A Treasury Committee Report published on 5 March 2014 contains a number of conclusions and recommendations relating to the Government's Transport and Energy infrastructure policy. The Committee was set up to examine the Autumn Statement 2013, the 'Economic and fiscal outlook' (published by the Office of Budget Responsibility) and the National Infrastructure Plan (NIP) update 2013, all delivered in early December 2013.
The Treasury Committee considered the detailed spending plans in a number of areas including roads, railways, telecommunications and energy. It also considered the Government's list of priority investments and planned public and private infrastructure projects. The NIP had updated the total value of such investments from £3 billion in 2012 to over £375 billion, of which over £340 billion were to be directed to the energy and transport sectors.
Ahead of this month’s Budget due on Wednesday 19 March, the Committee Report summarises the main findings of the inquiry and puts forward recommendations to address concerns raised. In the transport sector, the main concerns were that projects were not capable of being delivered in a timely and effective manner, and that large projects such as HS2 were taking precedence over support for smaller but essential schemes. As a result, the Report concludes that in the interests of transparency of decision-making, the Treasury should set out the absolute benefits and absolute costs, and the benefit to cost ratios, for each road and rail scheme considered by Government, whether approved or not. It also recommends that the calculations should be consistent with well-established Department for Transport best practice based on Treasury Green Book principles. Concerns were also raised that contingency funds were not calculated in a consistent way and that this might create perverse incentives to use contingencies, rather than encourage effective working practices for binding costs. To address this the Report recommended that the Treasury ensures contingency funds are used only for contingencies, and do not become a safety margin to accommodate poor planning.
The Committee also examined the Government's strategy for decarbonising the economy and the impact this was having on energy infrastructure investment. The Committee considered whether the Government had an implementation strategy which was both plausible and deliverable. Evidence given to the Committee was that the strategy was "extremely unlikely to be delivered" because the Government "grossly underestimated the economic, financial and engineering challenges of decarbonising a sector like power as quickly as [the Government] are proposing to decarbonise it" (paragraph 85 of the Committee Report). Evidence was given that energy investment deals were being distorted because the Government was trying to reach carbon reduction targets, and there was particular criticism of the commercial contract signed up between the Government and EDF Energy for the development of the Hinkley Point C nuclear power station. The net cost of decarbonisation, excluding investment to replace existing infrastructure, was estimated to be "in the region of £200 billion to £230 billion". Notwithstanding these comments, the Committee has not made any recommendations on the Government's strategy for decarbonising the economy or on energy infrastructure investment.
It is to be seen if the Government will publish a response to the Treasury Committee's report.