2.6 The spending review required savings in a timescale that was short relative to transport spending decisions and to the strategic initiatives outlined in Figure 5. The Department's approach to the spending review was guided by high-level objectives of supporting economic growth and reducing carbon emissions. Other objectives included tackling congestion and addressing social exclusion from lack of access to transport.
2.7 In early 2010, the Department developed an Alternative Planning Assumptions Framework that identified options for savings across the Department's spending and assessed their impact against these objectives. The 'discovery projects' (paragraph 2.2) also helped to identify some areas for reducing budgets consistent with these objectives, for example by considering the lowest possible road standards consistent with the safety and preservation of the network. This work provided the basis for judgements about potential areas for savings.
2.8 How far these objectives guided the Department's decision-making is shown in the process it used to identify possible areas for cuts and in its subsequent negotiations with the Treasury on the cuts. For example:
• The Department wanted to make sure that Transport for London continued to invest in upgrades to London Underground and other key infrastructure, believing these to be critical for economic growth. To do so, the Department split funding into a general grant and an investment grant, confirming that the latter, together with other sources of finance, was sufficient to make infrastructure improvements to a specific timescale.
• In presenting its case to the Treasury, the Department cited the adverse impact that certain capital and resource cuts would have on its objectives to reduce carbon emissions and address social exclusion, and tried to quantify the impact on carbon.
2.9 The Department also used a multi-criteria analysis3 to help provide a strong evidence case for part of its capital budgets. The process the Department followed for capital budgets, which were determined through a cross-government, zero-based approach, comprised:
• Protecting budgets for Crossrail, the Office for Low Emission Vehicles and the preparatory costs for High Speed 2, which were deemed policy priorities. These account for 14 per cent of the Department's final capital budgets. In addition, national road schemes and local transport projects under construction were protected, accounting for a further 5 per cent of the Department's capital budgets during 2011-12 to 2014-15.
• Agreeing a set level of resources for road maintenance (discussed further in paragraph 2.18 and figure 8), which came to 15 per cent of the Department's final capital budgets. During discussions the Department and the Treasury reallocated £100 million of capital expenditure notionally earmarked for road building schemes to national road maintenance to ensure provision in line with the levels already determined.
• Conducting a multi-criteria analysis to examine the relative merits of different capital projects, in terms of their economic benefits, deliverability, strategic ft and other impacts. This enabled comparisons between different levels of spending on national road enhancement schemes, local transport projects, and some of the other funding streams available to local authorities and the Highways Agency. Although it was not the basis for selecting all the specific schemes subsequently taken forward, this informed decisions on 13 per cent of the Department's final capital budgets.4
2.10 The Department's objectives were not the only criteria guiding decisions. Significant areas of Departmental spending are contractually committed for the spending review period, including rail franchises and PFI contracts. The Department and the Treasury decided not to seek to reopen Network Rail's five-year funding settlement which finishes in 2013-14: a £10.7 billion commitment over the first three years of the spending review, 28 per cent of the Department's budgets. This would have required going through an 11-month negotiation process, arbitrated by the Office of Rail Regulation and with little certainty of generating savings in the short term. The Department was not required to find compensating budget reductions in other areas, because the cross-government process for agreeing capital budgets examined individual programmes on their own merits rather than targeting an overall reduction for each department. The Department expects the McNulty review and the next-high level output specification and periodic review of funding for rail to drive longer-term savings.
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3 This analysis scored and ranked transport schemes according to different criteria, including: their Net Present Value per pound; deliverability (i.e. how close a scheme is to being able to commence construction); strategic ft; and other non-monetised benefits (such as biodiversity, or local air quality).
4 The remainder of the Department's capital budgets were not covered in this analysis and include the Network Rail grant (46 per cent), a separate grant for Metronet (3 per cent), the Department's contribution to the Government-wide Regional Growth Fund (1 per cent) and other capital programmes (3 per cent).