3 Project appraisal
20. How the DfT achieves value for money in its
decisions on infrastructure investment was a central theme of
our Transport and the Economy report. In reply to that
report, the Government drew attention to the five different components
of the business case for a transport project.
We recommended that "more comprehensive information and greater
transparency should be provided in the decision-making process
so that both the technical basis and ministerial judgements are
explicit", a recommendation that the department did not fully
21. The DfT's approach to investment in road
projects initially demonstrated a rigorous approach to project
appraisal. Projects for local major transport schemes were split
into different categories to reflect the level of preparedness
of their business cases.
Highways Agency schemes were treated similarly.
Ministers were able to use the categorisation of projects to explain
why some had been funded while others had not.
22. Focusing on the local major transport schemes,
it was announced in February 2011 that 45 schemes were competing
for funding on the basis of value for money, deliverability, strategic
importance, modal and regional balance, and the proportion of
funding from non-DfT sources. The DfT warned that it "did
not expect that all these schemes will be funded when final decisions
are made in December".
However, all of these 45 schemes were given the go ahead in the
autumn economic statement, as was a scheme for a Manchester Airport
link road which had not been included in the appraisal process.
23. A structured process of a different kind
exists for deciding on rail investment schemes. Network Rail puts
forward an initial industry plan listing desirable projects to
be undertaken in the next five-year planning period; the Government
responds with a high level output specification and statement
of funds available; Network Rail then publishes a strategic business
plan; and the Office of Rail Regulation uses all of this information
to decide what Network Rail should deliver and at what cost.
Preparations for the next planning period, from 2014-19, are well
underway. The autumn statement by-passed this process by committing
the Government to a number of new rail schemes, including a new
railway from Oxford to Bedford and electrification of the North
Trans Pennine route. It is not clear whether these schemes are
additional to the normal planning process for the 2014-19 period.
Steve Gooding of the DfT said he was "hopeful ... that what
we are seeing here is going to be a sustained extra" investment
but he described the major rail announcements as "some spending
earlier than otherwise would have been the case, rather than ...
straightforwardly additional to what would have been the case".
24. Asked for the rationale for the new rail
schemes, Ms Greening described them as "a blend of schemes
that were ready to be implemented now and could be got on with".
A similar justification was given for the new road projects: "we
were quite keen, above all, to make sure we could get on with
projects that were ones we could deliver in the short term".
25. We welcome the additional
investment in road and rail infrastructure projects announced
in the Chancellor's autumn statement. These have been prioritised
because they can proceed quickly and thus help boost economic
activity. Nevertheless, we have some concerns about how these
schemes have been appraised to ensure they offer sufficient value
for money. A project's readiness to proceed does not necessarily
demonstrate that it is the best way of using public money to promote
26. In relation to rail, we
recommend that the Government regard the rail schemes announced
in the autumn statement as additional to those which the Government
will include in its high level output specification (HLOS) for
the 2014-19 period. Reducing the scope
of the HLOS to take account of these new projects would be counter-productive
if the Government's aim was to increase spending on infrastructure
in order to help improve the economic situation.
32 Transport and the Economy, paragraph 43. Back
Ibid., paragraph 95. Back
Investment in Local Major Transport Schemes, DfT, Oct 2010. Back
Investment in Highways Transport Schemes, DfT, Oct 2010. Back
For example, see HC Deb, 2 Dec 10, cc946-48. Back
Investment in Local Major Transport Schemes: Update, DfT,
Feb 2011, p8. Back
For more information see Periodic Review 2013: first consultation,
Office of Rail Regulation, May 2011, especially table 5.1. Back
Qq114, 156. Back