Select Committee on Environment, Transport and Regional Affairs Minutes of Evidence

Examination of witnesses (Questions 340 - 359)



  340.  Could I ask when you received this information, the Local Government Association?
  (Mr Brearley)  This has been part of the annual round of discussions that we have with local government about all services, in fact, but this one in particular, in this case. They submitted their report last month.

  341.  Is it the intention of the Department to compile, it seems to me to be a pretty big black hole, when the surveys say that non-trunk roads, non-motorways are the worst recorded, deteriorating sharply, it seems to me a pretty big black hole, if you will pardon the pun, when the Department does not have any centrally-held figures that would indicate just how bad the situation is?
  (Mr Brearley)  I think, in this field, as in others, the point of the dialogue with local government is to establish what their assessment is of the situation and then to discuss it with them. I think I am right in saying that the National Road Maintenance Condition Survey does indeed reveal, as you say, that the situation on local roads has deteriorated quite sharply, actually after quite a long period of relative stability in its condition, going back certainly to 1990, so this is a fairly recent trend, is probably a result of underfunding over a period of the nineties, and is clearly something the Government will want to look at in assessing what provision needs to be made. And most of it is through the Revenue Support Grant and the local government funding arrangements to deal with this.

  342.  Could I ask one supplementary to that. You seem to imply, in your response, Mr Brearley, that there has been underfunding; could you confirm, or otherwise, that there has been a reduction, as well as underfunding, whatever that may mean, in the amount of money available to maintain non-trunk roads, non-motorways, local authority principal roads over recent years?
  (Mr Brearley)  For most of the period the amount of money being made available for non-principal roads through the Revenue Support Grant (because, in fact, it is an unhypothecated grant) has remained pretty steady in cash terms, while the amount of funding available for the relevant kind of capital maintenance on principal roads, fallen in recent years.

  343.  Are you able to advise us whether local authorities are spending up to these assessments, or are they spending the money pretty effectively and efficiently, as best they can, or is there a problem here?
  (Mr Brearley)  The short answer is that they are spending the money, the sort of sums that are assessed, on highways maintenance rather than on other programmes, and there is ongoing, again, debate and arrangements for discussing its efficiency and, indeed, improving its efficiency over the years, which are going forward, and there is no reason to believe that there is a great deal of inefficiency here to be dealt with.


  344.  But you seemed to indicate that that was their figure and that you, of course, were talking to them about it. Are you saying that that is a realistic figure? The wording you used was very specific, Mr Brearley.
  (Mr Brearley)  Yes, it was. Our view is that some of the standards they apply are unnecessarily high for some of the roads that we are talking about, such as of ordinary residential and minor roads, and that they probably do not have the volumes of traffic which require the kinds of standards which the Local Government Association's advisers have built in.

  345.  And yet your own traffic forecasts of growth show, what, 2 to 3 per cent per annum between 1993 and 1996, and a greater growth at the top of the range from 1997 onwards; 2001, traffic will have increased by 3 to 15 per cent from 1996 levels. These are not small increases?
  (Mr Brearley)  No, they are not, and, sorry, I am not saying that there are huge differences of opinion. The great mass of roads, of course, in terms of the mileage of roads, are relatively less trafficked, most of the traffic is, in fact, on, amongst local roads, the principal road network and the remainder of the primary route network, and other roads, of course, particularly in cities, have large volumes of traffic on them, but a lot do not.

Mr Stringer

  346.  London Underground. Can you give the Committee the latest estimate for the extra costs of the Jubilee Extension?
  (Mr Ballard)  The latest estimate, based on the May 1998 Quarterly Review, is that the outturn prices will be £2.812 billion; that compares with the original forecast of £2.141 billion.

  347.  Sorry, can you give me those figures again, I did not quite catch that?
  (Mr Ballard)  £2.812 billion.

  348.  Against?
  (Mr Ballard)  £2.141 billion.

  349.  How much of that is attributed to having to put in conventional signalling systems, as opposed to the more modern technology?
  (Mr Ballard)  I do not have a breakdown in that form, but I can obviously investigate it for you. But I would not have thought a large proportion was attributable in that way, but I will let you know.

  350.  Thank you. And when will the Extension be open?
  (Mr Ballard)  London Transport's estimate is spring 1999.

  351.  Within London Transport and elsewhere within the Department, you have encouraged and engaged in a number of Private Finance Initiatives. Can you tell us how far into the future you account for the revenue costs of those Private Finance Initiatives, and whether you compare the cost over the length of those contracts with what would have been the cost to the public sector of a wholly public sector scheme?
  (Mr Ballard)  I think the simplest example is to take the National Roads Programme, where if we do a PFI we will allow for the forward revenue costs over the life of the project, we will put into our forward costing the ongoing costs year by year, so there is a tail which we will take into account. And, obviously, in deciding whether or not a PFI project is sensible in the first place, we will take account of the ongoing revenue costs, as well as the upfront savings. So it will be looked at in those terms. If we are extending that to other parts of the transport system, for example, the London Underground, the proposition that is being investigated there, the proposal, with a public/private partnership, would envisage the revenue costs being met, if you like, off the public sector balance sheet.

  352.  Yes, I understand that, but there was a PFI scheme within London Underground before the current proposals for a PPP. What I was really trying to get at was whether, for individual projects that are either going to happen, like the Scottish Air Traffic Control Centre, or the PFI project that has happened, to renew the rolling-stock, I think it was, on London Underground, there is obviously an initial saving, as the private capital comes in, and then there is, as you say, a long tail. What I am trying to get at is, is there a comparison with what the cost to the public sector would be if you paid the capital up front, the debt on that, project by project, as opposed to going down a PFI route?
  (Mr Ballard)  We would certainly look at the traditional funding route as an alternative, to see what the costs of going down that route were, and also the wider benefits.

  353.  But will not the key factor be, when you look at that, the fact that the Treasury will say you actually cannot have that great wodge of money, to start with, and so you are forced into going down the road of something that is immediately less costly in year one? And what I am trying to get at is, what is the cost over 20 years, because it does not appear in the Annual Report, apart from a sort of exponential increase in revenue over two years, in Table C.1?
  (Mr Ballard)  We would certainly take it into account, and you are right that the availability of Treasury funding and public expenditure is a constraint, and that will be part of the equation in terms of the timing under which you might have resources available under a traditional public expenditure regime, and when you might actually be able to afford it using an alternative regime, in other words, getting your benefits earlier, that is all part of the equation. Mr Rowlands may want to add something about the Scottish Air Traffic Control system.

  354.  Either that or the London Underground system. I have yet to see, and I have asked a number of times, you can see the immediate saving, but a cost over the whole length of the project, compared with upfront, 100 per cent public funding?
  (Mr Rowlands)  Could I try to answer your question.


  355.  Mr Rowlands, we have got a whole section on NATS. Were you going to reply on NATS then?
  (Mr Rowlands)  No, I was going to reply on roads and the Underground, if I may. The Highways Agency, I believe, has undertaken an analysis comparing the full-life costs of privately-financed roads with the expected cost had they been built in the public sector, and that analysis shows that privately-designed, built, financed and operated roads have come out cheaper than the traditional road built in the public sector. That may have something to do with the claims culture of road construction companies, which, of course, you avoid if they are actually building the thing and operating it themselves. And, from memory, when the PFI deal was done for new rolling-stock for the Northern Line, how can I put this, slightly to the surprise of officials, who thought it would be more expensive in the private sector, it turned out, on the same sort of analysis on a full-life cost basis, to be somewhat cheaper than a privately-funded leasing deal.

Mr Stringer

  356.  That is interesting. Is it possible to share that information with the Committee?
  (Mr Rowlands)  We will do that.

  357.  And is similar information available on NATS and other PFI schemes that you have sponsored?
  (Mr Rowlands)  I think it is more difficult to answer the question on a PFI new Scottish Centre, because that deal is not yet finally negotiated.

Mr Donohoe:  There is one already that has been: Oceanic.


  358.  Mr Rowlands, let us put it to you like this. I am sure you have a number of these projects you could give us in some detail that have taken place, and the DBFOs are a good example, but also there are others. It would be very helpful to have that information?
  (Mr Rowlands)  We will be happy to do that.

Mr Pickles

  359.  I want to just ask similar kinds of questions to those from Mr Stringer but in a slightly different way. You, presumably, must have quite a lot of contact with your contemporaries in other European Union countries at official level. When you look at the way in which they deal with these kinds of construction questions, do you believe that the rules that they have, with regard to what is included in public finance, give them a better advantage over what we have?
  (Mr Ballard)  We all, in theory, operate within the same overall definitions laid down by the Commission, and so on. There is a traditional view that the French seem to have a more fluid interpretation of these things, but I do not know if—

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