1 Making strategic spending decisions
1. As part of the 2010 Spending Review the Government
announced that the transport budget would be 15% lower, in real
terms, by 2014-15 than the £12.8 billion budget in 2010-11.
Some 60% of the transport budget is spent on building or renewing
infrastructure, and these capital budgets were due to be cut by
11%, in real terms, compared to a 21% reduction in other budgets
which include funding for items such as routine maintenance, as
well as the Transport for London grant.
The Department told us that it had considered both short-term
cuts and more sustainable long-term changes in its search for
cost savings. We acknowledge that the Department appears to have
been one of the better performing Departments in terms of the
process it undertook, as part of the Spending Review in 2010,
to find cost savings and make cuts to budgets.
2. The Department explained that the extra spending
for transport announced in the 2011 Autumn Statement meant that
the overall level of budget reductions would now be less severe.
It told us that capital budgets will now only reduce by around
3%, whereas the reduction in other budgets is broadly unchanged.
This was due to significant new transport spending over the Spending
Review period, including £1.7 billion capital spending on
transport infrastructure. There was also a further £950 million
of improvements to the rail network detailed in the Autumn Statement,
to be financed through Network Rail borrowing.
3. The Department acknowledged that transport spending
decisions need to be planned over a long time-horizon, and this
can make it difficult to vary spending plans at short notice.
The Department had begun preparing for the Spending Review from
2009, including commissioning projects to consider how it could
do things fundamentally differently. However, there was no comprehensive
strategy to inform the Department's decisions so it was difficult
to judge whether decisions impacted on strategic objectives like
economic growth. Instead
of having a clear strategy the Department explained that it had
used a "pipeline" approach to prioritise its capital
programmes, so that it could speed up the rate at which it commissioned
projects if more money became available.
The Department told us that it accepted that it had no comprehensive
strategy for prioritising resources in the past but that it was
doing work to improve its strategic understanding. The National
Audit Office report found that the Department is currently developing
a longer-term and more comprehensive approach to spending decisions.
4. The Department accepted that the public should
know the impact of spending decisions in transport, but we found
that it is not always clear how spending decisions relate to the
Department's primary objective to promote economic growth, or
indeed to its other objectives such as tackling social exclusion.
As part of major investment decisions, the Department examines
both the economic and social impacts, but only 13% of the capital
budgets approved during the Spending Review had been subject to
a full multi-criteria analysis, which helps make direct comparisons
between different options.
In addition, although the Department had good data on most areas
of spend, some areas were not adequately scrutinised: there was
no analysis of the relative benefits and costs of cuts to rail
spending and the Department was unable to provide a figure for
the overall impact on the economy of reducing road maintenance
2 Q 5; C&AG's Report paras 1, 1.6, Figure 2 Back
Q 4; C&AG's Report para 6, 11 Back
Qq 4, 5, 73, 75; C&AG's Report, para 4 Back
Qq 4, 11; C&AG's Report, paras 6, 7 Back
Qq 5, 9 Back
Q 8; C&AG's Report para 7 Back
Q 112, 113, 139 Back
Qq 9-18, 112; C&AG's Report para 2.9 Back
Qq 23-34, 51; C&AG's Report para 2.13 Back