My right honourable friend the Minister of State for Transport (Sadiq Khan) has made the following Ministerial Statement.

I am today announcing the Government’s plans for a new Urban Challenge Fund designed to support local authorities in delivering economic growth and improving the health and environment for local communities in urban areas.

The Prime Minister’s Strategy Unit report on urban transport and the DfT response “The Future of Urban Transport” published in November 2009 identified a range of transport challenges faced by our cities. It estimated the cost of congestion, in delays and unreliability suffered by road users, to be of the order of £12 billion a year. The PMSU report also indicated that the measurable costs to society of poor air quality, inactivity leading to obesity and road accidents in urban areas are each similar to those of congestion. The evidence from the PMSU report is that initiatives geared to tackling the various challenges simultaneously would better achieve “triple win” outcomes in terms of economic growth, improvements to health and improvement to the urban environment. This new fund will support forward-looking cities and local authorities in delivering these outcomes.

The aim of the new fund will be to deliver clear and measurable benefits for urban areas in terms of:

enhanced mobility through offering people wider choices for their journeys;

reduced congestion and increased journey time reliability;

better health as a result of improved safety and much greater levels of walking and cycling;

streets and public spaces which are enjoyable places to be, where exposure to harmful emissions is reduced and where quality of life is transformed;

improved safety; and

reduced level of carbon emission from transport.

The fund will support packages of measures designed to deliver all of these benefits. The packages are likely to include a combination of sustainable travel measures, investment to encourage modal shift and better bus services alongside demand management measures, better and city-wide traffic management and improved street design. Acting together, these measures will deliver a step change in the local economy, the health of urban residents and the environment they enjoy.

The new fund will replace the Transport Innovation Fund. Work by a number of authorities showed that a combination of measures was necessary to tackle the problem of congestion and could deliver wider benefits to local communities, the urban economy and environment. TIF also encouraged new thinking in a number of areas, for example on a phased and incremental approach to demand management. Its weaknesses lay in its too narrow focus on the issue of congestion, the failure to win public acceptance for the more challenging proposals and inability to transform governance at the same time as delivering radical change. The new fund will draw on the lessons from TIF and the new ideas that have come forward.

Sustainable travel measures will be a key component of the packages supported by the new fund. The sustainable travel towns initiative has shown that small-scale relatively inexpensive measures can deliver significant reductions in car trips, increases in bus use, walking and cycling and consequential improvements in health. In order to achieve best value from available resources, the sustainable travel programme for cities will be absorbed into the Urban Challenge Fund. While there will be no separate fund for cities, we would expect these sorts of measures to form part of a wider package of interventions and deliver even greater benefits than those already achieved through the sustainable travel towns initiative.

The department will be considering the future of our current congestion performance fund and targets with a view to ensuring there is an integrated approach to addressing all of the challenges in urban areas.

Funding for the Urban Challenge Fund will be top-sliced from the department’s overall funding allocation following conclusion of the next Comprehensive Spending Review.

I am also publishing today a discussion paper inviting comments on the new Urban Challenge Fund. Copies of the discussion paper are being placed in the House Libraries and will also be available on the Department for Transport’s website.