Would a £15bn investment in public transport ‘level up’ the red-wall areas?

The chancellor, Rachel Reeves, has announced a £15bn investment in public transport projects in the English regions. Albeit her commitment to restore the pensioners’ winter fuel payment (in whole or part is not known) has grabbed much of the attention, these plans for enhanced light rail, bus and tram links will no doubt make an impact.

She said: “We know the potential that exists in all of our towns and cities … I can tell you today that we will be making the biggest ever investment by a British government in transport links within our city regions, and their surrounding towns; £15.6bn in transport funding settlements, to be delivered by our regional mayors – more than doubling real-terms spending on city-region connectivity.”

But it is not quite what it seems to be.

Not exactly. Much of it is effectively a reannouncement of the schemes unveiled by Rishi Sunak at the Conservative Party conference in October 2023. That was when he announced, to no one’s surprise but still widespread disappointment, that the HS2 high speed rail link between Birmingham, Manchester and beyond was being cancelled, but the funds would be redistributed to a wide variety of smaller transport schemes (some of which, embarrassingly, were to repair roads in the South). At that time, the figure of £13.8bn was allocated to the “City Region Sustainable Transport Settlements 2” – ie public transport improvements controlled by the various elected mayors in Greater Manchester, Teeside, West Yorkshire and so on.

Reeves says that these were never properly funded by the previous government, and she put them on hold when she came to power last year. Now they have been defrosted, topped up and presented as Labour achievements. They may turn out to be, but it will take years for them to come to fruition – as with earlier announcements focused on the South, such as the Heathrow expansion. And, just for the record, there’s no prospect of the HS2 Northern extension, nor the potentially revolutionary (for growth) Northern Powerhouse east-west fast rail link between Liverpool and Hull via Manchester and Leeds (“HS3”).

In principle, yes, but building new tramways, say, doesn’t necessarily leverage commensurate private investment or create new jobs. One of the more consequential of Reeves’s announcements was that she’s reviewing the criteria the Treasury uses to approve large-scale infrastructure projects, contained in the so-called Green Book.

She wants civil servants to recognise the benefits of investment as well as the cost. This is fine in principle, provided the government’s economists are not pushed into politically useful wishful thinking about regeneration projects that turn into white elephants. History is full of such prestigious (but in the end futile) dreams. As with the “raid on pensions” – where funds are to be directed to invest in certain UK assets – the net effect of any misallocation of resources would be to reduce productivity rather than boost it.

Politically, the point is that it shows Labour cares about what used to be called “levelling up” in “left behind” areas, especially in Labour’s red-wall areas previously taken by Boris Johnson and now vulnerable to challenge from Nigel Farage and Reform UK. The recent local elections showed just how deep and widespread the discontent can be. (Lisa Nandy, cabinet minister and MP for Wigan, has been warning that social pressures are so intense it could mean northern England could “go up in flames”).

Labour MPs representing marginal seats in the North West and the Midlands will thus have at least something to show for their efforts – or at least the prospect of improvement. However, it will be some time before any tangible improvements will be felt.

If Labour loses the next election, all the dividends of its investment in transport, housing and green power will be enjoyed by the Conservatives or, more remotely, Reform UK.