Britain's Second Cities Are Stuck: Let's Get Them Moving Again

We need to fund local transport projects locally

Britain’s second cities are stuck. In most countries, large cities that aren’t the capital are at least as productive as the national average. 

Yet, Britain’s second cities’ potential is still untapped. Their gross value added (GVA) per worker was just 86% of the UK average. These cities have GVAs per worker 30% lower than similar non-capital cities in Germany, 23% lower than France, and 18% lower than Italy. 

Britain’s second cities are struggling in part because they lack reliable and quick local transport. Only nine British cities have a tram or metro, compared to 30 French cities and 60 German cities. Every French city larger than 150,000 people has a light-rail or metro, while there are 30 British cities and towns that large which lack rapid transit. 

Many more French and German cities have rapid transit compared to British cities

Generally, bigger cities are more productive due to what economists call agglomeration effects. Think of the chance meetings at networking events that lead to new business opportunities, or the ultra-specialised job categories that can only exist in big cities. Yet without reliable transport options, Britain’s second cities are smaller in practice than their European counterparts. Less than 40% of workers in Leeds can get to the city centre by public transport in 30 minutes or less, while in similarly sized Marseille close to nine out of ten workers can. It is little wonder why Marseille’s residents are, on average, more productive than their counterparts in Leeds.

The metro & tram map of Marseille, pop 860k (left) versus Leeds, pop 810k (right)

With the cancellation of HS2 to Manchester, the Government announced that it had freed up £36bn that could be spent on local transport projects, including £2.5bn for a long-promised mass transit system in Leeds and West Yorkshire. Considering Leeds is the largest city in Europe without a mass transit system, locals welcomed the proposed project. Yet this funding is hardly guaranteed and past offers of funding never came through or were withdrawn. The history of the attempts to build a tram in Leeds demonstrate the pitfalls of Britain funding projects centrally. 

Why the way transit is funded matters

In the 1980s, when traffic congestion began clogging up the streets of Leeds, city leaders drew up plans for a supertram. The Government finally agreed to fund the scheme in 2001. But the costs of the proposal spiralled, and the transport secretary scrapped the project in 2005. 

With multiple levels involved there isn’t clear political accountability when the project fails, nor can a local leader champion the project effectively from start to finish. On the national stage, the Leeds tram was one of many projects that the transport secretary was overseeing. In Labour’s 2000 transport plan, there were 25 tram and light rail projects, plus many more heavy rail, bus, and road projects. With so much happening across a national brief, the transport secretary’s decision to cut a project because of cost overruns is divorced from the specific causes and solutions to any overspend.

The need to constantly ask Whitehall for funding limits the benefits of devolution. Instead of getting spades in the ground, local governments are forced to appeal to central government for money and are completely at its discretion. Andy Street, the West Midlands Mayor, has described the current system as a “begging bowl culture.” 

In countries that have had a tram renaissance, like France, Germany and Spain, the ability to fund a project is mostly in the hands of local politicians. Consequently, local elections are fought over transport expansions, with mandates given to build. 

Many French mayors are elected to a six-year term on their promise to build a tram in their city. With the ability to fund transport projects locally, mayors are empowered to deliver projects rather than waiting for arbitrary decrees from central government. 6 years later, the voters can reward the mayor with re-election if they successfully deliver the promised tram.

How to fund local transport expansions

The best way to invest in new trams and rail in Britain’s second cities would be to create a ring-fenced ‘local transport fund.’ To finance these funds, Britain should take a page out of the French transit playbook and adopt a form of the versement mobilité.

The Government should give mayors the ability to levy a 1% payroll tax payable by medium and large employers. The money should be specifically for new capital expenditures rather than covering operating expenses to encourage building new transport connections.

Businesses benefit from transport upgrades. Better connectivity widens the pool of talent they can hire from and increases the number of customers who can visit their business. For many businesses, an extra 1p on Employers’ NICs would be a small price to pay for that.

One advantage of using payroll taxes for financing transport upgrades is they raise revenue based on where people work, not where they live. Think of someone getting a train into town and then using the new tram system to get to work. Without a payroll tax, they could pay essentially no tax to the area they spend most of their working hours in.

Taking Leeds as an example shows how transformative this funding mechanism could be. There are 398,000 employees in Leeds with a median salary of £29,767. With 70% of UK workers employed by medium and large businesses, a 1% payroll tax on those companies could raise around £80mn per year for new transport infrastructure in Leeds. The French versement mobilité generated over €9 billion in 2021, accounting for 45% of urban transport funding. 

The local transport funds should also be topped up with workplace parking levies, where employers who provide parking spaces for staff pay per space. Currently a levy is only used in one British city, Nottingham, where employers providing more than 10 spaces must pay £550 per space, which is often passed to staff. This raises £9mn a year and has reduced congestion while enabling the construction of 17 km of new tram lines.

Nottingham’s tram, funded partly by a workplace parking levy

A local transport fund of £90mn per year would deliver the benefits of devolution. The West Yorkshire mayor could promise and deliver transport upgrades instead of having to be reliant on the whims of Whitehall for all of the funding. By providing a significant portion of the funding, the local transport fund decreases the risk for central government, which means that Westminster will also be more likely to support new local transport expansions. 

Conclusion

Dedicated local transport funding would be revolutionary for Britain’s second cities. By being able to fund significant parts of a project locally, city mayors could promise to deliver new transport and then get on with building it rather than being reliant on begging Whitehall for funding. This would increase political accountability for local transport and empower local decision makers who know what their area needs best. We need to give cities the power to raise money locally for transit expansions. A payroll tax on businesses and a workplace parking levy would get Britain’s second cities moving. 

This is a submission to TxP’s Progress Prize: a new £5000 blog prize, in partnership with Civic Future and New Statesman Spotlight, encouraging responses to the question:

Britain is stuck. How can we get it moving again?