Reducing costs in the Department for Transport - Public Accounts Committee Contents

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.[2] 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.[3]

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.[4]

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.[5] 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.[6] 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.[7]

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.[8] 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.[9] 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 spending.[10]

2   Q 5; C&AG's Report paras 1, 1.6, Figure 2 Back

3   Q 4; C&AG's Report para 6, 11 Back

4   Qq 4, 5, 73, 75; C&AG's Report, para 4 Back

5   Qq 4, 11; C&AG's Report, paras 6, 7 Back

6   Qq 5, 9 Back

7   Q 8; C&AG's Report para 7 Back

8   Q 112, 113, 139 Back

9   Qq 9-18, 112; C&AG's Report para 2.9 Back

10   Qq 23-34, 51; C&AG's Report para 2.13 Back

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Prepared 13 March 2012