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Written question asked by Tom Brake (Liberal Democrat) on Tuesday, 17 January 2006, in the House of Commons. It was due for an answer on Thursday, 19 January 2006. It was answered by Stephen Ladyman (Labour) on Tuesday, 24 January 2006 on behalf of the Department for Transport.

Road Improvements

Question
To ask the Secretary of State for Transport pursuant to the answer of 19 December 2005, Official Report, columns 2318–19W, on road improvement costs, what proportion of the overrun for the targeted programme of improvements can be ascribed to (a) underestimates, (b) fraud, (c) inflation in the construction industry and (d) other factors.
Answer

The targeted programme of improvements (TPI) table placed in the House Library in December 2005 compares the approved full out-turn cost against the scheme cost submitted for TPI entry approval. Since April 2003 the TPI entry cost has been reported on the basis of full projected out-turn, making allowance for identified risks, inflation up to scheme completion, non-recoverable VAT and for ‘optimism bias' in line with revised Treasury guidance issued in April 2003. Before then, only net scheme costs, exclusive of VAT, projected inflation and ‘optimism bias' were reported at TPI entry.This is why as stated in the footnote to the answer of 19 December 2005, the two sets of figures in the table are not directly comparable for the 43 schemes that entered the TPI prior to April 2003. For these schemes, about £0.6 billion (39 per cent.) of the £1.54 billion variance against the cost reported at TPI entry is attributable to the absence of VAT, projected inflation at 2.5 per cent. and ‘optimism bias'. The remainder of the variance can be attributed to underestimates in the scope of schemes and the impact of inflation. Scheme budgets have assumed that construction inflation would run at 2.5 per cent. per year. The latest indications suggest that a higher allowance may be more appropriate and more research is under way in that area. As far as the Highways Agency is aware fraud has played no factor in any requirement for budget increases.For the 39 schemes that entered the TPI since April 2003, the two sets of figures are directly comparable and only two schemes have approved budgets that have increased since TPI entry. These increases (£61 million) can be attributed to a combination of underestimates (£26 million) and higher construction inflation (£35 million). Again, none of these increases can be attributed to fraud.

Secondary information

Type
Written question
Reference
44104; 441 c1994W
Session
2005-06
Subjects
Costs Roads Repairs and maintenance
Contains statistics
Yes
Link
View this Written question on www.publications.parliament.uk