A possible model for future funding and governance of the local highway network

30th Mar 2020

By Jason Russell, Director of Community Operations at Oxfordshire County Council.

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A possible model for future funding and governance of the local highway network

The local highway network

The local highway network can often feel like a poor relation to the Strategic Road Network (SRN). The SRN is clearly a vital asset, enabling people and goods to travel long distances quickly and safely. It is vital for the nation’s economy, and the way it is managed and funded reflects its importance. In contrast the local highway network, which is equally important locally and regionally, has complicated governance and funding arrangements, a lack of understanding of the complex range of outcomes we expect from it, and strategic planning and funding is provided by a range of organisations all with different priorities. Funding is often short-term, and there is therefore insufficient long-term planning. The results of this are probably most apparent in resident dissatisfaction – the condition of roads is often the local council service that has the lowest levels of satisfaction. But there are other impacts as well - on the wider economy, on healthy lifestyles, on how people feel about the place they live in. This dissatisfaction can result in unplanned injections of funding, often in response to public demands to address damage caused by a bad winter. Whilst welcome in some ways, this also further reduces the effectiveness of the investment and the efficiency with which it can be spent.

There is a need for a more sustainable approach to the management of the asset, and in this article I’ve set out a possible future model for funding and delivery that could be implemented without major disruption to the current system.

Local highways are about much more than moving from A to B

Local highways form 98% of the road network, and carry 60% of all traffic. It is often pointed out that all journeys start and finish on a local road. The purpose of the local road network is arguably much more diverse than that of the strategic road network – they are much more than an asset that enables people and goods to get from A to B. They are places where people live and work, vital for the economy and for communities, critical for business and a convenient route for utility services to reach properties. They help to create a sense of place, and enable us to live healthier lifestyles, through walking, cycling and the use of public transport. They will almost certainly be the most valuable asset that any Council manages.

With the development of new, smart technologies, such as autonomous and electric vehicles and connected communities, it is likely that the requirements placed on them will continue to grow and become ever more complicated. This significance is reflected in the fact that for many local councillors, issues related to the highway will form the largest part of the correspondence they have with their residents. The highway matters to them. Managed properly, the local road network can add significant value to an area.

Complex governance arrangements

Local highways in England are managed by over 150 highway authorities. Many of these do work together as regional alliances to improve efficiency, with varying degrees of success. Looking beyond highway authorities themselves the governance becomes ever more complicated - Local Enterprise Partnerships, Sub National Transport Bodies, Homes England, all with their own objectives. Add to this the fact that in two tier areas, borough and district councils are the planning authorities and the CIL authorities and it is a highly complex landscape.

Whilst this model could be considered overly complex and inefficient, the reality of trying to change it is difficult. Simplifying it would probably require removing the management of roads from local councils and handing it to organisations that don’t exist yet. Wide scale local government reform won’t happen simply to create a more efficient highway sector.

Local Councils face significant financial and strategic challenges, particularly on social care which is by far the largest portion of their budgets. As a result much of the Council’s focus will be on Adults and Children’s services and on current projections the percentage spent on social care is likely to increase, putting a further squeeze on other spending. Even within environment departments, the biggest issues may lie elsewhere, particularly as challenges relating to waste management are increasing. As important as local roads are, the management of the highway isn’t the most significant strategic challenge facing local councils.

However, despite the flaws in this system, I believe that in many ways the local decision making and accountability provided by local councils actually provides effective governance for the local road network. Local democracy creates far greater accountability and better decision making than a centralised or regional model might do. So, whilst reducing the number of highway authorities would inevitably lead to efficiencies, there is a big question as to whether the benefits would be sufficient to justify the disruption, cost of change and possible loss of local accountability.

Short-term funding prevents long-term planning

Investment in the local road network will provide significant economic and social benefits. However, current funding arrangements do not enable those benefits to be realised. Local councils don’t get a direct financial benefit from improving the road network, in spite of the wider economic benefits this provides, and therefore can’t afford to invest. Local council funding comes from a range of sources, including Council Tax, business rates, grants from the Department for Transport and the Ministry of Communities, Housing and Local Government. Whilst councils will have a medium term financial strategy, current budgetary challenges mean that in reality spending is often planned on an annual or short term basis. Long-term planning is more difficult, although not impossible.

The increase in competitive processes to bid for funding are a challenge for local authorities. They do not have the resource to be continuously bidding for funding, particularly when success is far from certain, and most don’t have prepared schemes sat on a shelf ready to go. All too often bidding and delivery timescales are very tight, to the point of being unachievable. The cost to the sector of participating in these competitions is significant.

Collaboration, culture, relationships

There are a wide range of organisations that contribute to the maintenance, operation and improvement of the highway network. This includes parish and town councils, borough and district councils, county councils and Sub-national Transport Bodies. In two tier areas, the borough or district council will be the planning authority, critical to ensuring that new developments are properly managed and contribute to improvements in the local infrastructure. The effectiveness of all tiers of local government in working together is variable, and as such there is a risk that new developments will result in additional pressure on an already congested network.

Many local councils will work with service providers for the design and delivery of works and services. Numerous reports over the last few decades have highlighted issues within construction that result in low productivity. The highways sector is not different. The root cause of much of these problems lie in a culture which all too often falls into adversarial approaches, rather than collaborating together to achieve mutual benefits. Whilst there are many good examples of effective collaboration in a number of areas in our sector, a truly integrated approach, particularly where the wider supply chain is also able to effectively contribute, is lacking.

Resilience and climate change

Challenges arising from climate change are increasing. Our highly congested highway networks are fragile systems, and minimising the disruption to them means that we need to start planning more for an anticipated increase in the frequency and severity of extreme weather events. It is likely that severe weather will impact on the Council’s plans, as additional damage caused to the network from severe weather is difficult to predict, and so Council’s investment plans need to consider how they can develop the resilience of the network so that it is less susceptible to disruption.

A future model

Addressing the issues

So far I have set out my perspective on some of the issues that are impacting the effectiveness of our sector. However, there are plenty of positives as well. It is worth reminding ourselves that in the last 10 years of austerity, local councils have continued to deliver good quality services with large budget reductions, in some cases these reductions have been in the region of 50%. All the indications are that through efficiencies and innovation councils and their partners have been able to respond to the challenges and as a consequence are able to do more for less. This is testament to the capability and commitment that exists in the sector.

The way that our local roads are managed is different to other assets. The regulated model that governs our railways, utilities, and the strategic road network might have its faults, however it does provide clarity about strategic outcomes, gives longer term funding certainty and holds delivery organisations to account. The asset management cycles that exist in the water sector face some criticism for not providing continuity of work, with high levels of investment in some years, and lean periods in other years. However, they do require longer term planning linked to the achievement of key outcomes. The benefits of longer term planning are well evidenced. My own experience of creating a 5 year capital programme indicates that a reduction in cost of 15% is achievable, whilst also enabling improved quality and delivering wider social value. Clear outcomes and long term planning will enable organisations and their partners to find the most effective ways of achieving them, and will encourage greater innovation.

So thinking about the challenges we face, and considering what is working elsewhere, I would suggest the following four key elements should feature in any new model.

1. An outcomes based approach

We need to have a better understanding of the outcomes we want from the local road network, and use this understanding to determine the right investment decisions. When building new infrastructure we ensure we have a clear business case for it, however the case for investing in maintaining the network is less clear. We often talk about tackling the ‘backlog’ or holding the asset in a steady state, however these seem to me to be meaningless concept unless we can define the outcomes we want from our local road network. Understanding this would enable us to define an optimal state - where the capital and revenue costs of maintaining and operating the network are minimised and the benefits are maximised. Once we are able to do that then the backlog is simply the difference between the current state of the network and the state that it needs to be in to realise the required outcomes. This would enable Councils to develop long term costed plans for how they will get from one state to the other, and how long this will take.

Outcomes could be developed from two main elements. First of all, DfT should set nationally defined outcomes for what their share of highway funding should achieve. At the moment, the outcomes achieved by DfT grants are not known, and the money is not ring-fenced. However, it would not be unreasonable to require local councils to achieve minimum outcomes, not least to ensure consistency of experience for highway users.

Secondly, Local Councils should then add to these outcomes a set that reflect their own local priorities. This may be a desire to invest more capital to improve condition, improved customer services, more grass cutting or gully cleansing, or an investment in new, smart technologies. This would help provide clarity for residents and businesses about what their local taxes are paying for, and ensure local accountability.

Furthermore, whilst other asset owning organisations use the value of the asset to inform decision making, the value of local highway assets is still not included on Council balance sheets and is not consistently used to drive investment strategies. Problems in ensuring a consistent approach to how the value is determined means that the use of the asset value has been delayed.

A combination of all of the above should enable a clear set of outcomes to be developed that would meet local and national needs, and ensure the maintenance of a highly valuable asset.

2. Long-term delivery plan

Once their strategic outcomes have been developed, Councils should develop longer-term plans of at least 5 years, setting out how they will achieve them. They should develop strategic business plans and strategic delivery plans which between them will set out the investments they will make, the outcomes they will achieve, and how their works, programmes and services will be delivered.

The plans should be developed with everyone that will be involved in delivering them. Communities, service providers and the wider supply chain will be able to make a significant contribution if the long term plans and objectives are shared with them at an early stage. Visibility of the desired outcomes and a long-term pipeline will enable significant savings and quality improvements to be realised. Delivery plans will also need to identify the risks to delivery, including those associated with climate change, and include mitigations for how those risks will be managed.

3. Collaborative approach

In recent years, Alliance have demonstrated the significant benefits that can be achieved when all those involved in delivering a project or programme are working collaboratively towards common outcomes. Defining clear outcomes and developing long-term delivery plans are key ingredients to enable an alliance to be successful.

The pace of innovation and change seems rapid, and local authorities can struggle to find an appropriate way of keeping up with it. A clearly defined set of outcomes and long-term delivery plans will allow councils, local communities, and private sector partners to develop more innovative ways of achieving the desired outcomes.

4. Measurement and improvement

More needs to be done to enable the measurement of benefits, so that local Councils and DfT have confidence that the money is being spent effectively. They should be able to demonstrate that the investment is aligned to local priorities, will be targeted effectively and spent efficiently. There are already tools available that would enable Local Councils to predict the effectiveness of their plans and whether they provide value for money.

Ongoing performance measurement should be in place so that local councils and their partners are able to measure their progress against their delivery plans and adjust their plans as necessary for the following year, driving continuous improvement. Furthermore, there needs to be robust measurement of achievement against outcomes at the end of each delivery plan period, to ensure that the next plan is delivered more efficiently than the last.

In summary

I believe that whilst the sector continues to face significant challenges, a move to a more robust model as outlined above can help create long term certainty, better focus on the right things, and greater efficiency, creating a more sustainable model for local roads in the future.

Nothing that I have set out in here requires anything new to be invented. There are examples of all the things set out above already happening, either in the highway sector and elsewhere. All it needs is a collective willingness and commitment to make it happen.

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