Transport Insights

Northern Powerhouse Rail (NPR) may have escaped cuts to the Department for Transport’s capital spending on infrastructure to pay for drones, but MPs have cast doubt on whether the project can be delivered in full within a seemingly arbitrary cap on its funding.

By way of a reminder, the project does not have actual funding, beyond around a billion for development, but the Treasury has set a hard cap of £45bn on the amount that can be spent on delivering it.

Now the Public Accounts Committee (PAC) has flagged a “clear risk” that the Department for Transport (DfT) will not be able to manage the programme its funding cap. MPs said:

This may help affordability, but we are unclear how HM Treasury determined the cap before the entire project is designed, scoped and costed.

With NPR due to be delivered in phases, the PAC said:

The final phase of Northern Powerhouse Rail—needed for the full connectivity and benefits—is at risk if the Department cannot scope the programme within the cap or if early cost estimates prove unrealistic.

Most people seem to think the early cost estimates will indeed prove unrealistic and the PAC adds:

This serious risk is heightened by High Speed Two Limited’s (HS2 Ltd’s) responsibility for producing some of the cost estimates and the Department’s poor record on rail infrastructure costs and cost estimation. Yet the Department has no convincing plan for managing spending or prioritising benefits to remain within the cap.

The PAC said HM Treasury should explain in detail how it determined the funding cap before the entire project was designed, scoped and costed.

And with local (and regional) government expected to chip in, the PAC said the DfT should set out how much funding it will allocate to each phase, and how it will support local government to raise additional funding.

It also wants the department to “clearly set out” how it will manage its spending within the funding cap, “including how it will control costs, prioritise benefits and decide what to descope if cost pressures emerge”.

MPs also pointed out that

despite more than 12 years of planning, NPR remains at an early stage

The DfT’s response is to make a virtue of this. It says that, having accepted the recommendations of the James Stewart Review into how it governs major programmes, it is “taking a disciplined, phased approach – completing detailed technical work with all stakeholders before fixing precise choices for major infrastructure”.

Except that a £45bn funding cap is a very precise choice for a project that has not been designed, scoped and costed.