Transport secretary Justine Greening has this week been accused of ducking key decisions on future roads investment by industry leaders after she ruled out introducing a five-year spending settlement for the Highways Agency.
Responding to last November’s year-long review of the Agency by chairman Sir Alan Cook, Greening held back from agreeing to the principal recommendation that the Department for Transport should provide the Agency with a full five-year spending settlement.
This was intended to drive greater efficiency savings by providing greater funding certainty (NCE 1 December 2011).
The Cook recommendation received strong industry support when published, particularly for its recognition of the potential for significant improvements that contractors could deliver where there is a long-term programme of investment. Cook had committed the Agency to delivering additional year on year cost savings of £200M in return for the committed spending plan.
The government has instead opted to carry out further work to understand the benefits of greater funding certainty as part of a feasibility study to look at future ownership, financing and management of the road network as announced in March by David Cameron.
“The Cook review paved the way for the government to take important decisions about the future of the UK’s strategic road network and help attract new private investment. Unfortunately, the government’s response has fallen short,” said Rhian Kelly, director for business environment policy at business lobby group CBI.
“Its intention to set a long-term vision is laudable, but delaying its decision on the Highways Agency’s status is a missed opportunity.”
Mott MacDonald transportation director David Tarrant and past president of the Chartered Institution of Highways and Transportation agreed that the decision was a “disappointment” but “hardly unexpected” given the history of governments of all political persuasion.
The coalition government had pledged to correct stop-start investment and set up Treasury body Infrastructure UK with the principle aim of tackling this. On publishing the first National Infrastructure Plan in November 2010, Treasury commercial secretary Lord Sassoon said the plan “is not just another document setting out aspirations, but a clear move from the ‘stop start’ approach that has bedevilled everything we do”.
Tarrant reiterated the point he stressed during his 2008 presidential conference that government needed to face up to the difficulties of making far-sighted decisions on taxation, pricing and investment in capacity.
“We need action now,” agreed Civil Engineering Contractors Association (Ceca) director of external affairs Alasdair Reisner. “It is fair to say that this does not address the short-term need to invest in roads.”
“But what this does mean is that the feasibility study is of increasing importance. We believe that the case for long-term funding certainty is strong, and we will be working with other representatives from industry to provide evidence of this to the feasibility study team,” he said.
Ceca and Tarrant welcomed other commitments made by Greening in her response, including the development of a long-term strategy for the roads network, and the creation of performance specification for the network based on outcomes desired by motorists and the wider public.
A 20-year strategy for the national road network and new challenging performance targets for the Highways Agency to deliver against are central to Greening’s plan. The performance specification and strategy will be put out to consultation by the end of this year with the aim of having the performance specification in place for the start of the 2013/14 financial year.
Greening this week published detailed terms of reference for the feasibility study looking at ways to attract private sector investment in the road network.
This will examine how new financing approaches could interact with existing motoring taxation, but will not consider road pricing or tolling of existing highways.
The study will report to Cameron in the autumn.
CBI urges government rethink on infrastructure funding
The CBI has suggested that the mothballed £1.2bn scheme to widen the A14 between Ellington and Fen Ditton in Cambridgeshire would make an ideal project to demonstrate a new model for injecting private cash into infrastructure projects.
It has called on government to fundamentally change the way it uses cash set aside for capital projects, fully funding less schemes and instead pump-priming a far wider range of projects.
The up-front government cash, which would be the first to get swallowed up should the project go wrong, would encourage private investors to weigh in with the remaining money, the CBI believes. It says the move would be enough to lift the credit rating of typical infrastructure projects from junk status to investment grade BBB-.