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Background Information
Tyne & Wear
Midlands Metro


Section 56 of the Transport Act 1968

In practice, the award of a 'Section 56' grant is dependent on proof that this will be a 'one-off' payment and no subsequent operating subsidy will be required. The 'user benefits' are to be recovered via the fare box.

The 'non-user benefits' are critical in determining whether a 'Section 56' grant will be awarded. The assumption is that the value of these benefits will offset the cost of the grant; the Government is not giving something for nothing, it is buying environmental and other benefits for an area.

The onus of proof of non-user benefits is on the applicant. There should be no difficulty whatever in putting up an excellent case for Bath, which is a World Heritage Site.

Link to Current Government thinking on tramways
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Grant under 'Section 56'
No further details
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Pre-1984 Manchester Passenger Transport Executive set up Rail Study group (presumably financed by Local Government) and initiated the process for applying for County Council Block & Supplementary Grants which, at that time, were the way of financing major schemes. This process was superseded by the grant route via Section 56 of the Transport Act 1968.

 Nov 1984

First Parliamentary Bill deposited  - opposed by 3 property owners and Transport 2000

 Jly 1985

Application for Grant under 'Section 56'  

 Oct 1985

Transport Act changed the 'Section 56' rules  - application annulled
  Greater Manchester Council abolished  
  New Passenger transport Executive formed  

 Nov 1985

Second Parliamentary Bill deposited  


Both Bills get go-ahead  

 Jly 1987

Second 'Section 56' application submitted  

 Jan 1988

'Section 56' grant approved by Ministry of Transport subject to transfer of some risk to private sector.  

 Feb 1988

Both Bills get Royal Assent and become Acts of Parliament  

 June 1990

Final contracts signed  

 PTE borrowing
Authorised by Dep of Transport and underwritten by Govt. Repayments covered by adjustment to Standard Spending Assment and Revenue Support Grant, so no local tax increases.
 £ 70m
 Section 56 Grant   £ 50m
 Additional contributions for environmental enhancement
Cemtral Manchester Development Corporation and
European Regional Development Fund
 £ 10m



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Actual amount not known

 PTE borrowing authorised by HMG  63%
 Cash grant - 'Section 56' grant  30%
 Cash grant - European  4%
 Contribution from developers  3%

Repayment of PTE loans from:
  Cash from operating profits
  Eventual sale of operating company
  Govt Revenue Support Grant

Government objectives:
  Capture of 'added value' through fare box
  Transfer of risk to private sector
  Focus of private skills onto project control
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 Early 1980s West Midlands Rapid transit Study
 Feb 1988 Birmingham to Wolverhampton route confirmed
  Nov 1988 Bill deposited in Parlaiment
 1989 Act of Parliament passed
 1990 'Centro' (W. Midlands Passenger Transport Authority)
applied for 'Section 56' grant
  1995 Contract to design, build and operate the system
awarded to Altram, a consortium of Ansaldo Trasporti,
and John Laing. Later joined by Travel West Midlands,
(trading as Travel Midland Metro) as the operator.
 Nov 1995 Construction started


'Section 56' grant    £ 40m
Debt  £ 40m
European RDF grant  £ 31m
Passenger Transport Authority  £ 17.1m
Altram  £ 11.4m
Local Authorities +
Black Country Dev Corporation
 £  4m
Centro  £  1m



(European money has been made available for 'extras' like Wednesbury P+R but this may have already been included in the RDF figure.)


New extensions are now being planned and the financial structure has altered since Line 1 was built.

So far, £35m has been given by 'Chelsfield', the owners of the Merryhills Shopping Centre, to ensure that the Brierly Hill extension serves their premises. A further £10m has been raised for the Birmingham City Centre extension by a levvy on various developers at the time of granting Planning Permission.
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London Transport (LT) awarded a 99 year concession under the Private Finance Initiative to Tramtrack Croydon Limited (TCL) which is owned by:

Amey PLC
Sir Robert McAlpine
Bombardier ProRail
CentreWest Limited (a subsidiary of First Group)
Tram Operations Limited (operator)
Royal Bank of Scotland
3i PLC.

Approximate financial split:

Private sector finance  £100m 
'Section 56' Grant  £ 75m
LT's costs, including public utility diversions  £ 25m



Private finance includes bank debt and shareholder's equity and leasing of track and trams.
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Tracks appear to be owned by Blackpool Corporation and the operating rights leased to the tram company. Blackpool owes it's survival to having ploughed sufficient operating profits back into the infrastructure to avoid the problem of everything wearing out at once.

Currently Blackpool is bidding for a £230m Government grant to finance a major updating and expansion programme.
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This information above is based on earlier schemes but 'Section 56' funding may no longer be available now that it has been superseded by PFI. whereby the promoter has to provide a large amount of the funding and government money is paid in stages over the life of the contract. The Nottingham scheme (below) exemplifies this.

Currently government approval is needed before starting the Transport & Works Act procedure and to get that approval necessitates an involved process to show that you cannot achieve your aims
in a cheaper manner - The rules seem to be less clear now than earlier.

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The first line will be financed by the private sector consortium 'Arrow'.

Once the system is operating successfully, they will receive payments to a total value of £167m under the Government's Private Finance Initiative, over a 27 year concession period.
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For up-to-date information on current projects, see the websites of:

Nottingham, South Hampshire, Bristol


Comparing costs with other modes

Possible sources of Funding

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