North East Devolution and Levelling Up
Penshaw Monument

North East to get another transport plan. But where’s the money?

North East councillors are expected to sign off another ambitious and hugely expensive transport plan next week – the third in just 15 months – without any certainty where the money will come from.

Following the £6.8bn North East Transport Plan in March 2021 and the £804m Bus Service Improvement Plan last October comes the Rail and Metro Strategy (NERMS), costed at over  £3.4bn.

NERMS envisages new or re-opened lines all over the North East, including reopening the Leamside Line and the Stillington freight line to passengers, a Wearside Metro loop through Washington, links to Cobalt-Sllverlink and Consett, rail services to West Newcastle and West Gateshead, a link from the East Coast Main Line to Newcastle Airport, and more improvements in Northumberland.

NERMS forms part of the umbrella Transport Plan and is costed at £2.5bn for Metro and rail extensions plus around £783m of other capital investment and a further £120m revenue to maintain and operate infrastructure and services. The investment would be spread over the years to 2035.

Councillors will be warned by officials when they discuss the Strategy on Tuesday that funding is the key risk facing NERMS, with each scheme and projects subject to individual finance and resource assessments.

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The North East has achieved some important rail and Metro improvements in recent years. Most notably, a new fleet of Metro trains will start arriving this year, stations have been improved, and the track between Pelaw and Jarrow is to be dualled, giving extra capacity.

Previous rounds of the Local Growth Fund (LGF) and Transforming Cities Fund (TCF) show how the region can deliver significant packages of investment, says NERMS.

The North East received £270m over six years in LGF – that’s £45m a year – and £208.5m TCF, nearly all of which was awarded in 2020 for schemes to be carried out by March 2023 – an average of roughly £70m a year.

Other sources of finance are possible. For certain investments, says NERMS, developer contributions will form a viable part of the financial model. In others land value capture could be a viable proposition. Other possibilities include borrowing against future fares revenue, other government funding streams such as the Levelling up Fund, the UK Infrastructure Bank, commercial sponsorship opportunities and local government funding.

So the Strategy is not necessarily unachievable on cost grounds. But it is still a big challenge. The cost of NERMS, spread over the 13 years to 2035 is nearly £254m a year compared with the £115m of recent years from LGF and TCF combined, and if the aim is to carry out the full £6.8bn Transport Plan the cost would be £525m a year.

By comparison, the government awarded £163.5m of the £804m the region requested for the Bus Service Improvement Plan. That was only 20% of what was asked for.

A problem with government funding, apart from the amount, is that it is often committed no further ahead than the next general election, making long-term planning for ambitious projects like the Transport Plan and NERMS difficult.

That is all the more reason for the North East’s councils to get together and agree a new devolution deal, which would give them greater control over their finances. It would also give them access to the region’s share of funding from the City Region Sustainable Transport Settlement, available only to mayoral combined authorities. That would provide up to about £600m, which would be a good start for their transport ambitions.

Without a deal, all their grand schemes look more like dreams than plans, as this website commented on March 4. Without a deal, the plans resemble the government’s Levelling Up White Paper – few people take issue with the objectives but many ask where the money is coming from.