4 The Highways Agency
Reform
39. The Highways Agency was created
in 1994 as part of the Next Steps agency programme, which reallocated
the operation and implementation functions of Government Departments
into a series of executive agencies.[76]
Alan Cook, non-executive chairman of the Highways Agency, explained
the benefits now possible by changing the agency into aGovernment-Owned
Company (GoCo), fully funded by the DfT:
There are significant limitations
on the way the organisation is required to deal with the supply
chain today and, if we gave greater freedom, I believe it would
enable us to get a better deal.[77]
He anticipated that the Highways Agency
would focus on increasing capacity on existing roads:
…the legacy of the organisation
is one of civil engineers and road builders, and as the years
have gone by we have moved from a road builder to a road operator…
Most of the work of the future, with the level of investment we
are talking about, is going to be more smart motorways which increase
the capacity of an existing route.[78]
Graham Dalton, chief executive of the
Highways Agency, explained his support for the changes:
I think the real benefit—the
real advantage—that the plans will bring is a clear brief.
The Government's proposals are for a step change in performance
of the network… With the proper medium to long-term plan
that the new company is charged with delivering, based on outcomes
and how the network performs, not tactical interventions, it will
be far easier to hold the company to account.[79]
40. We heard a good deal of comment
about the planned change to the Highways Agency. The Civil Engineering
Contractors Association (CECA) expressed strong support for the
proposal. The CECA told us that the GoCo arrangement would provide
confidence to suppliers and contractors that the Government programme
of investment in roads projects would not change, which would
improve the value of tenders for projects.[80]
41. Some witnesses were less enthusiastic
about the proposed change. Professor Goodwin said that he did
"not really see the logic in the idea of a Highways Agency
that of itself would be more efficient if it was less close to
political influence."[81]
The Highways Agency Trade Union Side told us that the advantages
claimed for a GoCo were deliverable under the current arrangements,
provided there was "strong leadership at senior levels across
the department, that the central department relinquish some of
its centralisation tendencies, and that Ministers do not interfere
with the day to day running of the Agency".[82]
The AA also reported doubts from the majority of its members:
…our members were quite happy
with the Highways Agency running the roads. There was quite a
lot of doubt about transferring it to a "roadco", as
it were. Quite a high percentage-about 58% - thought that the
state should run the roads, which is surprising, especially in
the light of promises of extra investment that would come [from
a roadco].[83]
42. The Minister told us that the proposals
for the Highways Agency, along with its five-year funding package,
would enable the agency to tender maintenance contracts for between
five and seven years, rather than for one or two years as at present.
This would mean greater value contracts could be negotiated.[84]
43. We questioned the Minister on whether
the reformed Highways Agency would simply increase salaries in
exchange for a change in output that could have been achieved
under a reformed version of the existing agency.[85]
He argued that increasing salaries might be needed in order to
attract recruits from global organisations:
…it is important that, if we
are to attract and retain the best, we pay the sort of salaries
that are needed in that particular field.[86]
44. We are not convinced by the case
for establishing the Highways Agency as a GoCo. Its remit will
not be extended; it will not have new funding streams; and it
will still be subject to changes in Government policy, while incurring
ongoing oversight costs. We are not persuaded that increasing
salaries will be a value-for-money way of increasing skills in
the company. In that context, we note that the agency's current
chief executive has worked in both the private and public sectors.
The proposed benefits, including the implementation of the five-year
funding plans, seem achievable through better management of the
existing Highways Agency.
Oversight
45. In its consultation on the changes
to the Highways Agency, the DfT proposed that the Office of Rail
Regulation (ORR) would have its role extended to include oversight
of the reformed agency, reporting to the Secretary of State but
with no regulatory powers itself.[87]
In addition, it proposed expanding Passenger Focus's role to include
a customer research service for road users.[88]
46. Alan Cook and Oxfordshire County
Council both suggested that this oversight role would be adequate,
given that the Highways Agency GoCo would not be charging for
use of the roads.[89]
Other witnesses argued that the proposed oversight arrangement
would leave the ORR with insufficient influence over the reformed
Highways Agency.[90]
The RAC Foundation noted that the ORR would have no powers to
take action against inefficient performance and would only report
to the Secretary of State.[91]
47. Oxera compared the monitoring of
the proposed GoCo with that of other utilities. It noted that,
if the DfT were to allocate a "quasi-regulatory role"
of the GoCo, it would need good data on the SRN's costs and assets.
It was concerned that the DfT has insufficient information-gathering
powers to obtain this data, which—bearing in mind the example
of Network Rail—might take many years to research.[92]
Oxera outlined what would be necessary to ensure that the new
agency spent money efficiently:
A lot of work goes into the other
regulated utilities, in particular rail but also water, where
people are employed by the regulator to go into the company and
to make sure that money is being spent in an efficient manner;
so quite a lot of resource will have to go on checking the money
has been spent… There are many checks and balances that we
see in other infrastructure sectors that we would expect to see
coming into the strategic road network and, to the extent that
it is relevant and necessary, into the local road network as well.[93]
48. The Minister told us that he had
not made up his mind on the best model for regulating the proposed
GoCo:
We also need to ensure that we scrutinise
very well how effectively money is being spent, or not, as the
case may be. That is the other aspect of scrutiny. I am still
undecided as to the best way of doing it. I am not sure whether
the Office of Rail Regulation is the right route, or whether a
panel of experts would be the way to do that.[94]
An advisory or oversight body reporting
to the Secretary of State would not be sufficient to scrutinise
the performance of the proposed Highways Agency GoCo, because
the GoCo would not be accountable to it. The same argument applies
to establishing a panel of experts. Any such panel or body would
lack the credibility of an independent regulator.The new scrutiny
body must have the power of a full regulatory authority. An expanded
ORR could undertake this role.
49. We also heard concerns about Passenger
Focus's ability to take on the scrutiny remit for the GoCo.[95]
Professor Glaister told us:
…their skill is in representing
the interests of public transport users. They would have to expand
greatly their portfolio of skills to deal with road users, not
least because a third of this traffic is freight. They are also
not in the business of measuring the performance of the network,
as distinct from measuring the attitudes of users.[96]
The CBT defended Passenger Focus, saying
that there had been similar scepticism when Passenger Focus expanded
its role into scrutiny of buses, but argued that Passenger Focus
had taken over that role successfully and demonstrated that it
could expand.[97] The
Minister told us that Passenger Focus was a "good model"
for scrutiny and that he was "reasonably disposed to look
at how they may engage and represent road users".[98]
50. We note that Passenger Focus
has a record of successfully expanding to take on additional duties
and therefore recommend extending the remit of Passenger Focus
to include scrutiny of the proposed GoCo. It must be subject to
a duty to represent the concerns of all SRN users to the DfT and
should set up a panel of road user stakeholders to monitor its
work.
Engagement
51. Several witnesses told us about
their relationship with the Highways Agency. The Local Government
Association said that, in the past, the agency has "not engaged
in a way that we feel is helpful", given that the local road
network supported the SRN by providing access and diversionary
routes.[99] One business
group cited its recent experience in relation to the proposal
to upgrade the A14 from Cambridge to Huntingdon, which they suggested
had been subject to insufficient consultation and a lack of engagement
with road users outside the immediate area of the project.[100]
Jordan Products Limited, developers of the Conemaster system for
lifting and laying traffic cones, believed that there were "vested
interests" within the agency and among its contractors which
prevented them from engaging with companies offering technical
innovations that would make the agency's work more efficient.[101]
The Road Haulage Association set out its perspective:
I am not sure that the Highways
Agency is particularly good at consulting, sometimes with other
local authorities, never mind organisations such as the RHA, but
there is a contribution we can make, with our members, to schemes
locally, and also nationally, to scrutinise more closely how the
Highways Agency is operating.[102]
52. We discussed the current relationship
of the Highways Agency with its customers and other stakeholders
with Alan Cook, non-executive chairman of the agency. He told
us that the agency had not focused on this enough in the past,
but that it was trying to improve the situation:
There has not been a strong enough
customer ethos, whether that customer is the person driving a
vehicle on the strategic road network or managing a piece of road
that interfaces with it. That is an area we have been focusing
on a lot in the last 18 months.[103]
53. The Chartered Institution of Highways
and Transportation (CIHT) suggested that, before the GoCo is set
up, stakeholders should be asked to feed in to its objectives.
Local authorities, LEPs, community groups, other organisations
and individuals would be involved in developing what would be
the GoCo's performance specification. The final specification
could emphasise the importance of the GoCo's work being able to
capture the requirements of the local road network.[104]
54. Graham Dalton, the chief executive
of the Highways Agency, defended its record on public engagement:
There are a lot of local authorities,
and I run a relatively lean business. I do not think we offer
a full active dialogue all the time with all local authorities.
We have a couple of hundred of authorities to deal with, and I
am sure some will think we do not engage enough, and some will
be quite happy.[105]
55. The proposed new Highways Agency
GoCo must have a realistic performance specification for engagement
with its stakeholders. This must instil in the GoCo a view of
road users as customers and other organisations as partners in
developing roads for freight and passengers, as part of an integrated
transport network. This specification must be agreed with local
authorities, LEPs and road user groups before the GoCo is set
up.
76 The Accountability Debate: Next Steps Agencies,
Research Paper 97/4, House of Commons Library, January 1997 Back
77
Q 38 [Mr Cook] Back
78
Q 45 [Mr Cook] Back
79
Q 199 [Mr Dalton] Back
80
SRN 21, SRN 64 Back
81
Q 13 [Professor Goodwin] Back
82
SRN 12 Back
83
Q 122 [Mr Watters] Back
84
Q 274 [Mr Goodwill] Back
85
SRN 70 Back
86
Q 272 [Mr Goodwill] Back
87
SRN 8, DfT, Consultation on transforming the Highways Agency into a government-owned company,
October 2013 Back
88
Ibid. Back
89
Q 57 [Mr Cook], Q 110 [Mr Tugwell] Back
90
Q 145 [Mr Spiers], Q 158 [Mr Hugill], Q 172 [Professor Glaister],
SRN 33, SRN 35 Back
91
Q 192 (Professor Glaister] Back
92
SRN 15 Back
93
Q 193 [Mr Meaney] Back
94
Q 253 [Mr Goodwill] Back
95
Q 76 [Ms Dee & Mr Radley], Q 122 [Mr Bizley] Back
96
Q 192 [Professor Glaister] Back
97
Q 100 [Mr Joseph] Back
98
Q 253 [Mr Goodwill] Back
99
Q 141 [Cllr Box] Back
100
SRN 11, SRN 31, SRN 33, SRN 39 Back
101
SRN 51 Back
102
Q 122 [Mr Semple] Back
103
Q 37 [Mr Cook] Back
104
Q 150 [Mr Hugill] Back
105
Q 237 [Mr Dalton] Back
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