2 Department for Transport's expenditure
Presentation and information
4. Government finances are notoriously complex,
with distinctions between different forms of expenditure (for
example, resource and capital spending; departmental expenditure
limits and more volatile annually managed expenditure) and complicated
adjustments to the figures to ensure that cash and resource budgets
and outturns can be kept in line. In the past there were different
bases for expenditure plans and outturn figures, which made it
difficult to compare planned spending in one year with what actually
happened. There has been some simplification in recent years,
as a result of the Treasury's Alignment project. Last year we
welcomed the intention of Rt Hon Philip Hammond MP, the then Secretary
of State for Transport, to go beyond the requirements of the project
to simplify the DfT's annual budget (its Main Estimate).
We saw the first fruits of this work with the publication of the
DfT's annual report and accounts for 2010-11, which includes a
three-page table showing outturn and estimated expenditure for
the period from 2005-06 to 2014-15 itemised by some 20 comprehensible
categories. Figure 1
uses this information to show the department's overall spending
profile for the decade. We
commend the Department for Transport for simplifying the structure
of its Main Estimate and publishing detailed information about
spending for the 2005-15 period, which enables us to see more
clearly where the department spends money and trends over time.
DfT expenditure 2005-15
Notes: Annual Report and Accounts 2010-11,
pp35-37. Figures are provided in cash terms (ie without accounting
for inflation). The 2010-11 figures are estimated outturns. Figures
for subsequent years are for planned expenditure.
5. Each year the DfT provides us with a memorandum
to explain its annual Main Estimatewe publish the memorandum
for 2011-12 with this report.
These have become more useful documents, with clearer explanations
of how the figures have changed. However, there remains a problem
with inadequate explanation of in-year budget changes. Three recent
examples stand out. Firstly, after the 2010 election the new Government
reduced the DfT's budget by £683 million, as part of a wider
programme of cuts in public expenditure ahead of the Spending
Review. Information about where those cuts would be made was released
in response to a parliamentary question, rather than proactively
by the department.
6. An even more striking example occurred at
the time of the 2011 Budget. £300 million of new DfT spending
was announced, comprising £100 million in grants to local
authorities for road maintenance and £200 million in rail
projects. This was in
addition to another £100 million in road maintenance grants
announced in February 2011.
The DfT attributed the new commitments to "savings"
but no further explanation was offered. We wrote to Mr Hammond,
the then Secretary of State, on 26 April 2011 to ask where and
how these savings had arisen and had to wait until 21 July to
receive a reply. This explained that the savings had arisen as
- £336m from "successful
- £273m from efficiencies, such as reduced
dependence on consultants
- £229m because buoyant rail demand had reduced
subsidy payments to train operating companies
- £94m from other rail budgets
- £29m from the early sale of HS1
Mr Hammond concluded that:
Overall the Department spent £1,029 million
less than originally planned in 2010/11, of which £486 million
was recycled into transport initiatives and £543 million
surrendered to the Treasury.
We return to the underspend issue below, but it is
worth noting that without our intervention the DfT would not have
been obliged to explain how it could make new spending commitments
in March 2011.
7. Finally, a number of new transport infrastructure
projects were announced by the Chancellor in his 2011 autumn statement,
including 35 new road and rail schemes.
In addition, it was announced that regulated rail fares would
increase by RPI + 1% in January 2012, not RPI + 3% as had been
intended at the time of the Spending Review. The Treasury's autumn
statement document contained some useful information about the
costs associated with these changes,
but questions remain about whether the DfT had been given additional
funding by the Treasury and about the profile of the spending
to 2014-15 and beyond.
8. In oral evidence the Secretary of State said
that the DfT had been awarded £1.5 billion additional funding
over the spending review period.
In addition, it was suggested that the DfT had again been able
to recycle budgetary underspends to fund new initiatives.
Numerous parliamentary questions have been tabled to find out
more information about the spending profile for individual projects,
with limited success.
We wrote to the Secretary of State on 16 January to request further
details about some of the announcements in the autumn statement
and received her reply on 6 February, the day before this Report
9. In our view, the DfT does
not provide Parliament and the public with adequate information
about in-year changes in its budget. Cuts have been announced
without an explanation of where they would fall and new spending
commitments have been made without proper explanation of how they
have been funded. We recommend that when the DfT makes an announcement
to Parliament about a change to its budget it should explain the
effects of the change on specific budget lines and, where a new
spending commitment is involved, an explanation of how the money
has been found. If the details have not been finalised at the
time of the headline announcement the department should indicate
when it will be in a position to provide those details and make
a written statement at a later date.
10. Returning to the 2010/11 underspend, we were
surprised to learn that the Department had ended up in a position
where it was required to return over £500 million to the
Treasury. This is more than the estimated cost of the entire Northern
Hub project and is also likely to have exceeded the total reduction
in annual revenue for the English bus industry following the Spending
Review. Put another
way, the DfT accepted a cut to its in-year budget of £683
million and then underspent on its revised budget by over £1
billion, calling into question whether the in-year cut was necessary.
11. The Secretary of State said that in the event
of an underspend she would "look at the scope for bringing
forward projects" but would "not just ... spend money
at year-end on projects that I do not think will add value".
Her predecessor spoke of "lessons for the Department to learn"
following the underspend.
We also note that the Department's accounts were qualified by
the Comptroller and Auditor General because more income was received
from train operating companies than the limit for this set by
was a technical error but one which suggests that budgetary control
at the Department has been slack. Money voted by Parliament for
expenditure on transport should be spent on transport, not handed
back to the Treasury. We will be watching the Department's performance
in this area carefully to check that the lessons Mr Hammond referred
to have been learnt.
12. The debate about how much DfT expenditure
is incurred in London compared to the rest of the UK was further
stoked by the publication in December 2011 of a report by IPPR
North which claimed that 84% of planned new infrastructure spending
was aimed at London and the south east, compared to just 6% in
northern England. The average spend per head in London works out
at £2,731 compared to a miserly £5 per head in north
east England. IPPR
North concluded that this analysis "betray[ed] the government's
ongoing failure to take seriously the importance of spatial rebalancing".
This report chimes with the conclusions of research by pteg which
found that a total of £774 is spent on transport for every
Londoner, compared to less than £300 spending per head in
Yorkshire and Humberside, the West Midlands and north east England.
13. Responding in the House to the IPPR report
Norman Baker MP, Parliamentary Under-Secretary of State at the
DfT, said the report's analysis was "not complete; it did
not, for example, include the December announcements on local
major projects and did not take into account the further £1
billion from the regional growth fund. It is not a complete analysis".
He later pointed out that "it can be difficult and misleading
to assign spend to a particular region as the benefits of certain
projects can be far more widespread" and published a breakdown
by region of spending on schemes announced as part of the autumn
statement and on local major transport schemes.
In a welcome move, the DfT also now publishes a regional breakdown
of its overall spending in its annual report. According to this,
spending in 2009-10 in London and south east England accounted
for 32% of total identifiable UK expenditure. Spending per head
in London was £170 compared to £140 in north east England
and £120 in south west England.
14. There remain concerns that DfT spending,
particularly on infrastructure projects, is unduly focused on
London and south east England. We acknowledge, however, that calculating
how spending is distributed between regions is complex and some
projects may well benefit the nation as a whole. We
consider that the DfT could do more to ensure that its expenditure
plans involve a fair allocation of resources across the nation.
We recommend that the DfT's next annual report and accounts includes
a more comprehensive analysis of regional spend, including a fuller
explanation of how its figures (which are drawn from National
Statistics) are arrived at. In addition, we recommend that major
new spending announcements, such as the Spending Review or recent
autumn statement, should be accompanied by a comprehensive analysis
of their regional impact.
Regional Growth and Growing Places
15. The DfT contributes to two inter-departmental
funding schemes announced since the Spending Review.
REGIONAL GROWTH FUND
16. The Regional Growth Fund is a £1.4 billion
fund which operates over three years from 2011 to 2014 and aims
to "stimulate private sector investment by providing support
for projects that offer significant potential for long term economic
growth and the creation of additional sustainable private sector
jobs". The fund
is administered by the Department for Business, Innovation and
Skills: the DfT has contributed £500 million.
17. In November 2010 the then Secretary of State,
Mr Hammond, said:
We have made a sizeable contribution from the transport
budget to the regional growth fund, and I will be very disappointed
if we don't get at least our money back, and preferably a lot
more, in terms of transport projects.
In October, Lin Homer, the DfT's then Permanent Secretary
struck a different note, arguing that the Fund was "not ring-fenced
to absolute proportionality ... the previous Secretary of State
did not go into that looking to get his third specifically spent
The DfT subsequently told us that 21 transport schemes and bids
had been approved as part of the first and second Regional Growth
Fund announcements, and sent us the list.
What remains unclear is how much Government money will be spent
on these schemes.
18. In our view, there are important reasons
for the amount of money allocated to the Regional Growth Fund
by the DfT to be at least broadly equivalent to the value of the
transport schemes the Fund promotes. The principle of parliamentary
control over Government spending would be undermined if money
which Parliament agreed should be spent on transport was in fact
spent on something else.
We recommend that the DfT provide us with details of how much
it has contributed to the Regional Growth Fund and how that money
has been, or is planned to be, used on transport schemes.
GROWING PLACES FUND
19. The Growing Places Fund is a joint initiative
of the DfT and the Department for Communities and Local Government.
Intended to tackle short term constraints to infrastructure investment,
£500 million is available for allocation in 2011-12, from
The DfT told us that its contribution to the fund was £125
million and that it was likely to be disbursed to groups of Local
This new fund has the potential to ensure that departmental underspends
are used creatively rather than handed back to the Treasury but
we are concerned about whether a fair proportion of the fund will
be allocated to transport projects. We
recommend that the DfT explain how the Growing Places Fund is
disbursed and what arrangements are in place to ensure that transport
projects benefit in proportion to the DfT's contribution to the
3 Financial scrutiny, paragraph 7. Back
Annual report and accounts 2010-11, DfT, HC (2010-12) 972
(hereafter 2010-11 report and accounts) pp35-37. Back
Ev w3-12. Back
HC Deb, 13 Jul 10, c625w and see Reducing costs in the Department
for Transport, NAO, 14 Dec 11, HC (2010-12) 1700, figure 1. Back
See DfT press release, More than £100 million of extra
funding to repair winter potholes, 23 Feb 11 and HC Deb, 15
Mar 11, c284-85w (roads); Ev w2 and HC Deb, 30 Mar 11, c22-23
WS (rail); and also see Budget 2011, HM Treasury, HC (2010-12)
836, paragraphs 1.96-1.97. Back
See above. Back
Ev w2-3 and see 2010-11 report and accounts, pp48-50. Back
See annex A of Autumn Statement 2011, HM Treasury, Cm 8231,
Nov 11 (hereafter Autumn Statement). Back
See in particular Autumn Statement, paragraphs 1.82-1.96
and National Infrastructure Plan 2011, HM Treasury and
Infrastructure UK, Nov 11, paragraphs 3.1-3.58. Back
Qq 82-84. Back
For example see HC Deb, 30 Jan 12, c 410w (rail schemes). Back
Ev 35-36. Back
For Northern Hub see Network Rail, Initial Industry Plans 2011:
Definition of Proposed CP5 Enhancements, p89. For the bus
subsidy see Bus Services after the Spending Review, HC
(2010-12) HC 750, paragraph 12. Back
Ev w3. Back
2010-11 report and accounts, pp79-81. Back
On the wrong track: an analysis of the autumn statement announcements
on transport infrastructure, IPPR North, Dec 11. Back
Ibid., p13. Back
2011 pteg funding gap report (http://www.pteg.net/NR/rdonlyres/DC78CD78-F557-44F5-8014-FF35C279B17C/0/pteg_2011FundingGapreport_20111102.pdf)
HC Deb, 12 Jan 12, c318. Back
HC Deb, 31 Jan 12, cc568-71w. Back
2010-11 Report and Accounts, p44. Also see Ev 33. Back
Financial Scrutiny, Q11. Back
Ev 29-32. Back
Ev 29. Back