3.4 Ninety-three per cent of the Department's spending, and therefore the large majority of its cost reduction measures, are through the Highways Agency or third parties. The Department has good assurance over the total level of efficiencies targeted by the Highways Agency, and the level of confidence in achieving them. This is because from summer 2011, the Agency began reporting a detailed breakdown of progress in identifying and securing efficiency measures on both highways maintenance and new road building schemes. In relation to third parties, the level of the Department's assurance over cost reduction measures therefore depends on control and oversight arrangements in place. Each reporting regime has its own distinctive characteristics:
• The Office of Rail Regulation is responsible for ensuring Network Rail works safely and efficiently. The Department's role is to provide strategic direction and funding to the railways and to procure rail franchises and projects. Our report Regulating Network Rail's efficiency found that there are gaps in the Regulator's information on Network Rail's unit costs.
• Transport for London. The Department's oversight has improved to include specific milestones for infrastructure investment, covering 33 per cent of the funding it gives. Oversight of ongoing expenditure and Transport for London's overall financial sustainability remains light touch, with no regular reporting.
• Local authorities. The Department does not monitor cost reduction programmes in local authorities, which are responsible for their own budget decisions. Block grants from the Department can be spent on purposes other than transport. The Department has taken steps to improve transparency by publishing local authority data comparing expenditure against road conditions. The Department's oversight role is greater in relation to bid-based funding, including major transport projects, where it assesses and monitors individual schemes.
3.5 Although the Department's oversight of this spending is improving, it remains challenging to monitor the actual impact of the cost reductions. This means it cannot be assured that its objectives are being delivered at a sustainable lower cost. This is particularly important to provide assurance that efficiencies are genuine and not simply cuts to services. The Department monitors the condition of roads annually and is beginning to get good information on progress in identifying and implementing efficiency measures. Bringing this information together at board level would enable an explicit assessment of whether efficiencies are being achieved as well as giving assurance on the value of the Department's largest asset. While the Department is not responsible for the condition of local roads, it needs to understand the impact of its budget reductions on its objectives for local transport.