Maintaining strategic infrastructure: roads - Public Accounts Committee Contents

1  Funding for road maintenance

1. On the basis of a Report by the Comptroller and Auditor General, we took evidence from the Department for Transport (the Department) and the Highways Agency (the Agency) on the maintenance of England's road infrastructure.[2]

2. England's strategic and local road networks are made up of 187,000 miles of roads, 61,000 bridges and numerous other infrastructure assets including embankments, retaining walls, and drainage systems. The strategic road network, which includes almost all motorways and the most important 'A' roads, consists of 4,400 miles of road with 9,000 bridges. The remaining local roads are 183,000 miles long, including 113,000 miles of urban backstreets and rural lanes. The combined networks carry 90% of passenger traffic and 68% of freight movements and are the nation's most valuable infrastructure asset at around £344 billion. Just under 1% of the asset value (£4 billion) was spent on maintaining England's roads in 2012-13.[3]

3. The Department is responsible for operating, maintaining and improving the strategic road network through the Agency. In 2012-13, the Agency received £2 billion from the Department and £68 million from other sources, of which it spent £720 million on maintenance.[4] Local roads are managed and maintained by 152 local highway authorities, including Transport for London. The Department sets the legislative and policy framework and provides guidance on network management to local highway authorities. The local highway authorities spent £3.3 billion on maintaining local roads in 2012-13, including £779 million capital funding provided by the Department. Local authorities' revenue funding comes mainly from the Department for Communities and Local Government, council tax and a share of business rates that they retain. Authorities use this funding for a range of services, including road maintenance.[5]

4. In 2012, we reported in Reducing costs in the Department for Transport that the Department cut road maintenance budgets by £1.2 billion over the four years to March 2015.[6] We concluded that the Department did not have a full understanding of the likely impact of these reductions, and that these reductions risked deterioration of the road network and higher costs in the long run.[7] The Department and Agency told us that since then, highways authorities have taken a range of actions to reduce their maintenance expenditure.[8] For example, the Agency told us that instead of requiring its contractors to keep incident support staff on standby around the clock, it now specifies that roads should be kept operational. This means that staff are now able to do other work, such as grass cutting, when they are not needed to deal with incidents on the network. We were also told that some highway authorities are achieving efficiency savings through innovative methods such as sharing depots with other authorities or by sharing examples of good practice.[9]

5. Although it is too early for us to judge the long-term impact of budget reductions, the most recent data show that the surface condition of the strategic road network has not declined. There is less information on the state of local roads but the Department admitted that there is evidence of stress and strain with the greatest problems in London and the South-East. The Department told us that it is aware of public concern about the state of local roads. This is highlighted by the National Highways and Transport Survey, which reported that only 30% of the public were satisfied with the condition of the roads and the speed and quality of repairs, the lowest level since the survey began in 2008.[10]

6. In the 2010 Spending Review, the Department cut road maintenance budgets by £1.2 billion for the four years from April 2011. However, on nine occasions since then it has announced additional funds for road maintenance which total £1.1 billion. Thirty-five of 46 local highway authorities in the National Audit Office survey said that the stop-start funding had hindered them from getting value for money.[11] The extra money has reduced the extent of the planned budget reductions. The fall in the Agency's budget will now be 7% over the 4-year period to March 2015 instead of the 19% that was announced in the Spending Review 2010. Local highway authorities' capital funding from the Department for road maintenance is increasing by £97 million (3%) over the four years instead of the planned £557 million reduction (15%).[12] [13]

7. We were concerned that funding uncertainty has undermined value for money. The Department agreed that funding needs to be more predictable so that highways authorities can plan properly. Unpredictability also deters the right behaviours in the supply chain, such as investing in training and other ways of improving efficiency. Infrastructure UK has reported that certainty of funding is associated with cost savings of 10-20% for routine maintenance.[14] The Asphalt Industry Alliance reported earlier this year that the average cost of filling a single pothole in England and Wales was £52, or £70 in London. It also reported that it cost £31.6 million in 2013/14 to pay and process compensation claims from road users for damage to persons or vehicles arising from poor road conditions.[15]

8. We heard from the Department that it is working to provide the Agency and local highway authorities with more predictable funding. The Department explained that it has set out its capital funding for local road maintenance for the six years from 2015-16 to 2020-21: £976 million a year. The Department also told us that it plans to provide greater predictability of funding to the Agency through its reforms included in the Infrastructure Bill. The Department and Agency told us that the reforms would change the Agency's status to a limited company wholly owned by the government, with at least five-year funding settlements for capital projects and maintenance.[16] These new arrangements are a step in the right direction but by themselves are not enough to guarantee improved value for money. For example, Network Rail has had fixed 5-year funding settlements for over a decade but still faces challenges in maintaining the rail network in the most cost-effective way.[17]

9. The main effect of changes to road maintenance budgets has been a fall in revenue funding. The reduction in revenue funding is concerning because essential routine maintenance activities such as inspections, clearing drains and winter gritting can only be paid for from revenue funds. We therefore challenged the Department on whether the fall in revenue funding will increase the risk of flooding and long-term damage to infrastructure, particularly with increasingly frequent severe weather conditions.[18] The Agency spent 29% less revenue funds in 2012-13 than it had in 2010-11. Local highway authorities' revenue funding, which is for all local authority services, fell by around 33% in real terms over the 4 years from April 2011, and it is set to fall by a further 10% in real terms from 2015-16 to 2020-21. Local highway authorities' actual revenue spending on road maintenance has fallen less steeply, it was 7% lower in 2012-13 than in 2010-11.[19] [20]

10. The Department told us that it understands the importance of revenue funding for road maintenance. It said that it will work with the Agency to ensure that it has the appropriate level of capital and revenue funding.[21] However, the Department explained that the £976 million a year that it is to provide for local road maintenance from 2015-16 is all capital. Revenue funding comes from the Department for Communities and Local Government and local authorities' own resources. The Department therefore argued that the level and use of revenue funding for local road maintenance is a matter for the Department for Communities and Local Government, local authorities and their taxpayers.[22]

2   C&AG's Report, Maintaining strategic infrastructure: roads, HC 169 Session 2014-15, 6 June 2014 Back

3   Q 1; C&AG's report, Key facts, para 1 Back

4   C&AG's report, para 1.6 Back

5   Qq 44, 66; C&AG's report, paras 1.7-1.9 Back

6   Committee of Public Accounts, Reducing costs in the Department for Transport, Seventy-first Report of Session 2010-12, HC 1760, 13 March 2012 Back

7   Committee of Public Accounts, Reducing costs in the Department for Transport, para 5 Back

8   The term 'highways authorities' refers to the Agency together with local highway authorities Back

9   Qq 33, 48, 52, 55-57; C&AG's Report, paras 1.20-1.21 Back

10   Qq 41, 63-65; C&AG's Report, para 9, 1.32-1.35 Back

11   Qq 10, 29-30, 44; C&AG's Report Figure 2 Back

12   C&AG's Report, paras 7, 1.12 and Figures 2, 3 Back

13   Figures are in cash terms so there will be additional pressures on road maintenance budgets due to inflation Back

14   Qq 29, 44-45; C&AG's Report, paras 12, 2.5, Figure 13 Back

15 Back

16   Qq 27, 29, 44-45, 49 Back

17   Q 1; C&AG's Report, para 2.20 Back

18   Qq 7-9, 36, 42-43, 49, 66; C&AG's Report, paras 1.5, 1.17, Figure 1 Back

19   C&AG's report, paras 1.13-1.14, 1.18-1.19 Back

20   Changes to budgets and spending are in cash terms throughout unless otherwise stated. Back

21   Qq 43, 66 Back

22   Qq 10, 49, 66 Back

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Prepared 25 September 2014