The outcome of the government’s current Spending Review is due to be announced on 11 June. It will set spending plans for a minimum of three years and will prioritise delivering the government’s missions. Departments will be expected to make better use of technology and seek to reform public services, to support delivery of the government’s plans for ‘a decade of national renewal’.
The intention is ambitious: ‘This will not be a business-as-usual Spending Review. The government has fundamentally reformed the process to make it zero-based, collaborative, and data-led, in order to ensure a laser-like focus on the biggest opportunities to rewire the state and deliver the Plan for Change.’
In support of this approach, the former National Infrastructure Commission has been transmuted into the National Infrastructure and Service Transformation Authority (NISTA), with a remit to support the implementation of a 10-year infrastructure strategy. NISTA is a joint unit of the Treasury and Cabinet Office whose aim is to unite long-term policy and strategy with best-practice project delivery, so as to transform the delivery of infrastructure, service transformation and other major projects, to ensure the government’s investments are driving growth and delivering the government’s missions. The newly announced CEO of NISTA is Becky Wood, a civil engineer by profession, whose experience includes a decade-long role at the Department for Transport (DfT), where she acted as senior responsible officer for major projects such as Crossrail, Thameslink and the Intercity Express Programme.
As well as these spending and organisational developments, a number of Departmental permanent secretaries are stepping down, including Dame Bernadette Kelly who has been at the helm of the DfT for the past eight years. There will be new leadership, but whether with transport experience remains to be seen.
So we could be about to see a substantial change in approach to transport investment, to reflect both the government’s enthusiasm for infrastructure investment to boost economic growth and for new approaches to achieving better outcomes, as well as to remedy the DfT’s past shortcomings in managing investment, which led to the truncation of HS2 and the abandonment of the Smart Motorway programme. On the other hand, transport investment is a tanker that is very slow to turn around, with many parties benefitting from present arrangements, so we might well end up with more of the same, with only cosmetic changes.
I want here to consider the DfT’s record in planning and managing road and rail investments, both competence and the benefits achieved, to assess whether the Department is likely to be fit to continue to manage very large investment programmes. As a former civil servant, I am aware of the difficulties in assigning responsibilities, given the central role of politicians with manifestos to be implemented, and also given unanticipated events, of which the covid pandemic is a good, albeit extreme example. Nevertheless, if decisions are to be ‘robust’ (a favourite appellation), a government department must be able to successfully navigate these swirling currents. Too long a list of crashes and wrecks must raise doubts about competence and general approach.
National Audit Office
The National Audit Office (NAO) provided an overview of the DfT for the new Parliament in November 2024, a good place to start. The NAO is the one body to offer a comprehensive and rigorous assessment of the performance of each government department, pulling no punches.
The NAO records that for 2023-24, overall net spend by the DfT was £44.3 billion, comprising:
- the largest area of spend was on rail (£29.9 billion), most of which was on infrastructure management and enhancements delivered through Network Rail (£18.2 billion) and High Speed Two (HS2) (£8.5 billion). A further £2.6 billion was spent on subsidies and support for passenger train services. There were also book losses of £2.2 billion arising from the cancellation of Phase 2 of the HS2 programme and changes to how the redevelopment of Euston station would be delivered;
- strategic road management and enhancements in England through National Highways (£7.1 billion);
- funding to local authorities in England for their management of local transport (£6.1 billion), including road maintenance, bus subsidies and concessionary fares.
The NAO has assessed the nine principal risks faced by the DfT and its arm’s-length bodies. This is a formidable list, of which only a couple of items have decreased in severity in the past year. Particularly relevant to the investment programme are the Department’s inability to deliver its major projects to time or cost or deliver the expected benefits; inability to deliver sufficient carbon savings, inability to adequately maintain infrastructure, and to make adequate forecasts of future travel demand or changes in the transport system, thus resulting in ineffective decision making.
Noteworthy observations from the NAO overview include:
- Although the DfT had identified key problems that needed to be addressed by Rail Reform, it had not been able to translate this into a programme it could implement. DfT had committed to a timetable that it had identified as high-risk, reflecting ministerial ambition, but without a clear plan for what it needed to implement.
- Delays to projects on the strategic road network meant they would cost more and take
longer to deliver than planned. National Highways could have done more to plan for and manage the risks arising from the portfolio.
- DfT does not have a good enough understanding of the condition of local roads and does not use the limited data it has to allocate its funding as effectively as possible.
The findings of earlier NAO reports are also relevant:
- In 2019, the NAO concluded that the road tunnel proposed for the A303 near Stonehenge had a significantly lower benefit–cost ratio than is usual in road schemes; given experience of cost increases on projects of this kind, this ratio could move to an even lower or negative value. In the event, the new government cancelled the project in July 2024 due to cost concerns and a need to address public finances.
- In 2022, the NAO reported that by 2025 National Highways will have completed less work on road enhancements comprising the RIS2 programme and at a higher cost than originally planned. National Highways and DfT could have done more to plan for and manage the potential risks to their portfolio of enhancement work.
- In 2023, the NAO found that the rationale for East West Rail did not rest on the strength of the benefit–cost ratio for the project alone – which is poor – but on its wider strategic aim of overcoming constraints to economic growth in the Oxford–Cambridge region. Achieving the necessary value from the government’s investment in East West Rail will require stronger strategic alignment across government.
Office of Rail and Road
Another source of judgement of the performance of the DfT’s operational organisations is the Office of Rail and Road (ORR). In its most recent annual assessment, National Highways was found to be at risk of not being able to fully deliver the expected benefits of the RIS2 (2020-25) investment programme for road users and taxpayers, with four of its 12 key performance indicators below target or off track. There continue to be large variances between the company’s planned and actual renewals programme, without a clear explanation as to the cause. The consequence is that National Highways has needed to take account of a gap of £919 million between its Statement of Funds Available for the five years of RIS2, and the funding available within DfT business plans for Year 4 and Year 5. Moreover, the ORR found that National Highways was non-compliant with its licence in respect of the provision of data and information to allow the ORR to perform its statutory duties, to protect the interests of road users and ensure the efficient spend of public money.
Rail investment
Professor Steven Glaister, former Chair of the ORR, has recently discussed the prospects for the planned reform of the railways. He identified a crucial requirement: finding enough public money to meet everybody’s aspirations for a cheap, high-quality service. Yet he recognised that roads were providing for nine times the mechanised movement as rail, so that in the current financial climate it seems more likely that the level of financial support for rail will fall rather than be increased in the near future.
The DfT has recognised the problematic case for rail investment. In its 2021 Integrated Rail Plan for the North and the Midlands, it noted that rail schemes in the North are at increased risk of being considered poor value for money when applying conventional cost-benefit analysis, driven in part by smaller city populations, different travel patterns, as well as the general high cost of building rail infrastructure (p98).
In the same DfT document, it was also recognised that ‘Over the last 50 years the time people spend travelling has remained relatively constant, though distances travelled have increased . . .Overall, people have taken the benefits of better transport links as the ability to access a wider range of jobs, business and leisure opportunities, rather than to reduce total time spent travelling.” (p39). It is, however, noteworthy that the DfT has not seen fit to revise its Transport Analysis Guidance, to reflect this recognition of the importance of access as the long run benefit of transport investment.
In my recent book, Travel Behaviour Reconsidered in an Era of Decarbonisation, I endorse the DfT’s insight that enhanced access is the main benefit of transport investment, not travel time savings upon which almost all orthodox investment cost-benefit analysis is based. One crucial difference is that access benefits are subject to diminishing returns, which put a natural limit to transport investment, whereas time saving are subject to no such limit.
There is a distinction to be made between, on the one hand, most areas of national infrastructure where a good case can be made for more investment – electricity supply and distribution, water and waste services, fast broadband, flood defences; and on the other hand, transport infrastructures – road, rail, airports – which are, arguably, substantially mature, with limited benefits from additional capacity on account of diminishing returns.
Transport decarbonisation
Decarbonisation is a policy central to the government’s agenda. Legally-binding carbon budgets are a key metric, used to measure progress to achieve Net Zero. The DfT’s Transport Decarbonisation Plan of 2021 set out estimations of the carbon savings planned to be achieved over the period 2020-2050, including 1-6 MtCO2e arising from increases in active travel, 21-22 MtCO2e from railway electrification, and 620-850 MtCO2e from zero emission cars and vans. What was not discussed were the increased carbon emissions from new transport infrastructure, both from increased volumes of oil-fuelled vehicles and from embedded carbon in materials such as concrete and steel. The disregard of these additional sources of carbon has been justified at the level of the individual road investment project as ‘de minimis’. Yet the aggregate of such projects forming a road investment programme must be substantial.
The latest National Networks National Policy Statement, issued at the tail end of the Conservative government, continued the project-level focus on carbon emissions, not precluding schemes with net increases, and not requiring assessment of emissions at programme level. There is a legal challenge underway which, if successful, could change the situation. But the concern is that the conflict between new road construction and climate policies is neither made transparent nor resolved. In the meantime, the DfT’s methodology for assessing project carbon emissions focuses on improving cost-effectiveness, for example by estimating the monetary value of wider social benefits per tonne of CO2e emitted. But this does not provide any constraint on investment in new road capacity to align with climate change objectives.
I have previously pointed out the conflict between the government’s support for additional airport capacity and its climate change objectives – another failure to reconcile policy ambitions.
Conclusions
The failures and inconsistencies of the DfT’s policies and practice for major infrastructure investment are numerous and noteworthy, raising a question of the Department’s fitness for purpose. As a point of comparison, we might consider Transport for London, generally considered a world-class regional transport authority, responsible inter alia for planning and execution of major projects.
Not everything has gone to plan for TfL, notably Crossrail for which had a cost overrun of £4 billion, and which opened three and a half years later than planned. This arose in part from the challenges of tunnelling under central London, enlarging existing stations to take double length trains on new platforms, and the need to operate rolling stock with different power and signalling systems for the underground and surface segments. Nevertheless, the scheme once opened has been admired for its design – it won the 2024 RIBA Stirling Prize, the prestigious annual award that recognises the UK’s best new architecture. And the Elizabeth Line, as it is now named, is very popular with users, increasing London’s rail capacity by about 10% and reducing journey times.
A contrasting success has been TfL’s creation of the Overground from a disparate collection of underused rail assets. As well, TfL has successfully modernised much of the Underground, and has introduced the central London congestion charge, the city-wide Ultra Low Emission Zone, a single ticketing system for all modes of public transport and the ‘touch in/touch out’ contactless payment system.
As a former London deputy mayor for transport, Heidi Alexander, the present Secretary of State, is well aware of TfL’s strengths and achievements, as is her rail minister, Lord Hendy, a former TfL Commissioner. It would probably be regarded as going too far to propose outsourcing the DfT’s infrastructure planning and execution responsibilities to TfL, putting transport professionals in charge, rather than generalist civil servants advised by blinkered economists. Nevertheless, further devolution of responsibility for London’s commuter rail lines to TfL would make good sense. And conceivably, NISTA could bring to bear a more effective approach to planning transport infrastructure improvements.