Guidance

City Region Sustainable Transport Settlements: guidance for mayoral combined authorities

Published 12 August 2021

Scope of city region sustainable transport settlements

Objectives

The following 8 large metropolitan areas are mainstays of our work to level up in England:

• West Midlands
• Greater Manchester
• Liverpool City Region
• the North East
• the Tees Valley
• West Yorkshire
• Sheffield City Region
• the West of England around Bristol and Bath

As the National Infrastructure Assessment – and our response to it, the National Infrastructure Strategy – agree, one important weakness of many of these great city regions, affecting their productivity, is the quality of their local transport networks, particularly public transport, compared to London and their counterparts in Europe.

This new City Region Sustainable Transport Settlement (CRSTS), which is an unprecedented investment in local transport networks, is a major driver for significant change.

This new fund stems from the announcement we made in 2019 that the 8 eligible English city regions would receive £4.2 billion of additional funding for local transport networks. That new money is at the core of this fund and should allow city regions to commence transformational change.

But we intend to do more and to go further. We will also add sums equivalent to current annual funding, for the Integrated Transport Block (ITB) and Highways Maintenance funding, including the Potholes Action Fund.

This money will be part of the same fund, as we want to:

• simplify the funding landscape
• move towards greater consolidation of funding streams
• allow city regions much more flexibility to decide and develop long-term strategies that integrate all their local transport priorities

The CRSTS aims to work and deliver in the same way as the settlement established over the last 2 decades in London, creating a more consolidated and devolved model of transport funding and delivering significant improvements for users.

Just as London’s capacity and funding was built up over several successive multi-year financial settlements, we intend, subject to future spending reviews and the success of this programme, that this could be the first of a series of 5-year transport settlements for the city regions.

A London model will not be achieved overnight, but the journey has started and the direction is clear.

These settlements could be used to develop mass transit networks and sustainable transport options, open up new areas of the region for employment, leisure and housing, and create real innovation in transport to solve problems.

Bids should also include the effective management and maintenance of existing assets and meet existing obligations which the ITB and other funds currently individually address. As with London, these settlements will be the forum for addressing expected intra-city maintenance needs for both highways and other transport systems.

The CRSTS sits alongside other local funding streams, such as our £5 billion commitment for buses and cycling and our £4.8 billion Levelling Up Fund, which will still be available to these 8 regions.

City regions will still be able to access these and most other funding pots in the usual way, including the funding for the Major Road Network and Large Local Majors projects, and local electric vehicle charging infrastructure funds, alongside the CRSTS, to support delivery of their transport priorities, and subject to decisions at Spending Review 2021.

City regions eligible for CRSTS will not receive a settlement for the Transforming Cities Fund after 2021 to 2022, so CRSTS proposals should include any remaining TCF schemes which need to be completed.

Bids for the fund should be comprehensive across local priorities, culminating in a single transport plan and pipeline. Where schemes have been submitted for funding elsewhere, this should be noted.

If funding is provided through alternative programmes, funding flexibility of an equivalent value will be considered for the mayoral combined authority (MCA) for the next priority in line on the pipeline, subject to a conversation with government. This required bid structure is set out in more detail below.

As well as devolving more power and funding, we want to devolve more responsibility. While mayors will design their plans and have the long-term funding certainty to deliver them, they will also be held to account.

The funding settlements for each area, and the outcomes it has agreed, will be published on a single, easily accessible website. Delivery against those outcomes will be monitored and that data will also be regularly published in the same place, giving government and local electorates the opportunity to judge each mayor’s performance.

Delivery performance will be monitored through a series of metrics designed to allow local electorates to compare performance between different city regions. Mayors will bear responsibility for cost and schedule overruns.

As with nearly all previous local transport capital funding, city regions will be expected to raise at least 15% to 20% local contributions for capital enhancements, fully additional to the money granted by government. Higher proposed contributions will be scored positively in bids.

This is less than the National Infrastructure Commission’s recommendation that a local contribution of 25% should be applied to major projects funding and is significantly less than the contribution London is making towards the Elizabeth Line.

Proposals for new locally raised revenue streams will be welcomed. If schemes or services are likely to require ongoing revenue support, proposals should also outline how this will be provided.

To succeed, bids must clearly show how they will serve the following objectives, shared by the government and all MCAs:

• driving growth and productivity through infrastructure investment
• levelling up services towards the standards of the best
• decarbonising transport, especially promoting modal shift from cars to public transport, walking and cycling

Local transport strategies must, as many already do, include emissions targets and have credible strategies to achieve them. Bids must propose a programme of investments that reduce carbon and particulate emissions from transport within the MCA area, aligned with the UK’s legal commitments for each carbon budget and for net zero by 2050, and with the policies set out in the Transport decarbonisation plan (TDP).

City regions generally have mature road networks, but these ultimately have finite capacity. As we have seen in London, we would expect congestion to increase significantly as places grow. That is why public transport and active travel are the areas most in need of levelling up and car ownership in many parts of the 8 regions is low.

Bids must show that they will further the objectives of the national bus and cycling and walking strategies, including ambitious bus and cycling priority measures, and that decisions on Key Route Networks (KRNs) will be led by MCAs and mayors.

We are currently consulting on proposals to increase the powers that MCAs have over KRNs. The extent to which MCAs are proposing to use this fund to prioritise capital aspects of their Bus Service Improvement Plans (BSIPs) and cycling and walking investment strategies may be taken into account, as an indicator of commitment, in considering what additional funding will be provided for buses and cycling improvements.

Purpose of capacity funding

Each eligible MCA with appropriate governance arrangements has been allocated capacity funding to support this programme. Given the long-term and integrated nature of settlements, part of this resource funding should be used to support building longer-term local transport planning and delivery capacity, which could include developing local institutional capability, potentially including formal project and programme leadership training.

This funding should be used only for transport purposes, not wider priorities.

Monitoring and assurance

Final investment decisions on most schemes that MCAs commit to deliver within their settlements should be made by each MCA using its agreed assurance framework.

While government intends to agree settlements that refer to particular schemes, this does not constitute formal approval and local leaders must assess the full business case before investing. Government will monitor a selection of business cases from each MCA throughout the settlement period.

We will retain the requirement for full business case approval on schemes requiring government contribution beyond the current 5-year settlement period ending in financial year 2026 to 2027.

Where concerns are raised about appraisal and project selection, government reserves the right to revise downwards the delegation limit for business case approval with a specific MCA.

In some circumstances, such as adapting infrastructure to meet accessibility standards, proposals may not offer value for money but will be driven by a compelling strategic case. Local assurance frameworks should have the capacity to assess decisions in these circumstances.

Building on the government’s transport revolution, city regions are encouraged to establish their own brands for transport services, promoting local identity, loyalty and accountability.

To emphasise the integrated and networked nature of the service, and the role played by government funding, agreements will also include commitments to co-branding with the new national rail and bus brands, similar to the arrangements during the era of the then British Rail and National Bus Company.

Allocation process

We intend to allocate settlements with each place in autumn 2021. To inform this process we would want proposals to be submitted to government as soon as possible after the end of August 2021.

Prior to this, government officials should continue discussions with officials from MCAs to offer the opportunity give feedback on draft proposals.

We will agree exact submission dates with each place individually to increase the speed at which they can be assessed, and discussion started.

Before the final proposals are submitted, DfT officials will be available for regular meetings with the eligible MCAs to provide guidance on proposal development. For fairness, relevant information generated from these discussions will be shared with the other eligible MCAs.

Once the final proposals have been submitted, these meetings will stop while the proposals are assessed.

What to submit

Submissions should include a short prospectus (maximum 20 pages), setting out the strategic case for funding at the 2 levels set out below, how this funding meets the objectives set out above and how it relates to existing local transport or spatial development plans.

Where an up-to-date local transport plan is not currently in place, submissions should set out the timescales for delivering this.

This prospectus should set out:

• why the transport interventions proposed are right to address the objectives stated here
• which interventions have been prioritised and how they were selected
• how interventions will be delivered

We may share bids with constituency MPs and local councils following their submission to government.

Supportive quotes and sentiment will be considered favourably. At the point at which we agree the funding, the prospectus should be formalised into a programme business case, which will be reviewed annually.

This prospectus must be accompanied by a full list of investments that each city region expects to deliver at their bidding range, setting out:

• planned levels of highways maintenance funding for each highway authority
• the impact of proposed funding on the overall condition of local roads
• the stage of development, forecast cost, expected start of works and opening date
• the VfM of each major enhancement scheme or package of smaller measures

The interactions, dependencies and potential efficiencies between maintenance plans and each scheme and programme should be described. The proposals, including the prospectus and the intended schemes, will be made publicly available.

The prospectus should set out explicitly how these investments will contribute to the delivery of the national bus strategy and support cycling and walking investment strategies, including plans to strengthen KRNs.

The funding allocated to MCAs will be tied to specific investments at this stage which they will be expected to deliver, although MCAs will have flexibility over how they allocate funding within their funding envelope to deliver within this set programme.

Proposals should consider the areas noted in Annex A: factors to consider within objectives and MCAs must complete the forms in Annexes B to D.

While additional information may be sought to inform allocations, proposals should be complete and have the support of the MCA. The support of each local highway authority should also be set out clearly.

We expect that any local road projects will also deliver or improve cycling and walking infrastructure and include bus priority measures, unless it can be shown that there is little or no need to do so. It is DfT’s view that, given the predominantly urban, high-density nature of most MCAs, there are unlikely to be locations where this is not necessary or desirable.

Proposals for investment in new and upgraded cycling infrastructure must meet the standards outlined in local transport note 1/20: cycle infrastructure design.

Scale

Bidding ranges will be provided to each city region. Proposals should set out clearly what can be delivered at the lower bound and the upper bound of the funding ranges provided, including the local contribution additional to government funding. Submissions must be within the ranges identified. Final funding allocations will be between the lower and upper bounds, depending on bid quality and according to the assessment criteria set out below.

In the 5 years from April 2017 to March 2022, government funding for local transport in the 8 city regions totalled £2.9 billion. Under these settlements, government funding for the 5-year period, April 2022 to March 2027, will be above £4.2 billion and below £6.8 billion.

The lower end of the bidding range is to prevent overbidding. The government does not intend to fund any place at the lower end of the bidding range, subject to submissions achieving a minimum quality standard. Similarly, the government will not fund all places at the upper end. The competition will determine where between the lower and upper bound funding will be allocated for each city region.

Individual bidding ranges will be submitted to mayors following release of this guidance. This is based on a methodology that draws on the National Infrastructure Commission’s recommendations that funding should be growth-focused.

These bidding ranges will be for the financial years 2022 to 2023 and 2026 to 2027. While our ambition is that this is the first of a series of five-year settlements, this is subject to future Spending Reviews and success of the programme.

As such, while proposals can include schemes that extend outside this period, this must be justified based on unresolvable delivery factors and these schemes will require government full business case approval. As far as possible, development and delivery should be sequenced to optimise the benefits which can be realised with the funding confirmed in the settlement.

Proposals should consider what the transport infrastructure pipeline ought to include after the financial year 2026 to 2027 but both the capital and revenue funding supplied here should be predominantly focused on the five-year period 2022 to 2023 and 2026 to 2027.

Assessment criteria

Proposals put forward by MCAs will be assessed against the following criteria:

• value for money
• growth and productivity
• levelling up
• decarbonisation, especially modal shift to public transport and active travel
• local contribution
• deliverability

The government will be allocating funding to support these outcomes, so plans must demonstrate how local transport interventions will secure these outcomes, how the proposed interventions were selected, and the scale and timing of the effect these interventions will have.

Allocations will be made by scrutinising bids against the criteria listed above and funding will be allocated between MCA’s lower and upper bounds.

Value for money

The prospectus should outline the key SMART objectives of the programme and a cost-benefit analysis of different options in line with the Green Book.

The appraisal should highlight the economic, social and environmental benefits of the proposed programme (and for individual projects where applicable). These should be based on typical past schemes where such costs and benefits are not available.

In particular, the government will favour schemes that generate productivity benefits, positive impacts on areas that require levelling up and on decarbonisation.

Growth and productivity

Proposals should set out the expected benefits and wider impact on the local and national economy, demonstrating how the proposed transport interventions will lead to increased economic growth and productivity. This could include setting out how proposals will affect access to employment and services and how this will generate new growth rather than displacing growth from other areas.

Levelling up

Proposals should demonstrate how they would level up their city region, taking into account both economic and social benefits, assessing where improvements to intra-city transport will deliver the best returns in improving growth, productivity and quality of life.

This could include demonstrating:

• how proposals would increase connectivity from areas that most need access to jobs and amenities to urban centres
• how transport quality varies locally
• the impact that levelling up would have on the wider regional and national economy
• that the intended measures are local priorities that would positively affect people’s lives
• how transport can open up new areas of regeneration and housing
• the impact the interventions would have on people’s quality of life in areas beyond the city region’s boundaries

Decarbonisation

Proposals should set out the expected decarbonisation impact, demonstrating how the proposed transport interventions would support decarbonisation in the city region and be fully aligned to the UK’s legal commitments on delivering carbon budgets and net zero.

This should include predicted levels of carbon emissions and congestion reduction, predicted uptake in low and zero emission transport, and how the impact of higher-emission modes could be mitigated. Proposals should align with the policies set out in the TDP.

Note that, as the TDP states, simply relying on the electrification of road transport will not be viewed as sufficient to meet decarbonisation objectives and the UK’s legal targets, particularly the medium-term (2035) target.

By 2027, the end date of these settlements, the central forecast of the Society of Motor Manufacturers and Traders is that less than 15% of vehicles on the road will be zero-emission.

Modal shift plans are, therefore, also strongly required. Proposals should show how they will encourage people (and in some cases deliveries) to switch from cars to active travel and public transport, how they should prioritise such modes, and that plans will not lead to overall increases in car use or car modal share.

Congestion and pollution measures will also be assessed positively. Proposals should show how they will tackle traffic congestion, promote the use of public transport and improve air quality.

Local contribution

The government will expect proposals from city regions to be ambitious while still ensuring value for money and longevity of new and existing transport infrastructure. To this end, city regions should consider how their current funding and other potential funding sources available to them could be used in conjunction with the CRSTS to achieve their transport ambitions when developing their proposals.

City regions should demonstrate this through:

• identifying local contributions available to complement their investment from the CRSTS
• outlining how the proposed transport interventions could contribute to long-term fiscal sustainability
• demonstrating how revenue sources could be increased to supplement CRSTS investment

At a minimum, at least a 15% local contribution (fully additional to government funding) should be planned for by MCAs for capital works. Higher contributions will be scored positively.

Where public transport schemes are developed which rely on scheduled services, MCAs should assess whether and when future demand will be sufficient to meet the additional operating costs.

If services are likely to need ongoing revenue support, proposals must show how this will be met within the wider fiscal sustainability plan, through the implementation of other measures (such as bus priority schemes which lower operating costs) or what additional funding will be sought and over what time frame.

Proposals should set out how developments will be prioritised if there is a shortfall in revenue in future years.

A contribution will be expected from private sector stakeholders, such as developers, if they stand to benefit from a specific project.

Proposals should set out a plan for fiscal sustainability based on existing powers and expected funding. However, where further devolution of specific powers would support local fiscal sustainability this should be set out.

Deliverability

All proposals will be assessed for evidence of clear and robust delivery and procurement plans, governance structures, and project costings. Any delivery risks should be clearly explained alongside appropriate mitigating actions. For scheme proposals at an early stage of development or maturity, MCAs will need to provide details that quantify a cost or time range associated with that project’s risks.

Proposals should note the MCA’s and constituent local authorities’ recent delivery performance using the Transforming Cities Fund and other transport funding, demonstrating local capacity to effectively and efficiently deliver the proposals, based on evidence of their past performance with delivering projects on time and within budget, both at MCA and local authority level where appropriate.

In addition, MCAs will need to set out their approach for measuring their own delivery performance to budget and time for these settlements. Where this differs from any previous approach, MCAs will need to highlight what these changes are.

Proposals should note whether projects rely on new technology and what risk this poses to deliverability.

Once funding awards are decided, local institutions are responsible for delivery and further contributions will not be provided to meet cost overruns after funding has been agreed.

Other objectives and considerations

The government is required to comply with the Public Sector Equality Duty, as set out in the Equality Act 2010. To ensure we are considering the potential impact of funding on individuals with protected characteristics, we will give due regard to the Public Sector Equality Duty at significant decision points and will seek information from MCAs to support this process.

All authorities are required to consider the equalities impacts of their bids under the Public Sector Equality Duty and proposals should set out the expected impact on groups of individuals with protected characteristics.

As part of this, proposals should set how they will support delivery of the government’s ambition stated in the Inclusive Transport Strategy ‘for disabled people to have the same access to transport as everyone else, and to be able to travel confidently, easily and without extra cost’.

Proposals should set out how modern methods of construction will be used for efficient delivery, such as modular design.

Investment decisions

Final investment decisions should be made by each MCA using its agreed assurance framework. While government intends to allocate funding that refer to particular schemes, this does not constitute formal approval and local leaders must assess the full business case before investing, using an assurance framework approved by the Department for Transport (DfT).

In some circumstances, such as adapting infrastructure to meet accessibility needs, proposals may not offer value for money. Local assurance frameworks should be used to resolve these issues when there is a compelling strategic case.

We will retain the requirement of an Outline Business Case and Full Business Case approval on schemes with a potential tail of government funding required beyond the current settlement period.

COVID-19 recovery scenarios

Proposals should consider the impact on the viability of investments of a range of coronavirus (COVID-19) recovery scenarios, using data on both national and local economic and transport recovery, such as material from the Office for Budget Responsibility and from transport operators.

Where appropriate, proposals should highlight areas of uncertainty and any potential planning or delivery implications that arise due to COVID-19. In light of this, proposals should be adaptable to allow for any necessary changes while still supporting the objectives of these settlements.

Commercial factors

Proposals should provide evidence on their commercial viability and the procurement strategy that will be used to engage the market. They should present evidence on risk allocation and transfer, contract timescales and implementation timescale as well as details of the capability and skills of the team delivering the project and any personnel implications arising from the project.

Where the implementation of programmes involves partnership working, for example with transport operators or the community and voluntary sector, bids should indicate the MCA’s broad expectations for how risks would be shared between the parties involved with clear responsibilities identified for roles and risk management.

Evaluation

Monitoring and evaluation (M&E) of projects funded through settlements is a condition of funding. All authorities will be required to set aside a proportion of funding allocated to undertake monitoring and evaluation of CRSTS schemes.

While the amount allocated for this is at the discretion of authorities, we suggest 0.05% total funds as an indicative amount. M&E budget requirements will vary depending on the value of funds received in the settlement and the size and nature of schemes being delivered.

MCAs should provide a plan setting out their proposed approach to M&E for their programme and individual schemes within it as part of their proposal.

DfT will also be procuring a national evaluation of the CRSTS which MCAs will be required to participate in. There will be 3 components to this:

1. Development of a national M&E framework: this will be jointly developed with MCAs and used to collect consistent data on key metrics to enable impact and economic evaluation, and meta-analysis.
2. Experimental evaluation scheme: to facilitate the use of experimental approaches to evaluate novel schemes or programmes. Once settlements are agreed MCAs will be asked to identify potential projects for inclusion and will work with the national evaluator to develop and deliver an appropriate evaluation plan for those selected.
3. Process evaluation: to understand the effectiveness of this model of funding for city regions and learn lessons for the future

Annex A: factors to consider within objectives

Proposals should consider how each of the main objectives will be addressed. Details on what this could include for each objective are listed below, although these are not exhaustive and other material which demonstrates how proposals will meet the objectives is welcome.

Growth and productivity

Analysis of:

• the city region’s recent economic performance, both in absolute terms and in comparison to the rest of England, other English cities and relevant international comparisons
• how the city region’s economy works with the wider region and country
• which industries and areas are local successes and which have the potential to be in future
• how transport has supported local growth in the past and where it has been insufficient

Demonstrating how transport interventions will:

• benefit the local, regional and national economies
• improve connectivity between firms, educational institutions and housing to support economic agglomeration and human capital development
• support access to and for specific industries and areas of growth in the city region, particularly higher-value industries which will increase productivity
• generate new growth rather than displacing it from other parts of the country
• be aligned with other MCA competencies and activities to support growth

Levelling up

Analysis of:

• variations in local transport quality across the city region and existing levels of transport investment
• how different communities and population sub-groups currently use the city region’s transport network
• transport priorities expressed by local communities

Demonstrating how transport interventions will:

• improve connectivity for people in more deprived areas, people in areas with lower connectivity and any other population sub-groups for whom the current transport system is less effective
• increase employment, human capital development and wellbeing, particularly in groups with the greatest need
• improve people’s daily quality of life and journey satisfaction for users of the transport system, for users of public and private transport
• meet the priorities of local communities

Decarbonisation

Analysis of the current:

• levels of emissions from public and private transport
• powers and funding that are used on local decarbonisation projects
• use of low-carbon modes and how this varies across the city region and between population sub-groups
• levels of car use, broken down by fuel type

Demonstrating how transport interventions will:

• contribute to overall net carbon emission reductions from transport within the MCA area, aligned with the government’s ambitions for each carbon budget and for net zero by 2050
• reduce the level of emissions per passenger kilometre on different transport modes in the local area
• work with other local powers and funding to decarbonise transport
• increase low and zero emission public transport options and increase uptake in these modes, including assessing the potential for people’s behaviour to change in response to investment
• support uptake of low and zero emission private transport, including assessing the potential for people’s behaviour to change in response to investment and for people to switch to active modes
• mitigate the risks of high-emission transport modes, for example, through carbon capture or offsetting
• determine how the MCA will assess its progress in decarbonising transport
• support the UK’s legal requirements on delivering carbon budgets and net-zero
• determine how these plans will support improved air quality

Local contribution

Analysis of:

• the total current and future cost to MCAs and constituent local authorities for developing and maintaining transport infrastructure and, where appropriate, running services, and how this compares to expected future funding
• passenger levels, mode share and fare prices for commuter and non-commuter journeys in the city region before the COVID-19 pandemic
• insights from summer 2020 or more recent data that demonstrates how transport may recover from the COVID-19 pandemic

Demonstrating:

• how different funding streams – from DfT, other parts of central government and other sources, including private contributions – will be aligned to meet the MCA’s and national government objectives
• what steps can be taken and by when to move towards long-term fiscal sustainability
• how this interacts with plans for Enhanced Partnerships or bus franchising and any other farebox or commercial revenue streams the MCAs may receive now or in future
• how existing devolved fiscal powers will be used, including powers held by constituent local authorities
• how new infrastructure development that requires organised services to provide benefits – such as light rail developments or guided busways – will be developed to minimise the risk that they require ongoing revenue support or how such revenue support will be afforded locally
• proposals may also set out ambitions for further fiscal devolution and how this would improve either the approach to or timeline for fiscal sustainability.

Deliverability

To demonstrate sufficient plans for and experience of delivery, proposals should include the following:

• delivery and procurement plans, governance structures and project costings
• evidence of past delivery performance and local capacity and capability and skills
• how delivery risks will be managed and mitigated
• whether funding will be required after the financial year 2026 to 2027
• how this may affect delivery of schemes
• how benefits will be realised if that funding is not available
• scalable proposals that can be developed flexibly, dependent on the final negotiated settlement
• where new technology will be used in development and construction, how this could improve delivery and what risks this could pose
• any likely delivery issues in general or for specific schemes
• approach to consultation and local engagement to support delivery
• demonstrate the support of local highway authorities
• engagement with constituent local authorities regarding their individual asset management plans and oversight of their highways maintenance self-assessment

Value for money and cost

Proposals should include a completed version of Annex B.