Government Response
Introduction to roads reform
1. Our aim is to create a strategic road network
befitting of a modern, vibrant and progressive country and economy,
which gives road users the best possible quality of service and
supports broader economic, environmental and safety goals.
2. Achieving these aims requires a world-leading
public delivery and operations company that emulates best practice
from comparable private sector bodies, delivers faster and more
efficiently, provides a better service to customers and gets the
best possible value for money for taxpayers from this investment.
3. To this end, we are changing the way the strategic
road network is managed and run, by:
- Establishing a new, long-term
'Road Investment Strategy' (RIS),
setting out a clear vision and a stable, long-term plan for the
network.
- Transforming the Highways Agency into a government-owned
Strategic Highways Company, able to operate
more flexibly and efficiently and develop into a world-leading
road operator.
- Putting in place a robust system of governance
for this company, ensuring that Ministers
set the strategic direction for the network, giving the company
the autonomy to run the network on a day-to-day basis, while ensuring
can be held to account for its performance and continues to run
the network in the public interest.
- Setting up an independent watchdog and monitor,
to represent the interests of road users, and to monitor the efficiency
and performance of the company.
- Introducing legislation to underpin these
reforms, creating the legal framework
for reforms and provide a strong foundation that puts highways
investment on a stable footing similar to other sectors.
4. Alongside these reforms, we have committed to
a transformational level of investment of £24 billion in
our national roads, providing a long-term commitment to funding
for the network and trebling investment by 2020.
5. Together, these changes will tackle historic problems
of short-term decision making and uncertainty in funding, strengthen
delivery and transform how our strategic roads are run. This will
ensure more efficient operation and faster delivery, saving the
taxpayer at least £2.6 billion over ten years. It also means
clearer accountability and greater transparency, providing assurance
on the spending of public money and ensuring that the network
continues to be run in the public interest.
Further activity on roads reform
6. The Government's Response to the public consultation
on transforming the Highways Agency was published on 30 April
2014, just prior to publication of the Committee's report on 7
May 2014. Since then, the Government has published significant
further detail about our plans for reforming the way strategic
roads are managed and run.
7. On 6 June, the legislation required to implement
the reforms was introduced as part of the Infrastructure Bill.[2]
The Bill was accompanied by an updated Impact Assessment and the
publication of a business case for the creation of a new arms-length
body in place of the Highways Agency,[3]
which together provide more information and evidence about the
costs and benefits of reforms.
8. On 23 June, we then published a suite of documents[4]
to provide important context to the roads reform legislation in
the Infrastructure Bill, which set out further information and
details of the key elements that, together, will form a cohesive
and robust governance framework for the new company. The documents
published were:
· Transforming
our strategic roads; a summary
- an introduction to
roads reform, summarising the reasons for change, how the new
regime will work, and the benefits it will bring;
· Strategic
Highways Company: Draft Licence -
an outline draft of the company's Licence, in which the Secretary
of State sets statutory Directions and Guidance, and objectives
and conditions for how the company will act;
· Setting
the Road Investment Strategy: Now and in the Future
- a draft description of the elements that will form the Strategy
and the process for developing the first and future Strategies;
· In
addition, we published further information about the purpose and
content of the Framework Document and Articles
of Association for the company and how these will be developed.
Demand
Recommendation 1:
The DfT must immediately open the NTM to wider scrutiny, as the
Treasury and the OBR have done with their macroeconomic model,
to ensure that it accords due weight to all factors affecting
transport demand, including economic growth, industrial development,
fuel prices, vehicle ownership and demographic shifts. (Paragraph
21)
9. The NTM is an analytical and policy-testing tool,
which is used to provide road traffic forecasts, as well as a
systematic means of comparing the national consequences of alternative
national or widely applied local transport policies against a
range of background scenarios, taking into account the major factors
affecting future patterns of travel. These include factors such
as population, demography, economic growth, the money cost of
driving and network capacity and congestion.
10. The NTM uses what is known as a four stage behavioural
modelling approach to forecast the demand for travel. Firstly,
it estimates the numbers of trips people make, with the frequency
of trip making varying depending on factors such as household
structure, car ownership, and employment. Secondly, it allocates
those trips to journeys made between specific origins and destinations,
by comparing the attractiveness of different destinations with
the costs of getting there. Thirdly, it allocates those journeys
to specific modes, by comparing the relative costs of travelling
by different modes. Finally, it allocates the journeys to specific
routes across that mode's transport network, taking account of
the impact of congestion and crowding.
11. It combines a wealth of information taken from
a range of sources, such as the National Travel Survey, the population
census and the road traffic and goods vehicle censuses. Non-transport
related inputs such as oil prices and GDP assumptions are agreed
with other Government Departments such as ONS, HMRC and OBR. Whilst
the NTM assumes behaviour at micro-level remains unchanged, aggregate
'behaviour' can change through the composition of the population.
12. The NTM itself has been incrementally developed
over a considerable number of years, deliberately making best
use of existing data-sources and models wherever possible. It
actually comprises a number of discrete models covering different
aspects of supply and demand, including amongst others, separate
models for emissions, car ownership, vans and heavy goods vehicles,
and a personal travel demand model which covers six different
modes of travel. These are for car driver, car passenger, rail,
bus, walk and cycle, and this enables the model to look at mode
switching.
13. These models have been produced by a number of
different independent consultants, use a range of computer languages
and in some cases rely on legacy or bespoke software packages.
This suite of models is connected together through a series of
bespoke interfaces, which operate at different levels of geographical
or demographic detail and iterate between themselves until convergence,
between the costs associated with different levels of supply and
demand, is achieved.
14. The Department appreciates the views of the Committee
on opening up the NTM to further external scrutiny. We have already
sought to do this in a number of ways, including:
· Submitting
the NTM for extensive peer-review and validation. This has been
done on a number of occasions and included, for example, the 'Eddington
Friends' group of experts in 2006. These reviews have consistently
shown the model to be fit for the purpose of strategic policy
analysis. Model results, when compared with actual data, has shown
that the NTM performs well.
· Publishing
a number of reports on the NTM, providing detail on the overall
structure, inputs and performance, and the individual models -
including an external validation[5]
and peer review.
· Providing a
regular overview of the model as part of regular Road Traffic
Forecast publications, including updates to, and sensitivities
around key assumptions and inputs, and how these affected traffic
growth over time - along with results from the model, disaggregated
by region, road and area type[6].
· Making detailed
model outputs available to certain academics and research institutes.
· However, given
the significant size and complexity of the series of interlocking
models that make up the NTM, attempting to give direct public
access to it would be a complicated and very resource-intensive
undertaking. Achieving the correct installation of the current
suite of models that comprise the NTM on a contemporary and remote
computer system would represent a considerable challenge, and
would require significant support to other users to enable them
to understand and utilise the model effectively.
15. We therefore believe that at the current time
the most effective way to ensure sufficient and proportionate
scrutiny of the NTM is to continue to engage positively with stakeholders
and experts, through various stakeholder forums and workshops,
as part of our effort to develop and improve our forecasts and
provide clarity on how the NTM works. The Department is already
planning to hold a workshop in September to engage with a wide
range of external stakeholders and academic experts to improve
understanding of how the NTM works, update them on the current
programme of work to improve the model and discuss the future
development and scrutiny of the NTM.
16. As part of this approach, and to help maintain
and develop robust and credible approaches to its appraisal framework
and modelling, the Department announced in October 2013 that it
would create a Transport Modelling and Appraisal Panel[7].
We will look to use this panel initially to open up the NTM to
wider expert scrutiny, and ensure the model remains fit for purpose,
in a manageable way.
17. Whilst we think our
forecasts provide a sound basis for informing decisions about
transport investment, we seek to continuously improve our methods
and how we work with external experts to improve them. The Department
is therefore currently looking at new ways to develop its existing
modelling capability with the intention of opening up the model
to wider scrutiny in the future.
An effective programme
Recommendation 2:
The DfT must develop a transparent system of road planning as
part of a wider national transport strategy. This system should
take into account demographic, economic and land use changes,
including changes in the location of homes and parking policy.
This will allow the DfT to select the most resilient options for
reducing congestion or improving connectivity and to promote them
across Government Departments and local authorities. (Paragraph
27)
Recommendation 3: The DfT should commission integrated
passenger and freight plans for strategic transport routes or
regions, rather than looking at one mode of transport in isolation.
Such integrated plans, which should be developed in consultation
with local authorities, local enterprise partnerships and community
and road user groups, must take into account how different options
for the use of infrastructure and technology will impact on transport
movements and on economic development. The DfT must then identify
projects—including maintenance schemes—within the
chosen plan for implementation within the five-year funding cycle.
Every project should be subject to a post-implementation review
to assess the effectiveness of the investment. We recommend that
this process be set out in the forthcoming Roads Investment Strategy.
(Paragraph 38)
Recommendation 9: The Government must demonstrate
an integrated transport approach in developing and assessing improvements
to strategic routes. It must always consider how road and rail
improvements for passengers and freight can play a role together
in solving problems on the SRN and its feeder roads. This should
be alongside the trial of simple measures such as ride-sharing
and off-peak deliveries to reduce congestion on parts of the SRN
most used for local journeys. (Paragraph 63)
[Please note: The Department has sought to respond
to recommendations 2, 3 and 9 together, as we consider they share
a common theme concerning joined up planning and decision-making
about transport investment and delivery].
Complementary investments in transport
18. Roads and railways are always going to be critical
parts of the transport network, and we need make sure they function
well. The Government has already committed to transformational
and complementary investments in road and rail that will deliver
significant benefits for individuals and businesses, including
freight.
19. We are investing £24 billion in strategic
roads between 2010 and 2021, and £28 billion across strategic
and local roads in the next Parliament (2015-2021). This includes
£6 billion in this Parliament and £12 billion in the
next on maintenance alone - enough to resurface 80% of the strategic
road network and fill 19 million potholes on local roads. We are
also putting billions of pounds into the railways and pushing
ahead with High Speed 2.
20. Our roads investment programme is a balanced
package. It includes funding for major schemes; pinch point improvements;
a significant uplift in maintenance; and continued roll out of
'smart motorways'. It also includes significant investment in
environmental and cycling improvements, with an extra £500m
support for ultra-low-emission vehicles and over £20 million
on cycling improvements on strategic roads. In addition, the Highways
Agency has commenced work to provide improved training for all
highways engineers to design roads that are safe and easy for
cyclists to use.
21. This is part of a wider commitment to cycling
that includes more than doubling funding for cycling to £374
million, which with local authority and third party contributions
is now roughly £5 per person per year across England, and
over £10 per person each year in London and in our eight
cycling ambition cities: Birmingham, Leeds, Manchester, Bristol,
Newcastle, Norwich, Oxford and Cambridge.
22. We are investing almost £4 billion from
2011-2015 on maintenance of the local road network. And we are
also investing more widely at a local level. In July 2014 we announced,
as part of the Local Growth Fund, the largest local transport
funding announcement for over a decade - around £3 billion
of Government funding for new local transport schemes in total
- with £1.5 billion for new local road schemes, including
congestion pinch points, roads to facilitate new development and
employment sites, and new bypasses.
23. This is in addition to the £600 million
of previously allocated funding to major local transport schemes,
such as the Norwich Northern Distributor Route, which will now
be supported through the Local Growth Fund.
A PRAGMATIC APPROACH TO JOINING UP TRANSPORT PLANNING
AND DECISION-MAKING
24. We recognise that getting the most out of this
significant investment means making the whole system work as well
as it can.
25. However, we need to be realistic about the best
way of integrating transport planning and decision-making on investment
and delivery. Previous top-down attempts at integrated, multi-modal
transport planning have been big on rhetoric, but in practice
have failed to improve or speed up the planning and delivery of
real improvements for transport users. Bottom up approaches have
often descended into huge multimodal studies, consuming large
amounts of time and resources, producing vast quantities of analysis
but rarely delivering commensurate or timely improvements in infrastructure
or transport outcomes.
26. We also need to be realistic about the extent
to which different modes can provide genuine, sensible and proportionate
alternatives to solving specific transport problems, where the
best solutions may depend on the local circumstances, including
the location of existing transport networks and the extent to
which journeys can switch between modes. In many cases, individual
projects have demonstrated the potential for effective integration
between national and local transport networks where decisions
are taken in a joined-up way. For example, new improvements to
the A453 will connect directly to park and ride facilities on
the Nottingham Express Transit extension.
27. The Government supports a holistic and multi-modal
approach to transport problems and planning improvements. We
believe, though, that a pragmatic approach is needed that allows
transport investment planning and decision-making to be joined
up at the right time and at the right level - enabled and supported
by the reforms we are putting in place for roads, alongside the
frameworks already in place for rail and local transport.
NATIONAL STRATEGY AND INVESTMENT PLANNING
28. In August 2013, the Department published Transport
- an engine for growth, which set out our strategic approach
to making the most of this investment in our transport network.
This aimed to make it easier for transport planners to join up
planning more effectively, with particular emphasis on the need
to work closely with our partners to ensure our plans are understood
and that opportunities are fully realised.
29. The forthcoming Road Investment Strategy (RIS)
will provide a clear, longer term investment planning framework
for strategic roads, and give greater certainty to the road operator
and others to facilitate more effective and joined up planning
and delivery.
30. Ministers will propose a draft RIS. Following
advice from the Office of Rail Regulation and Passenger Focus
on the company's response (its draft strategic business plan),
Ministers will make a decision on the final RIS and strategic
business plan. The primacy of Ministers in the proposed
system is clear when it comes to setting or varying a RIS - they
are the ultimate decision makers in the process and retain the
right of determination if an agreement between the company and
Ministers cannot be reached.
31. Through the RIS, the new strategic highways company
will operate the network under a robust and much more transparent
'performance contract' with the government, modelled on similar
mechanisms in the regulated sectors. The company can be sanctioned
for failing to deliver any part of it in budget. This also means
that taxpayers and road users will be able to view strategic plans
and expectations for the network and hold the company to account
for its performance on delivery and operation.
32. This will put investment planning for roads on
a similarly stable footing to other infrastructure sectors, such
as railways, where the High Level Output Specification (HLOS)
process has allowed railways to deliver large-scale projects across
a large area over many years, and deliver transformational investments,
such as the widespread electrification of key lines.
33. In our consultation on transforming the Highways
Agency, launched in October 2013, we sought views on the alignment
of strategic road and rail investment cycles. Views were divided
between those opposed and those in favour. We recognise that aligning
decisions and timing of road and rail investment plans has advantages
and disadvantages, and will give further consideration to this.
For the first RIS, trying to align the cycles would add unnecessary
delay in delivering much needed investment in the Strategic Road
Network. That said, our proposed legislation would allow a future
government to align if they decided to do so. We will continue
to consider strategic decisions on investment and funding across
road and rail in a joined-up way where appropriate - and putting
in place long-term investment planning frameworks for both road
and rail will make this easier.
34. Major local transport infrastructure will now
be delivered through Growth Deals. For the first time ever, housing,
infrastructure and other funding are being brought together in
a single pot, and put directly into the hands of local authorities
and businesses to spend the way they know best. We therefore have
a mix of local schemes, based on local priorities about what is
needed to support the local economy to grow. At least a third
of all the new transport schemes (including half of the road schemes)
will help to open up commercial or residential development.
35. Growth Deals are not just about the investment.
They are about a new and increasingly productive relationship
between national and local agencies on transport. For example,
Growth Deals include a commitment from the Highways Agency to
develop a more proactive and collaborative approach to promoting
national and local growth and to continue building strong relationships
and working arrangements with LEPs and the Local Enterprise Partnership
Network, in the same way as with local and combined authorities
and the Local Government Association.
ROUTE-LEVEL PLANNING
36. While high level strategic plans can enable more
effective and joined-up thinking about national policy and the
balance of investments across modes, and between national and
local networks, this cannot effectively join up detailed plans
or decision-making on specific interventions in a way that takes
account of local circumstances.
37. The identification of specific problems, consideration
of specific options for intervention and decisions about long-term
development of transport services in an area need to be taken
at route or area level. This is where decision-makers can consider
the need for intervention in the context of specific local circumstances,
including existing transport networks, as well as local plans
and priorities around transport, economic growth and land-use
plans in a joined-up way, involving local authorities and communities,
other transport operators, Local Enterprise Partnerships and other
stakeholders.
38. The Highways Agency (HA) is currently developing
route strategies for its network - similar in concept to the Route
Utilisation Strategies and route studies for railways. These will
provide a much improved approach to future planning for the strategic
road network, and a clear evidence base on the need for and nature
of future investment, forming the primary input to Road Investment
Strategies, in the same way that the equivalent strategies in
rail inform the development of the HLOS.
39. Through collaboration and engagement with stakeholders
- including local authorities, LEPs and other stakeholders, such
as road user organisations, freight interests and environmental
bodies, as well as advice from Road User Focus - these will determine
the nature, need and timing for future investment and include
consideration of planned growth, including housing developments
and land-use changes, together with planned improvements on wider
transport networks.
40. In April the HA published a series of route strategy
evidence reports which identified the performance issues and future
challenges on routes, taking account of the local growth priorities
put forward by stakeholders. The HA is now taking forward a programme
of work that will identify outline solutions for a number of the
challenges and priorities recognised in the evidence reports.
Following further dialogue with stakeholders, these proposals
will be brought together with existing commitments for investment
in the network, and consolidated into route strategies setting
out plans for operating, maintaining and improving the network.
41. This evidence-based approach means that future
investment plans on roads will account for wider transport networks,
help to support local plans and priorities for growth and balance
national and local needs on the network.
PLANNING DECISIONS ON SCHEMES
42. Following the consideration of options for intervention
undertaken as part of the investment decision-making process,
decisions about individual schemes are made through the planning
process.
43. In March 2012, the Government published the National
Planning Policy Framework (NPPF), which sets out planning policies
for England and how they are expected to be applied. This provides
guidance for local planning authorities and decision-makers, both
in drawing up local plans and making decisions about planning
applications, including those relating to local transport schemes.
44. The NPPF does not cover specific policies for
nationally significant infrastructure projects, where quite particular
considerations can apply. These are determined in accordance with
the Planning Act 2008 and relevant national policy statements
for major infrastructure.
45. In December 2013, the Government launched a process
of public consultation on a draft National Networks National Policy
Statement (NN NPS) - the planning policy statement for nationally
significant road and rail projects, which will provide the clarity
and certainty about planning policy needs for these projects.
The draft NN NPS can be seen here:
https://www.gov.uk/government/consultations/national-road-and-rail-networks-draft-national-policy-statement
46. This consultation closed in February 2014, and
the Government is currently considering the feedback received
and finalising the NN NPS, with a view to publishing a final version
later this year.
47. Both the NPPF and the national policy statements
are designed to ensure that development is sustainable and both
recognise that different approaches and measures will be appropriate
for different places.
48. One of the key strategic objectives set out in
the draft NN NPS is to support integration across the transport
modes. As part of the consenting process for these projects,
scheme promoters are expected to collaborate closely with other
network providers at an early stage. This expectation is made
very clear in the draft NN NPS for the road and rail networks
and will help support better integration across networks managed
by different operators.
49. Together with the long-term investment planning
frameworks for road and rail, the NN NPS will support faster,
more effective delivery of much needed investment in our national
transport infrastructure.
50. The Department is currently considering the recent
Transport Select Committee report on the draft NN NPS and the
responses to the public consultation and will respond in autumn
this year.
INNOVATIVE SOLUTIONS TO ACHIEVING OUTCOMES
51. A key benefit of the transformation of the HA
into an arms-length, government-owned company is to allow the
company greater flexibility and autonomy to determine the most
efficient and effective ways to deliver the outcomes and other
requirements identified by government. The performance regime
for the company will seek to drive significant efficiency improvements.
The company will be incentivised therefore to explore innovative
options where these offer more cost-effective solutions for achieving
required outcomes.
52. This will include the freedom to consider how
to make best use of innovative technologies in making cost-effective
improvements to network performance, building on the extensive
work of the HA in rolling out smart motorways and using technology
and traffic management to improve the flow of traffic. This also
means collaborating with adjacent authorities to consider what
initiatives or options for intervention off the SRN might represent
the best way of improving the performance of the network.
53. In April 2014, we published Quiet Deliveries,
new guidance to local authorities, hauliers, retailers and construction
firms on making more out-of-hours deliveries to reduce congestion.
Trials of out-of-hours deliveries were held by local authorities
in 2010 and a temporary code of practice issued in 2012 by Transport
for London for the Olympic Games. The new guidance builds on that
by setting out the benefits from quiet deliveries and provides
a comprehensive guide to establishing a scheme. A further section
for community groups will follow shortly.
POST-IMPLEMENTATION REVIEW OF SCHEMES
54. We agree on the importance of post-implementation
reviews to evaluate the effectiveness of project investments.
The HA already conducts the Post Opening Project Evaluation (POPE)
of Major Schemes to identify the impact of completed schemes.
This is important in informing current and future appraisal methods
and scheme delivery and we are considering how best to ensure
that, going forward, evaluation continues and is improved.
The Highways Agency
Recommendation 4:
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. (Paragraph
44)
55. Achieving our aims for the network requires a
world-leading public delivery and operations company that emulates
best practice from comparable private sector bodies, delivers
faster and more efficiently, and provides a better service to
customers and gets the best possible value for money for taxpayers
from this investment.
56. At present, the Highways Agency is unusual. Most
other infrastructure that is operated within the public sector
is run at arms-length from government, which is typically focused
on making policy and delivering services. As an executive agency
that forms part of central government, the Agency has less flexibility
over day-to-day operations, procurement and contract management
compared to infrastructure providers in other sectors.
57. Alan Cook's 2011 report, A Fresh Start for
the Strategic Road Network (the Cook Review),[8]
highlighted that "the unique position
of the Agency, and its relationship with government, has failed
to reflect the wider interests of our economy", and recommended
setting up the Agency as a government company.
58. Cook found that reforms could enable savings
of 15-20% on strategic roads spending, but was clear that achieving
these efficiencies would require reform to the Highways Agency
that extended beyond simple changes of personnel or management
style if they were to come close to achieving their potential.
The problems he highlighted were deep-seated and structural, and
securing the potential savings is a challenging goal.
59. The Government appreciates the views of the Committee
about the case for reform of the Highways Agency. However, we
do not believe that a further variant of the status quo is sufficient.
There have been many decades of experience across different Governments
which have demonstrated that the current arrangements have not
encouraged a long term approach to planning infrastructure nor
to secure funding. Funding has been changed arbitrarily and sometimes
at very short notice. This comes with high costs for efficiency
and for the quality of our road infrastructure (which is only
rated 28th in the world by the World Economic Forum).[9]
This all constrains our competitiveness and economic growth.
Without a fundamental change to the relationship between central
government and the management of the network, the other elements
of reform will not be able to take full effect.
60. Establishing the Agency as a legally-separate
company, clearly independent from government, will ensure a transparent
and binding relationship, that the funding settlement is robust
and there is a clear 'performance contract' through the Road Investment
Strategy. This sets out the government's requirements and investment
plans and sets the funding to deliver these. If the Highways
Agency remained part of the Department then in practice it would
be much easier to change the plans and funding. In contrast under
the new business model, any change has to be transparent and go
through a consultation.
61. We have seen the benefits that this approach
can deliver from experience elsewhere. International comparisons
show that operators in other countries can run their roads more
efficiently at arms-length, with more certainty and flexibility
- as seen in the Netherlands, Austria and Sweden, for example,
where roads delivery bodies operate their roads at much greater
distance from central government, with long-term funding certainty,
meaning that significant efficiency savings have been possible.
62. Transforming the Agency is an essential part
of delivering a step change in the performance of our road network,
and vital to securing the efficiencies from stable, long-term
funding and planning. Key benefits will be:
· A
long-term strategic plan, underpinned by legislation, will provide
greater visibility and certainty to the roads operator and its
suppliers on the forward programme of investment and the size
of the future market. This will ensure that reforms have credibility
with suppliers, giving them confidence in an institutional framework
in which government has done all it can to ensure that plans and
funding remain stable for the long term.
· This will generate
savings by making a longer term approach economically viable for
contractors, insulating against short-term, non-strategic changes,
and allowing the operator and suppliers to deliver through longer-term,
lower cost contracts, more sequential programme planning and reductions
in mobilisation / demobilisation of labour, thereby increasing
the efficiency of their operations;
· This will also
ensure that government remains focused on exercising strategic
control and the operator has the necessary discretion and flexibility
over day-to-day operations to deliver as efficiently and effectively
as possible;
· Setting up
the Agency as a new company operating under company law, with
a well-established governance and financial framework, will reinforce
the relationship with government with structures and disciplines
that will support a more commercial approach. This will allow
the Agency to undertake the necessary organisation and culture
change to meet the step change demanded to deliver an ambitious
investment programme and to develop into a world-leading road
operator and delivery body.
63. It will also be important to ensure that the
new company is resourced appropriately. If we are serious about
delivering a step change in performance and efficiency, we will
need to attract and motivate the skills and talent to achieve
this. We appreciate the concerns raised by the Committee with
regard to board remuneration. Government, as the shareholder,
will approve Board pay and pay policy, will specifically agree
any high salaries or incentive arrangements, and ensure that any
remuneration and reward structure is acceptable and delivers value
for money. There will be no question of the company being able
to award itself large pay rises or bonuses.
Recommendation 5: 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.
(Paragraph 48)
64. We have given careful consideration to how far
the new SRN monitor should hold a regulatory role. Independent
oversight offers clear benefits. Research shows that continued
downward pressure on costs, particularly when backed by a credible,
independent body, leads to ongoing savings in a range of infrastructure
providers. Better data, better analysis and transparent reporting
have helped drive better value and performance in several sectors.
65. However, there are also several features that
are missing from the roads sector, which are standard in most
types of regulated infrastructure. Road users, unlike the customers
of regulated sectors, do not pay for their use of the network
(other than at a small number of concessions or charged crossings).
There is no need to regulate consumer prices, nor to act directly
to ensure consumer protection. In institutional terms, the roads
sector is 100% owned by Government and wholly funded by the taxpayer.
There is no risk of excess profits being extracted from users
of the network for the benefit of the company's shareholders.
As the owner of a government-owned company, the Secretary of
State will have sanctions and incentives (such as changing the
Board or taking greater control of decisions) which are not available
for private regulated utilities.
66. We recognise that there are no market pressures
acting on the company to drive down costs and continue to improve
efficiency. Therefore there is still a clear need for a body
with the power and skills needed to gather the latest information
on the company and to report its performance, using techniques
from the world of regulation to improve efficiency and control
costs to the taxpayer. At a minimum, some of the methods used
in economic regulation - notably benchmarking - will lead to a
much clearer understanding of where the company is doing well
and where it must do better. However there are still fundamental
differences that mean that the role of the monitor is not the
same as that of the regulators of other utilities, and will stop
short of activities like setting a funding settlement for the
road sector.
67. Both the Office of Rail Regulation (ORR) and
Passenger Focus agree that their new responsibilities must go
beyond passive monitoring, and have a role in independently holding
the company to account. They must play an active role in securing
more efficiency and greater responsiveness to user needs. Key
elements of this regime are likely to include:
· Information
from both monitor and watchdog used to shape the RIS at an early
stage, and the monitor to provide continued advice throughout
the process on whether the developing proposition is deliverable;
· Regular advice
from the monitor about whether the company is abiding by the conditions
of the licence, and whether the Secretary of State should take
action;
· A statutory
right for the monitor to require the company to turn over information
on its costs and performance. This will form the foundation of
comprehensive benchmarking of company performance, creating a
properly researched link between efficiency and outputs for the
first time;
· Both bodies
being able to carry out their own investigations into matters
where the company has other questions to answer.
There may also be a case for the monitor to have
the necessary power to be able to take direct action for enforcement
against poor performance. We note some of the amendments brought
forward during the progress of the Infrastructure Bill, which
consider further powers for direct enforcement such as the ability
to fine. Given the wider framework, the ultimate sanction (e.g.
to remove the licence) will need to remain with the Secretary
of State, but short of this there may be a case for giving the
monitor a more formal role involving direct enforcement.
68. Overall, this represents the best quality of
advice that has ever been created on the roads, fully equal to
the research that would be carried out by an economic regulator.
While decision-making will remain with the Secretary of State,
provisions in the Infrastructure Bill will place him under a duty
to take account of the findings of both bodies when making choices
about the future of the network. This represents the best of both
worlds, making the system transparent without sacrificing responsiveness.
Recommendation 6:
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. (Paragraph 50)
69. The Government welcomes the Committee's support
for Passenger Focus and has been working on options to expand
Passenger Focus's role in the light of feedback from the consultation.
The organisation will form a separate roads team with its own
independent branding. This 'Road User Focus' unit will carry
out its own research within the organisation and will have a full-time
commitment to roads issues.
70. We agree entirely with the Committee that Road
User Focus needs to consider all categories of road users and
not just motorists. The views of these users are important in
deciding whether the network is functioning well. Freight and
business users are essential to understanding the economic impact
of the network, while motorcyclists, cyclists and pedestrians
are central to any understanding of network safety. Passenger
Focus also support this conclusion, and are already working to
make sure that their understanding extends beyond the largest
group of SRN users.
71. The remit of Road User Focus will make sure that
it takes account of a wide range of views and their stakeholder
panel will represent a broad range of road users, to make sure
that the unit's priorities match with the experience of all users
of the network. The Chief Executive of Passenger Focus is already
in contact with a number of organisations, inviting them to take
an early role in helping to shape the way that Road User Focus
will approach this work.
Recommendation 7:
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. (Paragraph 55)
72. The performance specification contained in the
RIS will set the specific expectations for future SRN and company
delivery and performance, including metrics, and where appropriate,
targets, which tie back to the RIS's strategic vision and investment
plan.
73. The Government welcomes the Committee's views
on the importance of the company having both a meaningful performance
specification, and a good understanding of the needs of its users
and the businesses and communities that it serves. Without this
understanding, the company will struggle to effectively operate,
maintain and improve the SRN.
74. As noted in April, in our response to the consultation
on transforming the Highways Agency, we see a clear and specific
need for the company's governance and performance regime to build
in assurance that the company forges open and effective working
partnerships. This will be critical to the company's delivery
of its core statutory duties and wider responsibilities - in the
day-to-day management and operation of the road network as well
as planning future development. We confirmed our intention to
put in place specific requirements on the company to co-operate
with local authorities, emergency services and other stakeholders.
75. We will engage with stakeholders on the development
of the performance specification prior to issuing it. We recognise
that it will not be feasible to agree this with all stakeholders,
given that there will different views about priorities. However,
the route strategy process, feasibility studies and other channels
will provide important opportunities for stakeholders to feed
in to the development of the RIS as a whole. We have recently
published further details of our proposals for how the RIS will
be set, which can be found at: https://www.gov.uk/government/publications/setting-the-road-investment-strategy-now-and-in-the-future
Financing the future
Recommendation 8:
The Minister was very clear about the DfT's decision not to introduce
charging to the road network, apart from the Heavy Goods Vehicle
(HGV) user charging scheme that was recently implemented. However,
if the traffic forecasts are correct, the Government will need
to increase investment in the road network substantially during
the next decade. Simultaneously, income from fuel duty is likely
to decline as use of fuel-efficient low-emission vehicles increases.
Investment in the road network will require new funding streams.
This is a challenge that must be addressed. However, a consensus
would be required to introduce any road user charging scheme across
the SRN as an alternative to road taxation, and the many issues
involved would have to be resolved. (Paragraph 62)
76. The Government agrees that there is a strong
case for significant investment in road infrastructure, and has
already committed to a transformational level of investment in
our roads - complementing investments in HS2, rail and local transport.
77. This investment is essential to address historic
under-investment and existing problems on the network, to support
growth, jobs and an internationally competitive UK economy. Supported
by reforms to tackle historic problems of short-term decision
making and uncertainty in funding, and strengthen delivery and
accountability, this investment will deliver a strategic road
network befitting of a modern, vibrant and progressive country
and economy, which gives road users the best possible quality
of service and supports broader economic, environmental and safety
goals.
78. We are confident that our current programme of
reforms represents the best model for creating a more arms-length,
independent and efficient public body with the right skills, culture
and flexibility to deliver for the economy, for road users and
for the taxpayer. These reforms are about getting better value
for money by making better use of public investment, by ensuring
the network is managed as efficiently as possible.
79. The Government's policy is
not to introduce national road pricing to manage demand on the
strategic road network. The Government will consider tolling as
a means of funding new road capacity on the strategic road network.
New road capacity would include entirely new roads and existing
roads where they are transformed by an improvement scheme. River
and estuarial crossings will normally be funded by tolls or road
user charges.
80. As we made clear in Action for Roads, published
in July 2013, there are other business models which could
offer more flexibility and efficiencies, but this is an issue
for the longer term and the Government recognises that more radical
reform will need to take into consideration detailed discussion
with road users. We will continue to review the case for further
reform of the management of the roads network, in consultation
with road user organisations, business and other stakeholders.
81. Over summer and autumn 2014, the Government will
proceed with taking forward legislation to set up the Highways
Agency as a government-owned strategic highways company, with
the aim of the new company going live in spring 2015. Alongside
this, we will continue to develop the first Road Investment Strategy
(RIS), and to make available further details about the RIS, before
publication in autumn 2014.
2 https://www.gov.uk/government/news/infrastructure-bill
Back
3
https://www.gov.uk/government/publications/roads-reform-case-for-new-public-body
Back
4
https://www.gov.uk/government/collections/roads-reform Back
5
http://webarchive.nationalarchives.gov.uk/20110202223628/http://www.dft.gov.uk/pgr/economics/ntm/ Back
6
https://www.gov.uk/government/publications/road-transport-forecasts-2013;
https://www.gov.uk/government/publications/road-transport-forecasts-2011-results-from-the-department-for-transports-national-transport-model Back
7
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/253860/understanding-valuing-impacts-transport-investment.pdf Back
8
A. Cook, A Fresh Start for the Strategic Road Network, November
2011, https://www.gov.uk/government/publications/a-fresh-start-for-the-strategic-road-network,
(hereafter 'the Cook Review'), para 1.7, citing the IUK infrastructure
cost review and the Cabinet Office's government procurement strategy
as evidence. Back
9
World Economic Forum, Global Competitiveness Report 2013-2014,
http://www.weforum.org/reports/global-competitiveness-report-2013-2014 Back
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