Conclusions and recommendations
The framework for infrastructure investment
1. The Government has committed to the largest investment in infrastructure in decades, which it believes has the potential to support a fairer and more equitable national economy. However, there is also great potential to waste this money on “white elephant” projects if it is not invested wisely. Evidence the Committee gathered suggests that there is uncertainty as to what the Government means by levelling up, and how its large infrastructure spending commitments will contribute to levelling up. There is a clear risk that money will be spent on projects which might boost employment in the very short term, but will not lead to longer-term change in economic outcomes for the poorest parts of the country. (Paragraph 43)
2. The overall framework for this investment should be provided by the National Infrastructure Strategy, but this is significantly delayed and has yet to be published. The Government is keen to spend money quickly as part of the Coronavirus “bounce back” but it needs to publish the overall infrastructure strategy to ensure that money is spent in a co-ordinated and effective way. (Paragraph 44)
3. The Government should publish its infrastructure strategy as soon as possible, and certainly before it starts spending large amounts of money on infrastructure. The plan must clearly link the Government’s objectives for the economy and the planed infrastructure investment. It should either include an assessment of regional or local needs, or clear principles for Departments assessing need in areas in which they are investing. (Paragraph 45)
4. The Government must be clear on what it means by “levelling up” if it is to plan projects which lead to “levelling up” and measure progress against them. The Committee expects that the infrastructure strategy will be clear on what levelling up means in practice, how infrastructure investment will contribute to levelling up, and what data we can use to measure the success of the levelling up initiative over time. This Committee will examine the infrastructure strategy when it is published and put further questions to ministers. (Paragraph 46)
5. Previous infrastructure strategies have not led to coherent and co-ordinated infrastructure spending. A scattergun approach to infrastructure investment might result in expensive infrastructure that does not benefit a local area either because it is not supported by complementary services (for example new houses without transport links); or it is not nationally co-ordinated and directed to areas of greatest need. The National Infrastructure Commission was created to overcome silos, and while the Committee welcomes the NIC’s commitment to overcoming political barriers through its impartial reporting, it is not clear it has the power to really break through politicised and decentralised decision making, which sits within Central Government. The Committee welcomes Lord Agnew’s commitment to early involvement in decision making. (Paragraph 47)
6. The Cabinet Office needs to take a more active lead on co-ordinating infrastructure investment in line with a national strategy. It should be involved in the early stages of project development and lead on co-ordinating the national infrastructure effort. The Committee would like to see evidence of this work in the IPA's annual reports and it will raise with the Permanent Secretary at the Cabinet Office and Head of the IPA at regular scrutiny sessions. (Paragraph 48)
7. It is clear from the evidence submitted to this inquiry that Government infrastructure projects are progressed before due consideration is given to how they will address local needs. This practice increases the risk of infrastructure not addressing local needs, and therefore not supporting economic growth. (Paragraph 49)
8. Government should prioritise understanding local needs. Fully populated local needs assessments should be published when projects are announced to demonstrate the purpose of such projects. The IPA should require these assessments as part of the documentation for projects in the Government Major Projects Portfolio (GMPP) and it should also check that departments are publishing the assessments as part of its role as the Government centre of expertise in project management. The Committee will scrutinise this in future evidence sessions. (Paragraph 50)
9. The Government must also reconsider what infrastructure will be needed in coming years, reflecting on the experience of Coronavirus. For example, if more jobs will move to home working, whether this might create a greater need for faster broadband rather than new roads. This post-Covid view of infrastructure should be reported to this Committee for further scrutiny. (Paragraph 51)
10. The Committee heard evidence that investment in major cities, including London, has more immediate economic benefit than investing in areas where there is currently slower economic growth. (Paragraph 59)
11. If the Government wants to invest in areas of slower economic growth, including the North, regions and rural areas, it needs to be clear on the objectives of that investment, and set a framework for departments to appraise that investment so that it can pass the TAP hurdles. That might mean accepting lower overall returns for wider benefits, including local regeneration and levelling up. (Paragraph 60)
12. HM Treasury should update the Green Book as promised, in particular to reflect these wider Government objectives. There is a pressing need to publish this update so that new infrastructure investment can be appraised in line with its guidelines. The Committee would like it to be published no later than September so that post-Covid spending can be appraised using the updated guidelines. (Paragraph 61)
13. It is clear from the evidence received that locally-led infrastructure investment can- in some instances—respond better to local needs and contexts. But there are concerns about local capability and short-term funding mechanisms. (Paragraph 65)
14. If the Government is serious about its levelling up agenda, it should consider how it takes into account local needs when determining infrastructure projects. The Committee would like the Cabinet Office to respond to this report outlining whether it intends to deploy the new infrastructure funding through a mix of centralised and devolved approaches and, if so, how. If the Government wants infrastructure to be delivered by local structures through devolved funds, it needs to be clear about who is accountable for the outcomes of that spending. (Paragraph 66)
Delivering the projects which grow the economy and ‘level up’
15. A project’s benefits are the very reason it is proposed and delivered, and the Committee does not believe that a project can be deemed successful if it does not demonstrate realisation of its stated benefits. The Government has sought to justify spending millions of pounds on infrastructure during economically-uncertain times by stating it will boost economic outcomes across the country. The Committee therefore expects the Government to be able to demonstrate growth as a result of this spend in future years. (Paragraph 80)
16. Far too often, project managers and ministers prioritise time and cost at the expense of benefits. The Committee has heard of projects delivering benefits that are reduced to the point of no longer exceeding the costs, or more frequently, the benefits being unclear entirely upon delivery. (Paragraph 81)
17. Benefits must be prioritised and reported. The IPA should report against benefits plans consistently in its annual reports from 2021–22. Consistent reporting of benefits should include a standardised financial measure, reported as trend data (showing the benefit agreed at the outset, alongside any agreed changes at specific dates, up to current forecasts) alongside a narrative of transformational benefits promised. (Paragraph 82)
18. The Committee welcomes Nick Smallwood’s statement that major projects should remain in the GMPP until Gate 5. The Committee would like the IPA to consider periodic reporting on past projects, perhaps at five-year intervals, to assess whether they have achieved their benefits. The IPA should write to the Committee in the Autumn to explain how best to do this and when the first review will take place. (Paragraph 83)
19. Where benefits will not be apparent immediately on delivery and may only materialise later, there should be a mechanism to hold previous ministers and SROs to account after the project has ended. The Chair of the Committee has written to the Chair of Public Accounts Committee (PAC) asking that when it receives NAO reports on projects, it calls the ministers and senior civil servants who were in place during set up, where that is appropriate, to give evidence. (Paragraph 84)
20. Projects are hindered by over-optimistic estimates of cost and time schedules, and overstatement of early benefits. Ministers are too keen to commit to specific cost and timescales early in the process, and project managers become tied to these estimates. The early estimates can then shape the rest of the project delivery, sometimes leading to reductions in outputs or benefits as project-managers struggle to keep project timescales and costs in check. (Paragraph 91)
21. Project data should be reported in ranges, which reflect quantified risks to costs and timescales. The IPA should start reporting ranges for any newly-approved projects immediately, and HM Treasury should state an expectation that projects going through Treasury Approval Processes (TAP) present ranges as a default. (Paragraph 92)
22. Projects which are particularly risky or high profile should invest more time up front, and consider approaches such as shadow cost modelling. The IPA should report on the methods used on the GMPP which can be viewed as best practice for other Government projects. (Paragraph 93)
23. Not enough is done to involve local people in decision making at an early stage. The Committee heard that decisions are made about a project before consultation happens, and that late consultation can be insufficient to overcome local opposition. This can result in delays to projects, but it can also lead to infrastructure which does not have full public support or serve local needs. (Paragraph 101)
24. All projects should include proper public consultation as part of the early decision making phase. Projects should consider setting up an independent arm to lead on public engagement that is proportionate to the scale and profile of the project. Projects should be able to demonstrate their engagement as part of early IPA approval gates, and as part of the Treasury Approval Process. Projects that are unable to demonstrate that they have undertaken proportionate public consultation, and responded to the findings of that consultation, should not get Treasury or IPA approval. (Paragraph 102)
25. Efforts to address capability are welcome but will take time to take effect. A scarcity of appropriately experienced people and salary constraints in the public sector contribute to the ongoing problem of shortages, particularly in the SRO role. The Government needs to recognise that capability is a potential constraint on its infrastructure plans. (Paragraph 112)
26. The Government must give further consideration to civil service upskilling if it is to deliver its infrastructure commitments, which might include a commitment to making salaries more competitive, at least in the short term. The Cabinet Office should review whether a separate pay system or allowance for SROs and valuable project managers would help keep them in their roles for the duration of a project, and it should report back to the Committee in the Autumn.(Paragraph 113)
27. SROs should lead a project from start to completion, and remain accountable for delivering benefits after completion. Heads of Departments should ensure that the right incentives are in place to retain SROs, including career or pay progression opportunities as appropriate. SROs should have enough time to lead properly the projects for which they are accountable—and in many cases, this will require the SRO to work full time on that project. (Paragraph 114)
28. The Committee welcomes the introduction of training for ministers in project management. It is important that ministers take the opportunity provided to educate themselves better about how projects are delivered and how they can have an impact on that, both positively and negatively. The Committee expects that all Secretaries of State and any minister with significant projects in her or his portfolio will undertake this training immediately after appointment. In its response to this Report, the Government should include a list of all ministers who have already received the training and those who are booked to complete it by the end of the calendar year. The Committee will ask for regular updates from the IPA on training after ministerial reshuffles. (Paragraph 117)
Transparency of project delivery
29. Good and transparent data is vital for parliamentary and public scrutiny of major projects. The Committee has seen examples of projects which have gone off the rails late, having shown little or no sign of difficulty through reported data. The Committee also notes that the standalone data published in IPA reports and in Departmental annual reports and accounts do not enable individuals to know whether projects are in line with what the public was promised when projects were devised. (Paragraph 126)
30. As responsibility for policy on major projects and their management is shared across two departments, the Cabinet Office and HM Treasury should write to the Committee setting out the standardised data they expect departments to collect on the most significant projects. From 2020–21, all departments should publish this information in their annual reports.(Paragraph 127)
31. The IPA should review the data that it publishes in its Major Project Annual Report, and this should be extended at least to add timelines of project approvals and estimates. (Paragraph 128)
32. Departments with large projects should, from 2021, be able to demonstrate compliance with the recommendations of the 2019 Government financial reporting review, the revised Financial Reporting Manual and the forthcoming thematic review of project reporting review of accounts, which included publishing trends in project data. Project data published in departments’ annual reports should be easily reconciled to data published in the IPA annual report and should be consistent with announcements by ministers or local elected officials. Where information on projects differs between these documents and announcements, a clear explanation or reconciliation should be given in the relevant department’s annual report. (Paragraph 129)
33. The IPA should consider how it can publish data more quickly—and in particular highlight changes to the project, such as increases in costs or delay—so that these issues do not first emerge a year after the fact. (Paragraph 130)
Published: 28 July 2020