1Improving the South West road corridor
1.On the basis of a report by the Comptroller and Auditor General, we took evidence from the Department for Transport (the Department) and Highways England about plans to improve the A303 and A358 road corridor in the South West of England and about other transport infrastructure issues in the region.1
2.In its 2014 Road Investment Strategy the Department said it aimed to upgrade the entire A303 and A358 road corridor to dual carriageway standard over the next 14 years, through eight individual projects. The corridor has more than 35 miles of single carriageway. There is more traffic on the road than the single carriage way sections are designed for, resulting in high levels of traffic and slow and unreliable journeys. Congestion on the section of road between Amesbury and Berwick Down, where it passes Stonehenge, is particularly acute. Local authorities and businesses along the route consider poor road connectivity to be a major barrier to economic growth in the region. The Department committed £2 billion to starting three of the eight projects, including the A303 between Amesbury and Berwick Down, which forms part of the road corridor where Stonehenge is located, by March 2020.2 Figure 1 shows the eight projects required to upgrade the A303/A358 corridor.
3.The Amesbury to Berwick Down (hereafter the ‘Stonehenge tunnel’) project involves building a tunnel of 3.3km (just over 2 miles) beneath the World Heritage Site at Stonehenge. The Department and Highways England objectives for the project include:
- Economic growth: to enable growth in jobs and housing by providing a free-flowing and reliable connection between the South East and the South West;
- Transport: to create a high-quality and reliable route between the South East and the South West that meets the future needs of traffic;
- Cultural heritage: to help conserve and enhance the World Heritage Site and make it easier to reach and explore, by removing most of the road from the site; and
- Environment and community: to improve biodiversity and provide a positive legacy for nearby communities.3
4.The Stonehenge tunnel project is still at an early stage. The expected range of costs is £1.5 billion to £2.4 billion with a most likely cost of £1.9 billion (including VAT), and the Department and Highways England expect the upgraded road section to be open to traffic by December 2026.4
Source: National Audit Office
Funding the Stonehenge tunnel project
5.The ‘Stonehenge tunnel’ project in its current form was originally to be publicly financed, subject to approval of the business case. In October 2016 HM Treasury instructed the Department to use private finance, which delayed the planned start of works by 21 months from March 2020 to December 2021. In October 2018 the Chancellor of the Exchequer cancelled future private finance deals under the PF2 programme, including for the Stonehenge tunnel project. At the time the government set the £25.3 billion draft funding package for the second Road Investment Strategy (covering 2020 to 2025) the Department had expected the project to be privately financed. The government has released £21.5 million of enabling works funding in advance of business case approval to support the project in keeping to its 2026 target opening date.5
6.The Department said that both it and the Treasury have made it clear that they remain committed to this project, and indeed to the Lower Thames crossing project which was also to have been funded under PF2. It said that the funding will need to be resolved in the forthcoming Spending Review and that it would make a strong case for these schemes to be funded in addition to the RIS 2 funding envelope. But the Department stressed that this would ultimately a matter for determination in the Spending Review.6
7.Highways England told us that it was funded this financial year with all the money needed to progress the scheme in that period. However, it said it had made it clear to the Department that even with approximately £50 million that it will need next financial year to keep the project going, it needed clarity on the funding before the end of the year. It said it needed this for two reasons: first, in order to engage with the market, as the procurement would involve significant costs on the side of the supply chain and it needed to go to the market with an engagement notice towards the end of the year; and second, that it had been almost impossible to prepare a Development Consent Order (DCO) without funding clarity. Highways England confirmed that, until funding decisions are made, the (DCO) process and other work was continuing as if the project were going to be funded.7
8.The Spending Review has already been delayed, and we drew attention to the Chief Secretary to the Treasury’s recent comments that there may be further delay.8 The Department said that, recognising the political uncertainties, it (a three-year spending review) might not ultimately be possible at this time. The Department said that a one-year settlement is not out of the question, but that this was not the formal position of the Government at the moment. But if it were the position then it would need to have a conversation with the Treasury about whether to ask Highways England to continue to make progress on the scheme to the same timeframe on the understanding that it would be funded. The Department said that “if we want this scheme to continue, and to continue in a sensible and efficient way to the current project timeframe, we cannot wait another year, or however long it takes to carry out a spending review.”9 Highways England reiterated the need for a funding decision by the end of the year, so that it could engage with the market in the first quarter of next year and suppliers could in turn engage with a high degree of confidence that the project would go ahead.10
Delivering within budget and on time
9.As stated earlier, the expected range of costs for the Stonehenge tunnel project is £1.5 billion to £2.4 billion, and the Department and Highways England expect the upgraded road section to be open to traffic by December 2026.11 Key risks that the Department and Highways England will need to manage include:
- Failure of the development consent order application. Highways England applied to the Planning Inspectorate in October 2018 for consent, which is not guaranteed;
- Archaeological risks. There remains a risk that as yet unidentified sites of interest may be discovered during construction;
- Construction risks, both geological and engineering. For example, the discovery of further phosphatic chalk deposits, of unstable cavities, or the ground level sinking excessively as a result of tunnelling below; and
- Capability and capacity risks.12
10.The Department told us it had learned from experience on other projects that it was sensible at this stage of development to have a cost range for a project of this scale, rather than to fixate on a single number, given the level of uncertainty. That said, it and Highways England also said they had a most likely delivery cost for the Stonehenge tunnel of £1.9 billion, or £1.7 billion excluding VAT. The Department said it had every reason to believe that was “a sensible, prudent but robust estimate at this point, in particular, because a huge amount of work has gone in over five or six years.” The Department highlighted work over recent years to understand the nature of the scheme, establish the scope and gain independent assurance.13 It added that it had learned that a scheme is only deliverable if it meets three distinct success criteria: first, it has to be affordable; second, it has to have a sensible economic case; and third, it has to have the support of the environmental bodies that look after the site. “What is very different about this scheme, compared with the experience of the last 20 years, is that we have all those three things in place. We are in a unique position to deliver something successful.”14
11.On skills and capacity, Highways England said that, in the four years since Highways England was formed, it had done a great deal of work in upskilling to be able to deliver complex projects. It had formed a complex infrastructure projects division and recruited people with relevant skills from the private sector. It said it had 1,000 more people now with commercial, programme management and engineering skills than it had four years ago, and also used external advice where needed.15 Highways England added that it had changed many of its contracting arrangements for the next Road Investment Strategy period and was in “a very good place in terms of having the contracting skills to do this”.16 It said it would draw on its experience of the A14, which it said has been held up as best practice on contracting for a major infrastructure project, in setting up and delivering the contract.17
12.On cost, Highways England said that the upper end of the range, £2.4 billion was becoming less likely as time went on, because it knew that some of the risks included would not materialise or were now more unlikely to materialise. The Chief Executive commented “I intend to build it for £1.7 billion.”18 Highways England added that it considered £1.7 billion to be a robust cost estimate because it had people on site and had done a great deal of geotechnical work, understanding the water table, geology and much of the archaeology. “We are confident that we have a good programme and a good budget for this.” Highways England said it was satisfied that the surveys it had done were sufficiently complete that it was not going to find any unexpected surprises.19
13.The Department added a slight note of caution, commenting that while “the scheme is well planned and the timetable set out for it is credible and deliverable”, with projects of this complexity one could never be 100% certain that all will go exactly to plan. It said it would ensure that fixation on dates does not cause perverse outcomes, but there is no reason to suppose that delivery dates could not be met.20 The Crossrail programme has highlighted how early fixation on a challenging timetable can result in further delays and cost escalation as work is done in parallel to attempt to meet the expected deadline.21 As we reported in April this year, costs on Crossrail have overrun to the tune of nearly £3 billion and services on the central section will be delayed by at least a year.22
14.In October 2018, Highways England applied to the Planning Inspectorate for development consent for the Stonehenge tunnel. An application begins a review period for the public and other interested parties to comment on the proposals. The Planning Inspectorate will advise the Secretary of State for Transport on whether to proceed.23 Highways England confirmed that its Development Consent Order (DCO) work was complete. The Department said it expected the Planning Inspectorate to have done its work by the end of October 2019. The project has support in principle from stakeholders such as the National Trust and English Heritage, and the Department said that the huge amount of work already done with environmental bodies should stand the DCO process in good stead. Nevertheless, there remains a risk that certain aspects may still be challenged by those stakeholders or other interested parties during the Planning Inspectorate’s review.24 The UNESCO World Heritage Committee has voiced concerns about the current project and made proposals including the option of a longer tunnel. The Department acknowledged the importance of the UNESCO perspective, but said it was disappointed with UNESCO’s position, pointing to the need for Government to consider affordability and that the extra tunnelling would increase costs by around £1.2 billion.25 Highways England confirmed that, while it could do specification and scoping work now, detailed design work could only take place after the DCO process, when it would enter the next stage of ‘constructive dialogue’ with three or four major tunnel contractors.26
15.The A358 project is one of the others committed to within the first Road Investment Strategy. The project is to upgrade the A358 to a dual carriageway between the junction with the A303 at Southfields roundabout and junction 25 of the M5 near Taunton.27 Highways England confirmed that the project would be a year late because it had had to carry out a second public consultation. The first consultation had only considered one option, respondents had wanted to see more options, and as a result of the second consultation Highways England had moved to an option which gave a shorter route and better development opportunities in the area, but which was more expensive.28 An announcement was due in autumn 2018 on the preferred A358 route and had still not been made at the time we took evidence. Highways England said that it would still expect the road to be open by summer 2024, as indicated previously, and certainly by the end of the second Road Investment Strategy period, which would be spring 2025. It explained that the advantage of not doing the schemes all as one programme was that the A358 could be taken as an independent scheme and should still be built irrespective of the fate of other schemes around it.29
16.The first A358 option put out to public consultation had an estimated cost of £251 million. Highways England now estimates that it could cost up to £452 million.30 It said that the A358 project had quite a low benefits to cost ratio and that it was “a difficult road to build”, but it had found ways to keep it affordable through a combination of reduced costs of new contracting arrangements and moving money across from other projects that had come in under budget.31 Highways England said that while it expects the A358 project to be more expensive than it originally expected, it was bringing its wider portfolio of projects in on or around budget.
17.We drew attention to concerns highlighted by Ian Liddell-Grainger MP about the vague figures quoted on the Highways England website for the A358 upgrade, and about why investment was not being made alternatively in the M5. Highways England agreed to engage directly with Mr Liddell-Grainger and to review whether its website properly reflected the latest cost position.32
The benefits of the Stonehenge tunnel project
18.The high cost of building a tunnel, compared with widening or moving the road, means that under the standard method for appraising transport projects, the project would only deliver 31p of benefit for every £1 spent. Highways England therefore expanded its appraisal to include a monetary value for cultural heritage, to reflect the project’s wider objectives. At £955 million (2010 prices and discounted) these make up 73% of total monetised benefits. With these included, Highways England expects the project to deliver £1.15 of benefit for every £1 spent, which the Department considers low value for money. While Highways England has been clear about the traffic and heritage issues the project will address, it has set few clear quantitative measures with which it can assess the future success of the project.33
19.Highways England told us that in its view the transport and heritage benefits were indivisible, and one had to accept that if you are to connect the south-west to the south-east, you have to handle Stonehenge in the most sympathetic, proactive, caring manner that you can. Its view was that the current project is the best answer for both what is an internationally recognised world heritage site and a strong economic need. The Department agreed, also stressing that the section of road was the most important part of the road corridor in terms of traffic congestion and bottlenecks.34 The Department also said it was important in its view to take account of all the impacts of the scheme, directly transport-related or not, and was appropriate to construct the business case using an innovative approach to assessing the value of having the heritage asset better protected.35
20.We asked about the Department supporting Highways England to work with other government departments, local authorities and heritage bodies to achieve the project’s full benefit. The Department told us that the project had required very close working with a range of stakeholders, with relationships well established and that Highways England would want to continue with this throughout development and delivery of the project, and Highways England said it would continue to engage in that way.36
21.We asked whether the Department and Highways England had come up with any innovative schemes to make it easy for people to visit and encourage as many visitors as possible to the World Heritage Site. The Department said that the way in which the scheme is designed—the green area over the top of the tunnels, the new access and landscaping—means the site will become much more accessible for both visitors and local people and make it a much more usable piece of public space. However, when we pressed for something more specific, we were not provided with examples. The Department said that some of the conversations (with stakeholders) were at a relatively early stage and told us that there was potential for really constructive conversations with all local partners. It said that it had a few more years to work through exactly what the plans for improvements would be.37
The approach to upgrading the entire A303/A358 corridor
22.The Department and Highways England have chosen not to produce an overarching programme-level business case for the A303/A358 despite initial plans to create one. Instead, they will approve the eight projects individually. But each project on its own can only fully deliver strategic objectives as part of a completed A303/A358 corridor. If it does not complete all eight projects, the Department will struggle to deliver all its strategic objectives. Taking projects individually, Highways England currently considers the five uncommitted projects along the corridor as low to poor value for money, which may mean that other projects with better economic cases are prioritised.38
23.The Department confirmed that it had no formal commitment to the remaining five projects and that they would be considered on a case-by-case basis during the course of the second Road Investment Strategy period (2020 to 2025). It said that it had been an “aspiration rather than a commitment” in the first Road Investment Strategy to have dealt with all eight by 2029.39 The Department said that all eight projects had their own merits and need to stand or fall as independent projects, but also confirmed that there are programme-wide benefits which crystallise at the point when the entire corridor is dealt with.40
24.The Department explained that a programme-level assessment done earlier had added something like £273 million of benefits to the whole. But the Department had chosen to treat them as individual projects to ensure they were taken in a sequence and time scale that was affordable, deliverable and value for money. Looking at each project on its own merits would allow them to be both responsive and flexible in delivering them. The Department referred to the NAO having made a sensible recommendation on programme-level evaluation and consideration, which it needed to keep under close review.41 That recommendation covered the need to demonstrate value for money of investments along the A303/358, reflecting: clear, measurable objectives for the whole road corridor; clarity on sequencing; analysis and capturing of benefits; the need for investment in subsequent projects along the corridor; and transparency about the basis for approving projects that contribute to wider strategy.42 Highways England added that it had had to prioritise which projects across the country it would deliver over the next five years because: the total money available over that period is capped; it had to consider the road-building skills bases in each region; and road users would have a miserable time if work was being done simultaneously to several different stretches of the same road.43
25.We challenged the Department and Highways England further on the risk of ending up with improvements to the complete road corridor only partially completed, and why the improvements were not being treated as one project with several parts, rather than as eight individual projects. The Department reiterated that government had “a broad ambition” to deliver all eight projects, while stressing the need to still consider priorities across the country. Highways England said it could not over-promise given the constraints of a five-year funding settlement and what it could deliver for that. It also said that the road user would get immediate and measurable benefit as each section of road, such as the Stonehenge tunnel, was opened.44 Highways England also said that, if there were no barriers to delivering the eight projects, sensibly sequenced, the work might be delivered in five to ten years.45 Highways England acknowledged that not doing all eight projects as one programme had certain disadvantages. But it also said that the advantage was that, once a project was approved it is an independent scheme that stands on its own merits, and should therefore still be built regardless of the fate of other schemes around it.46
1 C&AG’s Report, Improving the A303 between Amesbury and Berwick Down, Session 2017–19, HC 2104, 20 May 2019
2 C&AG’s Report, paras 2, 3
3 C&AG’s Report, paras 1, 4, 7
4 C&AG’s Report, paras 5, 14
5 C&AG’s Report para 13
6 Q 67
7 Q 70
8 Q 71; Select Committee on Economic Affairs, oral evidence on the spending review, Tuesday 4 June 2019 (Q 2)
9 Qq 71–73
10 Qq 83–84, 87
11 C&AG’s Report para 5
12 C&AG’s Report para 3.11
13 Q 43
14 Q 50
15 Q 44
16 Q 81
17 Q 77
18 Q 45
19 Qq 75, 76
20 Q 77
21 C&AG’s Report, para 3.6
22 Committee of Public Accounts, Crossrail: progress review, Session 2017–19, HC 2004, 3 April 2019
23 C&AG’s Report, para 3.11
24 Qq 79, 80; C&AG’s Report, para 3.11
25 Qq 51, 52; C&AG’s Report, paras 8, 1.17, 3.14
26 Q 78
27 C&AG’s Report, Appendix Three, para 4
28 Qq 100–103; C&AG’s Report, Appendix Three, paras 5, 6
29 Qq 118–119
30 C&AG’s Report, Appendix Three, para 5
31 Qq 100, 104–107
32 Qq 114, 116, 117
33 C&AG’s Report, paras 9, 2.4
34 Qq 46, 48
35 Qq 56, 57
36 Q 89
37 Qq 90, 91
38 C&AG’s Report paras 10–12
39 Q 47
40 Q 55
41 Q 61
42 C&AG’s Report, recommendation b
43 Q 61
44 Qq 62, 63
45 Qq 65, 66
46 Q 119
Published: 3 July 2019