Counting the cost: financial scrutiny of the Department for Transport 2011-12 - Transport Committee Contents

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.[32] 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 address.[33]

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.[34] Highways Agency schemes were treated similarly.[35] Ministers were able to use the categorisation of projects to explain why some had been funded while others had not.[36]

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".[37] 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.[38] 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".[39]

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".[40] 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".[41]

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 growth.

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

33   Ibid., paragraph 95. Back

34   Investment in Local Major Transport Schemes, DfT, Oct 2010. Back

35   Investment in Highways Transport Schemes, DfT, Oct 2010. Back

36   For example, see HC Deb, 2 Dec 10, cc946-48. Back

37   Investment in Local Major Transport Schemes: Update, DfT, Feb 2011, p8. Back

38   For more information see Periodic Review 2013: first consultation, Office of Rail Regulation, May 2011, especially table 5.1. Back

39   Q115. Back

40   Qq114, 156.  Back

41   Q100. Back

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Prepared 23 February 2012