depend on
extra charges, such as road user and congestion charging. Governments are also sensitive to
levels of general taxation, which can mean that public transport funding is increasingly
vulnerable to political pressures.
Local authorities can also be reluctant to press for Section 106 Agreements and other types of
land value tax since they might encourage development to go elsewhere. This can be an obstacle
to increasing levels of private finance which have the potential to make a significant impact upon
local transport initiatives.
2.5 Problems in Managing Partnerships
The need for partnership working, both to secure funding and to increase integration between
transport and other service areas, is increasing. Many of the DISTILLATE case study local
authorities are experienced in forming partnerships and noted their value in attaining funding
and delivering effective projects, but a number of concerns were also raised. It was mentioned
that partnership working can be costly and can lead to an effective gridlock in the decision
making process. Many of the problems evolve from the potential difficulties of managing a large
number of partners and the subsequent delays and miscommunications which can result. This is
of particular concern given that local authorities often lack the skills and resources required to
form and maintain a successful partnership (see Forrester, 2009).
2.6 High Levels of Funding Uncertainty
The funding process is imbued with a degree of uncertainty which can make effective long-term
planning problematic. DISTILLATE research has shown that this is a criticism that can be levelled
at the vast majority of funding sources, including funding obtained through the LTP process and
private finance, and which has considerable implications for scheme design and delivery.
Local authorities stated that greater certainty at an earlier stage of the ‘likelihood, level and
availability of funding would make… decisions easier’ (Hull and Tricker, 2006).
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Overcoming Financial Barriers
The uncertainty in relation to funding provision stems largely from the requirement for funding
to be bid for with no guarantee that the proposed scheme will be approved. Even if funding bids
are approved there can still be uncertainty over when funding will be made available. Moreover,
it will often be unclear whether funding will be available to ensure the effective operation of the
asset or service over its lifetime.
3. Impacts of Funding and Funding Barriers on Transport Schemes
The funding barriers detailed in the previous section have a number of wide-reaching
implications both for the choice of transport and land use schemes funded and for the local
authorities who implement them. The project report ‘Local Transport Funding: An Assessment of
the Implications of Funding Restraints’ (Binsted and Brannigan, 2008c) contains a full analysis of
these potential implications. The key implications, both negative and positive, are detailed below.
3.1 Negative Implications
Figure 1 below links the key barriers to the potential implications that they can cause and
evaluates the severity of the impact, based upon DISTILLATE research findings.
Implications: Scheme
doesn’t go
ahead
A
different
scheme
is
funded
Scheme
details are
altered
Scheme delivery
is delayed
Lack of staff time and
resources (organisational
constraint)
999 99 9 99
High levels of funding
uncertainty
9 99 9 999
Narrow leadership interests
and political will
9 9 9
Managing partnerships
9
99
Capital rich revenue poor
mismatch
999 999 999 99
Barriers
Funding streams that relate
to national transport
priorities
999 999 999 9
9
Slight influence
99
Moderate influence
999
Large influence
Figure 1. Funding barriers and their implications.
A key consequence of many of these implications can be that local transport strategies and
progress towards central government objectives suffer as a result of transport or land use
schemes being altered, delayed, or not delivered. Funding barriers can also result in local needs
and priorities not being met, and schemes being devised outside the LTP. Costs can increase,
delay can be incurred, and the cost effectiveness of schemes can significantly decline – issues that
authorities consulted appear commonly to face. The impacts tend to be not only project specific
but also more wide reaching. One local authority, for example, stated that it had negotiated
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Overcoming Financial Barriers
Section 106 funding from developers but that delays in the development led to long periods in
which the approved schemes could not be progressed. This led to deadlines being missed which
not only affected the accessibility of, and service provision to, the development, but also resulted
in a loss of sequencing with other projects and synergy benefits not being realised.
The response to instances where funding barriers reduce the effectiveness of transport and land
use schemes was found to vary between authorities. One council stated that it did not proceed
with schemes whose effectiveness is compromised by such barriers, whilst a more frequent
response was that scheme specifications are downgraded or the type of scheme altered.
At a strategic level one of the most fundamental impacts that funding provision can have is upon
whether or not certain types of schemes go ahead. The lack of revenue funding can result in
capital intensive projects, which may be less cost effective than alternatives that are more difficult
to fund, being implemented. Implications for schemes that are particularly vulnerable to the
impacts of funding mechanisms are discussed below.
3.1.1 Public Transport Services
The lack of available revenue has particular implications for the provision of socially necessary
public transport services. Revenue is largely unavailable for bus services that are not viable in
business terms, which can mean that many services are not provided and that innovative
passenger transport schemes may not be pursued. The experience of many local authorities was
that even if they were successful in bidding for funding to support bus services, such funding
sources come with a time limit and once the funding has run out the revenue costs need to be
covered by another source. The shortage of revenue funding can mean that services are then
discontinued or severely curtailed, and that all of the benefits of the original scheme are lost.
Rural bus schemes in particular are prone to not breaking even at the end of the funding period,
which jeopardises continued provision. A similar issue can be experienced in relation to revenue
payments from developer contributions; they tend to be of a short term nature, and the future of
schemes that they support can be jeopardised when the funding stops.
One local authority consulted stated that whilst a priority was to support a modal shift to public
transport, in one instance the lack of required revenue led it to invest the capital earmarked for
the public transport network into increasing the number of dropped kerbs instead.
3.1.2 Smarter Choices and Other ‘Soft’ Transport Schemes
The relatively poor level of revenue funding has meant that implementation of more innovative
revenue dependent schemes has been hindered. There are insufficient resources available for the
design and implementation of innovative transport projects, particularly for ‘soft’ transport
schemes, such as walking, cycling and travel planning, compared with those available for more
traditional transport schemes like road building.
3.1.3 Maintenance Schemes
A lack of funding for maintenance schemes is another implication of the relatively poor
availability of revenue funding, with the result being that maintenance schemes may be replaced
by capital works for which funding is more readily available (DfT, 2005)
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3.1.4 Road User Charging
The perceived public acceptability of certain policy interventions, such as congestion charging
and workplace parking levies, is key in determining whether schemes are implemented. The
implication of not implementing such schemes can be wide-ranging, particularly as demand
restraint measures, such as road pricing, have the potential to generate large amounts of revenue
and can therefore support the delivery of a number of other schemes.
3.2 Positive Implications
When discussing the potentially negative implications that can arise from the funding process it
is also important to reflect upon the many positive implications that are experienced, such as the
access it gives local authorities to large amounts of capital. The consultations conducted through
the project indicated that increases in levels of capital funding in particular have accelerated the
implementation of transport projects. A number of local authorities also reported that funding
constraints have made them more creative in terms of the schemes implemented and approaches
adopted. Increased emphasis on delivery was also reported, which again was thought to have
had positive impacts upon management practices.
The range of funding opportunities that are available to local authorities is continuing to increase,
which should have a further positive impact upon the implementation of transport and land use
schemes. The ‘Local Transport Funding: An Assessment of the Implications of Funding
Restraints’ (Binsted and Brannigan, 2008c) discussion note produced by this project provides
recommendations to both local authorities and the funders of transport schemes on ways in
which distortions to transport schemes can be minimised.
4. Developing guidance
The DISTILLATE Funding Project resulted in the production of three forms of guidance:
1. Local Transport Funding Toolkit for Local Authorities
2. Local Transport Funding Guidance for Funders of Transport Schemes
3. Local Transport Funding: An Assessment of the Implications of Funding Restraints.
These products were created based upon the findings of two surveys conducted by the
Organisational Behaviour and Barriers Project and three literature reviews. They also drew
heavily upon the findings of a case study report that was based upon ongoing consultations with
five Local Authority partners, a workshop attended by transport consultants, academics and
practitioners, and a series of Local Authority telephone consultations. For details of these
research activities see Brannigan et al (2008). The consultation activities helped to develop both
the content and approach of the Funding Project, and a further workshop was organised to test
the deliverables.
The main product is the ‘Local Transport Funding Toolkit for Local Authorities’ (Binsted and
Brannigan, 2008a), a guidance document aimed at transport planning professionals within local
authorities in the UK. The Toolkit aims to help transport practitioners both in identifying
alternative sources of funding to traditional approaches, and in highlighting potential pitfalls at
an early stage. The Toolkit also contains a range of case-studies that demonstrate experience of
these funding barriers and ways in which the issues have been overcome in practice. It is
comprised of four sections and two appendices:
• Section One provides an overview of the barriers to identifying and obtaining funding for
transport and land use schemes identified through the DISTILLATE project.
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• Section Two indicates how to overcome these barriers. The problem is presented, followed by
potential solutions. Funding sources and case studies are cross referenced with appendices.
• Section Three identifies funding considerations by scheme type. For example, if a local
authority is considering implementing a cycling scheme, it is able to consult this section to
identify any funding sources that could be used for cycling, and relevant case studies.
• Section Four discusses the role of partnerships as mechanisms to obtain, and effectively
utilise funding.
• Appendix A is a matrix of available funding sources, at the European, National, Regional and
Local level. Each funding source is described along with the types of scheme that it can be
used for, case studies, benefits and challenges associated with its use.
• Appendix B provides case study examples of funding sources being used for a variety of
schemes in practice.
This Toolkit aims to help transport practitioners in both identifying alternative sources of
funding to traditional approaches, and in highlighting potential pitfalls at an early stage. The
Toolkit also contains a range of case-studies that demonstrate experience of these funding
barriers and ways in which the issues have been overcome in practice.
The second product, ‘Local Transport Funding Guidance for Funders of Transport Schemes’,
(Binsted and Brannigan, 2008b) is a guidance document aimed at the bodies that fund transport
and land use schemes. It provides stakeholders with an overview of the barriers faced by local
authorities and the potential implications that each of these funding barriers may have both upon
the projects that they are helping to finance, and upon the local authority itself. The report also
contains, where appropriate, suggestions for the ways in which the relevant funding mechanisms
may be improved. It is envisaged that this document will be used by the private sector, the
voluntary and charitable sectors, and by all levels of government.
The third document, ‘Local Transport Funding: an Assessment of the Implications of Funding
Restraints’ (Binsted and Brannigan, 2008c), examines the implications of various funding barriers
to the delivery of transport schemes, and the wider ramifications. It serves to highlight the way in
which funding sources can distort planned schemes. This guidance document also provides
recommendations, aimed at both local authorities and the funders of transport schemes.
5. Improved methods for dealing with funding barriers
Local authorities are becoming more adept at managing some of the barriers that funding can
cause to scheme development and delivery, which makes them increasingly able to overcome
some of the potentially negative implications relating to funding mechanisms (Binsted and
Brannigan, 2008c). Increasing experience of funding sources is leading local authorities to put
contingency systems in place should any problems be encountered. A diverse range of
approaches can be adopted to help alleviate the impact of funding barriers. The full details of
these practices are detailed in the Funding Toolkit (Binsted and Brannigan, 2008a), and a number
of these approaches are outlined below.
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5.1 Managing Inconsistencies Between Local Objectives and Those of Funding Agencies
Seeking to enhance locally generated revenues, as these provide the most flexibility in terms of
investment decisions, is clearly one approach to giving local authorities more control over
schemes implemented. Road user charging schemes, land value taxes, Business Improvement
Districts (BIDs) and developer contributions or agreements can all generate income which can be
invested directly into the local community therefore bypassing the need to meet national
eligibility criteria. Local authorities are also identifying their own solutions. One local authority,
for example, was considering introducing a ‘roof tax’ on developments in its area. The tax would
be at a rate of £10,000 per roof with either all or a significant proportion of the revenue raised
being earmarked for the transport sector.
Local authorities should also explore the scope to tailor funding acquired from other sources,
with funding opportunities from Regional Development Agencies
23
, charities and trusts perhaps
having more potential to be tailored to local priorities than central government sources.
Prudential Borrowing
24
does not require local authorities to seek the consent of central
government for transport schemes, and is therefore also likely to have some potential to reduce
the need to change schemes to correlate with national priorities. Resources such as the Funding
Toolkit will be instrumental in increasing awareness of alternative sources of capital and revenue
funding. It also helps local authorities to identify the extent to which each can be tailored to local
conditions.
For this barrier to be truly overcome it will, however, be necessary for action to be taken by the
funders of transport schemes. Providing local authorities with more control over the way that
revenue and capital are spent and increasing the emphasis on local rather than strategic level
information when deciding which bids to approve could go some way to reducing the impact of
this barrier upon local transport networks (see Binsted and Brannigan, 2008b, for steps that
funders of transport schemes can take to this effect).
5.2 Addressing the ‘Capital-Rich Revenue-Poor’ Mismatch
Developing stronger internal cases for transport investment and allocating scheme champions for
revenue intensive projects to effectively communicate their benefits can help to reduce the
likelihood of revenue allocations being diverted to other service areas. CfIT (2005) states that the
importance of transport revenue spending could perhaps be detailed in relation to the delivery of
wider corporate and community objectives.
It is also important for local authorities to supplement LTP revenue allocations by generating
revenues locally where possible. Resources such as the Funding Toolkit can be used to make local
authorities aware of the full range of opportunities available for increasing access to revenue that
can be earmarked for reinvestment in local transport networks, and also to highlight funding
pots that provide financial support specifically for revenue intensive projects, such as walking,
cycling and travel planning schemes. The Toolkit also gives advice on how revenue can be
treated as capital. One approach identified in the workshop was to classify staff time as
intellectual property. Another example was the recruitment of additional staff at the beginning of
23
RDAs are public bodies that were established by the Government in 1998 (with the exception of the London
Development Agency, which was established in 2000 as a body of the Greater London Assembly). There are nine
RDAs in England, each of which is responsible for the quality of life, economic development, and regeneration of
their region.
24
Prudential Borrowing is a source of capital that transport authorities can borrow from either the Public Works
Loan Board (a body with access to funds from the UK National Loans Fund and therefore able to offer
competitive borrowing rates) or directly from the market in the form of a loan. The finance can be used as the
authority sees fit, although borrowing must satisfy the conditions of a Code that exists to ensure that the
borrowing is affordable.
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Overcoming Financial Barriers
the first LTP period specifically to implement certain projects. Many partners identified the need
for guidance on the types of activity that would normally be funded from revenue which could
be charged to the capital pot. The only advice available at present is for the capitalisation of
revenue to be supported by auditors
25
to maximise its effectiveness (DfT, 2004).
A range of other strategies have been adopted by local authorities to help manage the revenue
short-fall. These include: seeking to establish partnerships with revenue-rich partners, such as
bus operators; investing in high quality materials to reduce revenue implications; identifying
opportunities to jointly procure services; and increasing levels of private investment to
supplement revenue allocations. One local authority had started to buy buses so that it could
reduce the tender prices for operating the services, which subsequently reduces revenue
requirements. The procurement of advertising contracts has also provided local authorities with
access to revenue. This can involve letting advertising space at bus shelters, which can be used to
fund the maintenance and enhancement of the bus infrastructure.
For this barrier to be eliminated it will need to be addressed by the funders of transport schemes.
The project report ‘Local Transport Funding Guidance for Funders of Transport Schemes’
(Binsted and Brannigan, 2008b) recommends that local government is given more control over
the way in which revenue and capital are spent, that local and capital expenditure are integrated,
or that ongoing maintenance charges be included as part of the capital charge for new
infrastructure works. In the short term revenue support to the bidding process would help to
alleviate the burden on local authorities.
5.3 Overcoming the Organisational Constraints of a Lack of Staff Time and Resources
Documents that provide guidance and bring funding sources together in a single point of
reference, such as the Funding Toolkit, will help to free up staff time by highlighting ways in
which additional revenue can be raised to help cover costs. The Funding Toolkit also enables
local authorities to identify ways in which other practitioners are overcoming challenges faced.
Local authorities identified, for example, that some auditors itemise staff time as intellectual
property and class it as a capital resource, which enables some staff time spent on bids to be
recouped.
Local authorities can pursue funding sources that raise revenue to help cover the costs incurred
in the bidding process, or which bypass the bidding process altogether. There are a number of
revenue streams that local authorities can consider to raise finance that can be earmarked for
reinvestment in the transport network. Congestion and road user charging, off-street parking
levies, advertising, developer levies and taxes that raise funds from those who benefit from
transport measures are examples of such revenue streams. Other potential sources of funding
which have the scope to reduce the burden of the bidding process on local authorities, but for
which there are no implementation mechanisms currently in place include property,
environmental and tourist taxes.
Local authorities can use such locally generated sources of revenue funding to support
applications for other sources of funding. The revenue raised can be used to enable Prudential
Borrowing, for example, which enables local authorities to borrow for capital investments for
local transport improvements without seeking the consent of the government.
The formation of partnerships can be a way of alleviating the burden of a lack of staff time. Staff
time and resources are required to ensure that local authority staff have the expertise to
successfully set up and manage partnerships, but they can also be crucial in securing funding and
25
Auditors, either public or private, conduct financial audits of local authority accounts ensure that financial
statements have been properly prepared, and that they represent value for money.
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making the most effective use of resources. Further details are given in the section on partnership
funding in the Funding Toolkit, and also in Forrester (2009).
5.4 Overcoming the Constraints of Narrow Leadership Interests and Political Will
The nature of this concern is likely to vary considerably between local authorities, and so
different approaches will need to be undertaken to address these issues by different local
authorities.
It is likely that local authority management would benefit from being made aware of the full
range of funding sources which are available to them, associated benefits and the extent to which
they can help to fund specific transport projects. This could help to broaden the scope of
leadership interests and diversify the range of funding sources applied for. This information is
again provided within the Funding Toolkit, which details the various funding mechanisms that
can be used to support different types of scheme and the benefits that can be accrued from each.
Transport practitioners can also seek to enhance the public perception (and hence political
support) of what tend to be politically unpopular charging mechanisms, such as road user
charging, by more effectively communicating the benefits to be obtained, schemes that the
revenues can be used to fund, and the implications of not pursuing such funding sources. It is
likely to be of even greater significance to lobby internally for projects and schemes throughout
their lifecycle to help obtain, and retain, consistent political support. The most effective way of
doing this seems to be having a champion for each scheme who can continue to support and
communicate the benefits of the project and the potential for the value of the initial investment to
be eroded if financial support for its maintenance is not forthcoming.
5.5 Effectively Managing Partnerships
Many practitioners have a negative view of partnership working, and efforts should be made to
alter this perception by clearly outlining the benefits (Forrester, 2009). In particular it will be
helpful to demonstrate that partnership working can be used as a mechanism to obtain funding
and to deliver transport and land use projects to time and to budget.
Local authority staff should receive the necessary training to establish and effectively manage
partnerships, define and distribute responsibilities and accountability, and foster support for the
partnership at all levels. In one instance a local authority negotiated with a developer for S106
Agreements and also for their collaboration in travel planning initiatives. This helped to
overcome the barrier of staff time, with developers both contributing their own time and
covering the cost of time for others. It also helped to overcome barriers to implementing revenue
intensive transport schemes, with the developer eventually financing the creation of a ‘car club’
26
.
On a larger scale a case-study partner saw partnership working as partly responsible for the
success in obtaining funding for the majority of improvements to a city centre, which include
extensive transport improvements. A partnership comprising local and regional government
bodies along with English Partnerships
27
was established at the outset and given responsibility
for the city centre regeneration project. Funding was provided by a range of local, regional and
national agencies, all of whom contributed towards different parts of the overall strategy. The
partnership was instrumental in obtaining and managing these diverse sources of funding as its
26
Car clubs enable users to book one of a pool of cars for either hours or days at a time. Use is often charged by
the hour. It has been estimated that each ‘car club car’ can replace approximately 10 private cars (CarPlus, 2008).
27
English Partnerships was the UK government’s national regeneration agency, although since December 2008 it
has been part of the Homes and Communities Agency, which is the housing and regeneration delivery agency for
England.
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clear remit enabled it to focus upon pursuing and exploiting a range of funding opportunities
that local government may have struggled to find the revenue and staff time to support.
Commercial expertise contained within the partnership also enabled it to prepare bids, mediate
negotiations between groups, develop contractual arrangements to improve cash flow, secure
advance funding, and attract more entrepreneurial private sector partners.
5.6 Dealing With High Levels of Funding Uncertainty
Local authorities are likely to make most effective use of resources by applying for fewer funding
sources but spending more time tailoring funding applications to the criteria of these sources.
Documents that provide a greater understanding of the range of sources of finance available,
such as the Funding Toolkit (Binsted and Brannigan, 2008a), can further help to increase the
probability of funding being attained by enabling local authorities to make a more informed
decision on which sources of funding to bid for. The Funding Toolkit can also be used to help
local authorities identify whether there are any funding sources that do not need to be bid for.
Increasing levels of private investment in transport schemes could help to alleviate some of the
uncertainty experienced in relation to bidding for funding sources. Local authorities could form
legally binding agreements with developers, for example, to provide a steady revenue stream
over an agreed period. Taxing and charging mechanisms and advertising revenues also provide a
continuous source of funding that can be earmarked for reinvestment in the transport network.
The acceptability of revenue raising mechanisms such as road pricing, congestion charging, Tax
Incremental Finance
28
, LABGI, and property and environmental taxes, can be enhanced if it is
emphasised that those targeted stand to benefit the most from the schemes. Revenue raised from
these sources can also be used to make repayments on Prudential Borrowing for capital, which
again enables the bidding process to be bypassed thereby reducing uncertainty further.
Funding uncertainty is likely to remain inherent to the funding process, but as detailed in the
DISTILLATE guidance note to funders of transport schemes (Binsted and Brannigan, 2008b) there
are a number of steps that funders can take to help local authorities manage the risk. These
include increasing the level of advice and guidance provided to local authorities, seeking to
provide a steady stream of finance over an agreed period rather than sporadically, and providing
financial assistance with which to develop proposals.
6. Conclusions
Research undertaken through the DISTILLATE project highlights the range of barriers which
local authorities face when identifying and obtaining funding for transport and land use projects.
These barriers have a number of implications, each of which has been shown to undermine the
ability of local authorities to effectively deliver schemes that have been designed to fulfil locally
defined needs and priorities.
Local authorities are becoming increasingly adept at obtaining and managing both capital and
revenue funding and constraints are being viewed constructively, with barriers seen as ways in
which transport departments can gain more focus. The barriers do, however, remain, and whilst
there is evidence that their impacts are being managed more effectively it seems inevitable that
they will continue to skew the transport and land use schemes being delivered. Many local
authorities still do not have experience of using what are widely considered to be relatively
28
Enabled by Lord Rogers’ Urban Task Force in 1999 Tax Incremental Finance is a way in which regeneration of
urban areas can be financed. It enables capture of some of the increase in land value produced as a result of rising
land values caused by infrastructure development. It involves the designation of a zone around the transport
infrastructure responsible for the increase in land value, and an increased tax of these properties to reflect the
increase in value.
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traditional funding sources, such as private funding, some central Government funding streams,
or European funding (Hull and Tricker, 2006). Local authorities are aware that their knowledge
of the availability of funding sources is limited, but resource limitations do not make it feasible to
allocate the staff time to expand this knowledge.
There are many examples of good practice where local authorities have employed numerous
approaches to try and managet some of the potentially negative implications of funding
mechanisms. However, it needs to be recognised that the barriers are externally driven.
Therefore, unless the organisations that provide funding for transport and land use projects are
aware of the issues faced by local authorities, they will remain constrained by the external
framework in which decisions crucial to local transport networks will need to be made.
An increasing body of literature, driven in part by the end of the LTP1 period and the publication
of prominent reports such as the Lyons Inquiry and the Eddington Review, is suggesting that
central Government policy is not providing a framework which is conducive to overcoming
funding barriers. Such literature focuses upon the potential for structural reforms of local
government to strengthen the role of local authorities, and to separate capital and revenue
budgets. Local authorities should be given more control over the funding process and remove
some of the barriers which are currently constraining effective scheme design and delivery.
In the long-term relatively large-scale shifts will be needed in the way in which funding is
provided, but in the short-term there are a number of relatively straight-forward changes which
could be made by funders to enhance the effectiveness of transport solutions. An enhanced
awareness of the increasingly diverse range of sources of funding that are available to help
finance transport and land use projects would be of great use to local authorities.
The fundamental influence of funding barriers on the design and delivery of transport schemes
has resulted in the Funding Project inputting to many of the projects undertaken by other
members of the DISTILLATE consortium. There are synergies with the work on option
generation (see Jones et al, 2009) and on improved indicators (see Marsden and Snell, 2009) who
found that the availability of funding for option development and monitoring, respectively,
compromises the effectiveness of transport strategies. There is also a connection with the findings
of the Indicators Project and the Appraisal Project (see Page et al, 2009). These two projects
highlight that basing funding on the fulfilment of certain indicators, and the relatively narrow
approach that the DfT takes to valuing transport schemes, results in certain schemes being more
likely to get funded than others, sometimes resulting in a shift in focus from local priorities to
national targets and a distortion of projects to fulfil national funding eligibility criteria.
Acknowledgements
DISTILLATE was funded by the UK Engineering and Physical Sciences Research Council under
its Sustainable Urban Environment programme, and supported by sixteen UK local authorities
and a steering group including representatives of the International Transport Forum, the
European Commission, the UK Department for Transport and Transport Scotland. We are
grateful to all of these bodies for their support for the research. The research reported here
involved several other colleagues in the Distillate consortium, including Charlotte Brannigan and
James Paskins. The conclusions are, however, our own.
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