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Local Government: Roads

Volume 703: debated on Thursday 10 July 2008

asked Her Majesty’s Government:

Whether they will reimburse local authorities for the £671 million cost increases on current road schemes managed by local authorities.

My Lords, responsibility for developing local major scheme proposals, including preparing robust scheme cost estimates, lies with local authorities. Ministers will consider cost increases for local road and public transport schemes at the appropriate approval stage, in line with the criteria set out in the department’s local authority major scheme guidance.

My Lords, I am grateful to my noble friend for that long Answer, but perhaps I could press him to be a little more specific. Surely local authorities tend to underestimate the cost of schemes to make them appear to be better value for money. Surely the only way of making them come up with proper estimates of the outturn cost is to make them carry the extra cost if they run out of budget. Is it not in the Government’s interest that local authorities should keep to budget? If they cannot, surely the Treasury has to increase the optimism bias that it uses in appraising schemes to ensure that local authorities stay within the total budget.

My Lords, very clear guidance is issued to local authorities about schemes that are brought forward through quantified risk assessment. Local authorities also have to produce a sort of risk register for any scheme that they want to take forward. For schemes submitted to the department for programme entry from April 2006, the department now requires local authorities to agree to contribute a minimum of 10 per cent towards the estimated total scheme cost, 50 per cent of any increase up to an approved scheme cost and 100 per cent of any increase above that figure. The incentives are there.

My Lords, can the noble Lord confirm or deny what I am sure is an unhelpful rumour that is going the rounds in Eurosceptic circles to the effect that many of the repairs being carried out to our road bridges are in some way influenced or dictated by weight limits imposed from Brussels?

My Lords, in answer to that, in fact it was the British Government who agreed to the heavier lorries, although they were well warned about the effects of weight increases. I return to the Question. Is it not the case that many local authorities are trying to blame central government for their lack of money, although that is due to the fact that the authorities do not estimate properly in the first place?

My Lords, I am reluctant to place the blame on local authorities; there must be a shared responsibility. Of course there are occasions in which a local authority’s estimation has been less than rigorous, but we must use the guidance, press local authorities and help them to develop the capacity so that estimations are more accurate and timely. One sometimes has to accept that there are good reasons for cost overruns in what are ambitious schemes. These things cannot always be seen at the outset of a project.

My Lords, does my noble friend accept that the details of a number of road-building schemes have come to light recently as a result of Freedom of Information Act requests to the Department of Transport and that they demonstrate that the cost overruns in a number of cases are almost completely out of control? One example is that of the new crossing of the Mersey, whose cost has risen from £209 million to £390 million. Do not such schemes represent bad value for money and are they not environmentally unsound? Would not the money be better spent on, for example, railway electrification and other public transport provision?

My Lords, I do not think that this is a question of either/or. Clearly, the schemes must stand on their own merit. I will not get into a debate about the new Mersey Gateway scheme, although I know that there is some concern about the figures produced for it. We must accept that there are many instances in which local major road schemes make a significant contribution to reducing congestion and have a sound environmental base; they were long argued for because of their contribution to local regeneration. We must look at this in the round rather than use a narrow either/or choice between rail electrification and the merits of the road scheme.

My Lords, although my noble friend seems to be taking responsibility for the cost overruns of many of these local authority schemes—I am sure that the local authorities will be pleased about that—the fact remains that local authority schemes and many Highways Agency schemes are running well over their estimated budget costs. I should be grateful if my noble friend could explain what the Government are doing to control the costs of these road schemes, as has happened already in the railway industry.

My Lords, I set out the formula that is applied and I also explained that there is very clear guidance. We are not taking responsibility for the cost overruns; it is up to local authorities to make absolutely sure that they make accurate estimations when they submit schemes as part of the bidding process.

My Lords, in his original Answer, the Minister referred to a “robust scheme”. What is a robust scheme and what is a scheme that is not robust?

My Lords, perhaps I need to take advice on that from the noble Lord. The process of building up estimations for each part of the scheme has obviously been gone through. Very clear guidance is given on that, and local authorities have to ensure that they conform to the process.