Road upgrades could exceed budget by billions

The National Audit Office (NAO) has said planned improvements to England’s motorways and main roads will cost billions of pounds more than expected due to inflation and delays.

A new NAO report has identified inflation and delays as the reasons behind the likely inability of national highways to meet budgets set for dozens of road improvement projects.

National Highways, which manages motorways and trunk roads in England, has received a total of £14.1bn from the Department for Transport (DfT) for 69 improvement programs in its second road investment strategy (RIS2). According to NAO, the government-owned company completed fewer jobs and at a higher cost than expected.

The report warned that it will cost around £3.3 billion more than anticipated to complete projects scheduled between April 2020 and March 2025.

It also said projects expected to be under construction over the next five years were likely to cost £6bn above previous expectations, although that includes some of the schemes included in the £3.3bn figure.

Currently, some 33 schemes are overdue by between one month and more than three years, with the average being overdue at 12 months. The NAO also found that National Highways has already committed its full £1.16bn RIS2 emergency budget.

“The scale of cost inflationary pressure is beyond levels that can be absorbed by national highways and construction may need to be delayed, scaled back or canceled to stay within the overall budget,” the report said. .

“Similarly, DfT is experiencing cost pressures from inflation across its rail and road transport infrastructure works programme. DfT cannot absorb the level of inflation risk within its budgets and carry out its work as planned.”

Projects in RIS2 include the construction of a dual carriageway and tunnel near Stonehenge, Wiltshire, and the Lower Thames Crossing between Kent and Essex, neither of which have received approval for development.

Last year, the budget for improvements was cut by £3.4bn and the number of projects was cut to 58 when it became clear that National Highways could not implement the delivery plan as planned.

Gareth Davies, head of the NAO, said it was “unfortunate” that the road investment plan being developed by the DfT and National Highways coincided with the coronavirus pandemic and rising inflation, but “something could have been done more to manage risk”.

“Project delays meant that less work was delivered than expected and at a higher cost,” he added.

“DfT and National Highways must now fully address the rising costs of its revised portfolio of projects by undertaking a review of all road plans it intends to move into the time frame of its third road strategy (2025-2030).

“This review needs to consider whether these projects remain viable and provide optimal value for money.”

The funding crisis and project delays are also expected to have a significant knock-on effect on the envisaged plan for RIS3 (2025-2030), as the already committed elements of this program have risen to £11.5 billion over RIS3’s estimate. £5.5 billion in 2020.

The NAO also warned that further funding would need to be found if the paused smart highways scheme is restarted, because £635m of the £745m previously allocated upgrade funds have been diverted to upgrade areas of additional emergency, the installation of concrete barriers, CCTV and other security measures .

National Highways chief executive Nick Harris said “external factors” had a “significant impact on our ability to deliver this complex program.”

“Despite these challenges, we have successfully received the green light to implement several major infrastructure developments,” he said. “We are confident that we are managing portfolio and project risks well, while recognizing that there is always room for improvement as we mature our RIS3-ready processes.”

A DfT spokesman said RIS2 was “transforming our road network” and that a “minority of projects” were being delivered later than originally proposed.

He added: “We have set aside £24bn to ensure a road network that is safe, reliable, environmentally friendly and good value for the taxpayer.”

RAC road policy chief Nicholas Lyes said drivers would be “very frustrated if vital improvement work is put on hold”.

“Any attempt to reduce the road budget is short-sighted because slow traffic and delays do nothing to help the economy grow,” he said.

To address this situation, NAO recommended that DfT and National Highways should, working alongside HM Treasury, develop a response to current inflationary pressures and adapt ongoing projects accordingly.

In the longer term, NAO said that national highways need to make further improvements in risk management that could impact the implementation of the third road investment strategy.

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