Examination of witnesses (Questions 340
- 359)
WEDNESDAY 1 JULY 1998
MR JOHN
BALLARD, MR
CHRIS BREARLEY
and MR DAVID
ROWLANDS
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.
Chairman
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.
Chairman
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.
Chairman
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—
|
