Local transport funding in England is facing significant uncertainty. This is secondary to the more pressing issue that local authorities are grappling right now with severely stretched budgets, with some on the brink of issuing Section 114 notices. This of course comes against a backdrop of national economic pressures, with rising inflation, a cost-of-living crisis, and fiscal constraints tightening public finances. Councils are also responding to the Government’s ongoing local government reorganisation programme amidst key transport infrastructure reviews and shifting funding streams, all of which is complicating future investment planning. These are busy times - but the need for a clear, stable funding system has never been more urgent. Councils need certainty and resources to invest in transport, stimulate regional economies, and deliver housing and infrastructure projects - goals that align with broader government missions.
Uncertainty around key funding streams
The ongoing transport infrastructure portfolio review and Comprehensive Spending Review (CSR) have left local authorities facing significant uncertainties. The Autumn Budget did little to settle nerves, and all eyes will be on the Spring Statement and Comprehensive Spending Review for clarity. Until then, many local transport projects remain in a holding pattern.
The Network North conundrum
The previous government’s Network North proposals introduced new funding streams, but none of this money has yet materialised. The £2.65 billion Major Road Network 2 (MRN2) fund and promised increases in pothole funding appear unlikely to be realised. While the £4.7 billion Local Transport Fund (LTF) allocated only to the North and Midlands may remain in principle, the size of the allocations might be at risk. The rationale for its distribution, which excludes the South East, South West and East has also been described as unfair. A more equitable distribution mechanism might be the existing Integrated Transport Block (ITB) allocation, though the total value of ITB would have to rise significantly to match the LTF allocations.
False hopes with Major Road Network (MRN) 1 funding
Another challenge is funding for existing Major Road Network schemes. The previous government initially promised to increase its contribution to 100% at the outline business case stage. This was a welcome development for local authorities given the cost of many schemes had escalated due to inflation. However, delivery on this offer has not materialised for local authorities with the Department citing cost pressures, leaving many projects with significant funding gaps and threatening their viability.
City Region Sustainable Transport Funding
Even the City Region Sustainable Transport Settlement (CRSTS2) funding, initially allocated at £8.8 billion, has faced complications. The Network North uplift promised an increase to £15.4 billion, but this has not been re-confirmed. Some authorities are also being told that underspend from CRSTS1 may be deducted from their CRSTS2 budgets, creating uncertainty and complicating their ability to plan effectively.
The end of competitive bidding: A turning point?
For years, local authorities have endured a complex, competitive bidding process to secure transport funding. This often resulted in significant investment of time and resources without any guarantee of success. Government moves to phase out this "Dragon's Den-style" system are promising, as it will reduce red tape and give less-resourced councils a fairer chance at securing funding. However, questions remain about how new funding streams will be allocated and whether the overall funding increase will match or exceed the sum of the former patchwork system.
Local authority budget pressures
While the prospect of a more straightforward funding system is welcome, it must be viewed in the context of broader budgetary constraints. Councils are already struggling to maintain basic services, and transport improvements are often not a top priority when funds are tight. Whilst the recent increase in Local Government Finance Settlements is a step in the right direction, real-term funding has yet to return to pre-austerity levels. Additionally, transport-related social care costs continue to drain budgets, which could be addressed through ring-fencing, or ideally, increased social care funding.
Exploring new revenue generation models
Facing these financial constraints, many councils are seeking innovative ways to generate revenue, such as negotiating income from electric vehicle charging infrastructure, investing in local energy projects, or introducing lane rental schemes. However, more controversial options like congestion charging and workplace parking levies are politically sensitive and generally avoided due to public opposition, particularly in light of the current cost-of-living crisis.
Devolution and its impact on funding
The government’s devolution agenda is significantly shaping local authority funding. Local authorities are increasingly joining forces to meet the population thresholds required for greater devolution powers. Those achieving Strategic Authority or Established Strategic Authority (ESA) status stand to gain longer-term, consolidated budgets for housing, regeneration, and transport, providing more planning flexibility. Consequently, many councils see the devolution programme as an opportunity for increased funding and influence.
Funding reform and alignment with government priorities
Given the Government’s intention to streamline the local funding landscape, with some funds being discontinued or reduced, future funding will likely be aligned more closely with broader government priorities, such as growing the economy, delivering the housing recovery plan, and achieving clean energy goals. Though recent announcements such as the £1 billion investment in buses and £100 million in active travel provide hope, councils are still waiting for further details on how funding will be allocated moving forward.
Conclusion: A call for long-term certainty and strategic planning
Local authorities anxiously await further clarity on the transport infrastructure portfolio review and the future funding landscape. As the government refines its approach, it must prioritise stability, fairness, and long-term certainty in transport funding. Alongside this, for local authorities to maximise funding opportunities they must proactively develop effective Local Growth Plans, Spatial Development Strategies, and align their Local Transport Plans with government priorities. This strategic preparation will put councils in the best position to secure investment and drive long-term economic and infrastructure success.
ABOUT THE AUTHOR
Ian Baker is a Transport Planning Director at WSP