Parliament’s spending watchdog has called for a rethink of RIS 3, warning that current plans risk splurging taxpayers’ cash on low value, high risk mega projects in the south.
In a new report on progress with enhancements schemes in the current road investment strategy (RIS 2 – 2020 to 2025) the head of the National Audit Office (NAO) called on ministers to rethink whether mega projects like the £9bn Lower Thames Crossing (LTC) and the £2.4bn A303 Stonehenge scheme remain 'feasible' after delays pushed them into RIS 3.
The NAO added that in RIS 2 ‘less work has been delivered than planned and at a higher cost’.
The report reveals an increase of £6bn since 2020 in the forecast cost of projects approved in 2020 and planned for delivery between April 2025 and March 2030. In September 2022, National Highways provided a forecast cost of £11.5bn during RIS 3 for these schemes, up from its initial estimate of £5.5bn.
The NAO noted that in last year’s spending review, the Government shaved £3.4bn off the £12.6bn RIS 2 budget for 69 specific enhancement projects due to be in construction in the period, largely due to delays to projects requiring development consent orders, such as the LTC and A303.
The Government subsequently reduced those 69 projects to 58, mainly through the decision to pause 11 of the 17 smart motorway projects in the plan, although one scheme was brought forward from RIS 3 while another was dropped.
The report notes that the lifetime cost of the projects in the revised portfolio has continued to rise by approximately £3.3bn by September 2022. The delay to major schemes and increases in their costs are the main reasons for the huge increase in costs in RIS 3.
Gareth Davies, the head of the NAO, said that although the RIS 2 enhancements programme ‘has been unfortunate to coincide with the COVID-19 pandemic and rising inflation…more could have been done to manage risks’.
He said: ‘Delays to projects have meant that less work has been delivered than planned and at a higher cost.
‘DfT and National Highways must now fully address the rising cost of its revised portfolio of projects, undertaking a review of all road plans that it plans to move into the time-period of its third road strategy (2025-2030). This review must consider if these projects remain feasible and provide optimal value for money.’
The NAO also pointed out that both the LTC (pictured) and the Stonehenge schemes – the two largest in the portfolio by value – are rated as low value for money and that projects carried forward into RIS 3 ‘have a lower value-for-money profile than National Highways and DfT would typically aim for’.
As of September 2022, in terms of total costs 76% of the RIS 3 projects will be low or poor value for money, while around 80% by value of projects carried forward are in the combined south-east, south-west and east of England.
The regional distribution of lifetime spend on enhancements in the portfolio has also changed. Where National Highways initially planned that 74% of the total cost would be on projects in those three regions, this has increased to 78%.
Spend per capita decreased on average by £24 per person in the North and £13 per person in the Midlands. In the South and West, it has remained the same and in the East it has increased by £393, largely driven by increases in the cost of the LTC.
The report notes that adding new projects to the portfolio in RIS 3 could help address the value for money and regional balance of the portfolio but may not be feasible or affordable. The £11.5bn of costs carried into RIS 2 is already greater than the revised RIS 2 budget of £9.2bn for the remaining 58 enhancement schemes.
The NAO said that while it recognised that National Highways created a £1.16bn contingency budget in RIS 2 to address emerging risks, these funds will not be able to cover the increased costs. Over half of the contingency funds were allocated between the setting of the draft budget in 2018 and publication of the delivery plan in 2020. By July 2022, National Highways had allocated £1.19bn of contingency funds, more than the original budget.
It added that in March 2022 National Highways reported a third of projects in the revised plan were at risk of delay, with the primary reason being the difficulty in securing development consent.
The NAO disclosed that National Highways is forecasting that 33 projects will take longer to open to traffic than planned, with an average delay of 12 months, which ‘will leave road users with an underperforming road network for longer’.
It observed that ‘National Highways has not assessed the impact of changes to the portfolio on the delivery of these benefits and the impact on users of the roads’.
In RIS 2, National Highways had planned to obtain consent for 33 infrastructure projects but by May 2022 had experienced delays in receiving or applying for development consent on 12 of the projects.
In most of the cases, additional work was required to show how road projects complied with evolving government policy relating to environmental standards, with some projects being legally challenged by stakeholders in relation to their cumulative carbon impact.
The NAO said that in the short term, it has recommended that DfT and National Highways should, working alongside the Treasury, develop a response to the current inflationary pressures. They should also work with other government departments to ensure that they are taking account of wider government policies, which will allow development consent applications to be more efficiently prepared for submission.
In the longer term, National Highways needs to make further improvements to its management of risks that could have an impact upon the delivery of RIS 3, the NAO said.
National Highways said it was disappointed by delays but pointed out that it has had nine DCOs approved since April, including two in the last month.
Chief executive Nick Harris said: ‘As the report points out, external factors including the pandemic, inflation and planning delays have had a significant impact on our ability to deliver this complex programme. Despite these challenges, we have successfully received consent to deliver several major infrastructure developments.
‘We’re confident that we manage portfolio and project risks well, while recognising that there is always room for improvement as we mature our processes ready for RIS3.’
