24
Examination of witnesses
Baroness Neville-Rolfe, James Cartlidge and Jonny Medland.
Q47 The Chair: Good morning. Welcome to the Built Environment Committee’s final evidence session in our short inquiry into infrastructure policy‑making and implementation in government. Our witnesses today are Baroness Neville-Rolfe, Minister of State at the Cabinet Office, James Cartlidge MP, Exchequer Secretary to His Majesty’s Treasury, and Jonny Medland, deputy director for infrastructure, digital and culture at HM Treasury.
We have quite a lot of questions to ask. We will try to keep them short, and I will try to confine each member to one supplementary, so that we can get through them in reasonable time. I would ask you also, if I may, to keep your answers fairly focused and short, so that everybody gets a chance to ask the questions that there are. I will introduce each Member as they come to ask a question, but there are nameplates in front of people to help you in the meantime.
In each case, unless questions are specifically directed at an individual, the suggestion is that you decide among yourselves who will answer, rather than us telling you who they are for.
I will ask the first question. Can you give a brief account of the Government’s decision-making process for selecting which large-scale infrastructure projects should be approved and, crucially, how they are prioritised? By large infrastructure projects, we mean those qualifying as part of the Government Major Projects Portfolio, if that is a helpful definition. The key thing here is not to take us through the Green Book and how they are evaluated, but how they are prioritised and, when you have a list of projects that you would approve, which you take forward in preference to others.
James Cartlidge: It is a pleasure to be here. Thank you very much for inviting me to address your committee on this important inquiry on infrastructure. In preparing for this session, I asked whether I could have a diagrammatic illustration of the basic sausage machine process, which I have and I will ask my officials to share with you afterwards in writing, if that is okay.
In essence, the key is the spending review process. Departments bring forward their proposals to be funded in the spending review. If a proposal is within the delegated limit that a department has had agreed in the spending review, generally it can proceed with that without going through the full assessment. If it is above that amount—obviously particularly for very large projects—or if what we call novel, contentious or repercussive, it goes through the full assessment process.
There are three levels. We have a desk-based review, the Treasury approvals process panel and the Major Projects Review Group, which would apply primarily in the sorts of larger projects that you are talking about. If it gets through all those stages, it goes to the Chief Secretary to the Treasury and he will consider it in the usual way. That is, if you like, the summary of the process.
You have to remember that, ultimately, these are led by departments, so they will have their own prioritisation. Through the spending review process, they will engage with our department, the Treasury, as to which will come forward to enter consideration.
The Chair: I have two points to pick up on that. You have, effectively, landed the decision in the spending review on the desk of the Chief Secretary to the Treasury. Across government and between departments, there must be a process of prioritisation. How does that take place? Is that where the Major Projects Review Group comes in? Who sits on the Major Projects Review Group? I do not mean by name, but what character of person sits there?
Secondly, is it solely a matter for the Chief Secretary to the Treasury—I am sure with the Chancellor looking over his shoulder—or is there a wider ministerial involvement in that decision?
James Cartlidge: Going in reverse and talking about the Chief Secretary, that is the final stop on the journey, as it were. We are trying to simplify this. Projects can vary enormously in the way they proceed, but this is the summary of the generic process.
To talk about prioritisation, we need to take a step back and look at the overview of the architecture we have with the different institutions. We are very keen on having a broad, long-term focus. We want to have a joined-up approach—we have the Cabinet Office and the Treasury here today—across government and, included in that, the institutions; the National Infrastructure Commission is particularly important in this.
When they make their national infrastructure assessment, which, as you know, is every five years—there will be another one coming out in the autumn—this is a way of informing government of what they believe priorities should be at the top strategic level for economic infrastructure. As you know, we then published on the back of that our national infrastructure strategy. That sets the prioritisation across the Parliament and the overall direction of travel.
Then, at a departmental level, you have prioritisation that will be an internal process of their own. There are lots of different people, officials, Ministers et cetera, involved, but the ultimate decision is made by the Chief Secretary. As you say, he is ultimately responsible to the Chancellor in that sense.
The Chair: So there is no further ministerial involvement beyond that. The Chief Secretary, with the Chancellor looking over his shoulder no doubt, is the decision-maker. I am still not clear. When the Chief Secretary receives advice on prioritisation as between departments, departments can do their own prioritisation and make recommendations, but, across government, from whom is he or she getting that advice?
James Cartlidge: The key point is that, ultimately, the authority here comes from the mandate from a general election. As a Government, you enter the new Parliament with a manifesto, which will contain your priorities that you set out in your manifesto and which you are accountable to the public for, because they voted for you on the basis of delivering that. Ultimately, that sets overall policy.
When these things reach the Chief Secretary, he has to consider the advice of his officials, the assessment that has been made through the standard process of assessing the business case against the Green Book, as you said, and the way we assess individual projects, but, ultimately, within a context of overall policy priorities.
The Chair: I agree that that will cover a small number of major projects that might appear in a manifesto, but we have 235 in the portfolio at the moment. I will drop it there, because others want to ask questions. I am not absolutely clear who is doing this thinking about which comes first and which has to wait.
Q48 Lord Grocott: This relates quite closely to the earlier discussion. It is about ministerial responsibility. Once the project has been identified and approved at whatever level and by whatever mechanism, which department and, specifically, which Minister is responsible for seeing the project through? If it all goes pear-shaped, who gets the sack, metaphorically speaking?
James Cartlidge: As I said at the beginning, it is crucial to remember that we are two departments with an overarching view of government: HM Treasury, underpinning the financial side; and the Cabinet Office, responsible for co-ordinating cross-government policy.
As I stressed, the individual bids that come in for individual projects, particularly large-scale infrastructure, will typically be from individual departments. Once they are agreed, it will be an individual Minister within the department who takes responsibility. Day to day, that is through someone called the SRO—the senior responsible officer—who is an official in the Civil Service. It is important to stress that it is the individual department that takes responsibility once the project has been signed off.
With the Cabinet Office, we have joint responsibility for the IPA—the Infrastructure and Projects Authority. There are many ways in which we co‑ordinate across government to look at how projects are progressing, and so on, but, ultimately, accountability in a sense rests with the individual department.
Lord Grocott: Would that be made clear—it is not always clear to me, I must admit—at the point at which the project has been approved, that he or her, this Minister or that Minister, has the responsibility? I will leave aside for a moment the fact that Ministers change pretty rapidly these days and major infrastructure projects take a long time to deliver, so there could be several Ministers during the project’s life who would be responsible, which is perhaps not the best of things but is unavoidable. Do we know who to go to if things are going wrong? Who carries the can?
James Cartlidge: Ultimately, under our constitution, Ministers are accountable to Parliament. In an individual department, it will be the Minister in that department—and, ultimately, the Secretary of State—who is responsible.
To exemplify it in a typical sense, if there is a fiscal event and the Treasury is announcing significant infrastructure projects that are getting the go‑ahead, that will be coming from the Treasury. That is because of the funding issue. Day to day thereafter it will be the individual department, and you would have a press release, no doubt, from the Department for Transport, for example, if it was a major transport scheme. That is the way the structure works. I will check with Jonny whether the SRO would typically change in a project.
Jonny Medland: There is potential, of course, for the SRO to change over the life cycle of the project. Broadly, you would expect the SRO to be in place for a number of years.
To your question about ministerial responsibility and SRO responsibility, SROs are also responsible to Parliament in the case of GMPP programmes. To try to embed a greater level of sustained leadership of these programmes, the Infrastructure and Projects Authority, with us and the Cabinet Office, has in recent years been embedding, for example, minimum time commitments of SROs on programmes requiring a greater degree of SRO training. That is how that sits alongside, as the Minister says, ministerial responsibility to Parliament.
Q49 Lord Grocott: Can I ask one further quick, and I hope related, supplementary? It is about connecting up with the Government’s levelling-up strategy. Do you have information about the levels of expenditure on major infrastructure projects? Do you have figures on a regional basis for expenditure, so that we know, at a simple level, where the money is going and who is benefiting from it? At a regional level, are you able to provide that kind of information?
James Cartlidge: I do not have it to hand with me now, but I would be more than happy to look into what data we have on that basis. I have one point of caution. It is a really important question for government policy. I am personally very passionate about the levelling-up agenda. It is crucial to our government and to the Prime Minister. The key thing to stress is that it is often seen as a difference between regions when it is also about difference within regions.
That is really important. You can have a scheme for levelling up within a part of the country that is externally/outwardly/otherwise the sort of “prosperous” area that you would not expect to benefit. I represent a rural constituency, South Suffolk, which to all intents and purposes would be seen as prosperous and all the rest of it. We have pockets of rural deprivation and urban deprivation, and we have challenges; we still have families who have particular challenging special educational needs and so on. One has to be slightly careful in looking at it in that sense. That is not necessarily what levelling up means.
Having said that, by definition there is a particular priority in bringing economic growth and inward investment to areas that, relatively speaking, would not have benefited to so high a degree in the past. Inevitably, therefore, means there will be a preponderance of certain localities in the kinds of bids we are seeing for infrastructure funding and so on at a more localised level.
Lord Grocott: We will see that in the figures when you supply them.
James Cartlidge: Yes. As I say, I do not have them to hand with me, but I am more than happy to do that.
The Chair: We have had some figures, confidentially, from the Infrastructure and Projects Authority. We are very impressed, by the way, by the Infrastructure and Projects Authority, so this word of criticism is unusual. We thought that the figures we got were pretty incomprehensible and very thin, so we will keep digging away at this, if we may, and making it clear also what the benefit is. To give an example I used when we were discussing it earlier, if you build a railway around Newcastle but all the rails and the rolling stock are from Cornwall, do you count that as a benefit to the north-east, the south-west, both or whatever? Clarity about that would be helpful in any figures.
James Cartlidge: Back in our patch, we have Felixstowe, which is incredibly important. There is an infrastructure project on a constituency level here that is very important to me, which arguably you could say is in East Anglia but would be of massive benefit to the UK. There will be lots of projects like that. You have National Rail projects that stretch many miles, for example. We will look further into it, but there would be some key caveats on the way you would have to consider, as you quite rightly said, exactly where the benefit lies in a particular scheme.
The Chair: No doubt the Government themselves will want to have these figures aggressively in the public domain, not least as an election approaches, so that you can demonstrate what you have achieved after four and a half years of levelling up.
James Cartlidge: I probably would not use the word “aggressively”. Obviously we want to be as transparent as possible. As I say, I am more than happy to look into what further data we can provide to you.
The Chair: I am sure you will be wanting to boast about that, so we might get an early look at a draft.
Q50 Lord Stunell: This follows up very much on that. How exactly is the work of the Cabinet Office, the Treasury, the Infrastructure and Projects Authority, the National Infrastructure Commission and other related departments that are all active in the area co-ordinated, or is it even co-ordinated? If so, can you tell us by whom?
James Cartlidge: It is an extremely important question. I briefly alluded in my first answer to this point that we want to see co-ordination across government. There has been a tendency to say that government generally in this country is done in silos or is not long term, et cetera, particularly in relation to infrastructure. That is why it is crucial, in terms of our institutional framework, that it is delivered in a way that enables joining up to happen in practice.
We have mentioned the key institutions. I would characterise the National Infrastructure Commission as having the strategic overview, setting that long-term plan, but particularly across the Parliament from the national infrastructure assessment. In terms of the delivery of individual projects and that focus, you have the IPA; thank you for your comments on the IPA. My Cabinet Office colleague may say more on that. Recently, there was the Bill, which started in your House, to create the UK Infrastructure Bank. These institutions are working together to help bring that sense of long-termism and certainty to infrastructure policy.
We have to be frank and say that any Government are subject to the impact of external events and, blimey, have we had two pretty major external events in recent years, almost unprecedented in recent history in this country: a pandemic followed, on the day it legally finished, by the invasion of Ukraine. That is abnormal, but, for all Governments, there are ebbs and flows of events. The point is that we want to have an infrastructure framework that is resilient, has this strategic level, has a delivery level and is overseen by our departments together.
Baroness Neville-Rolfe: I want to follow up on a prior point. It is a pleasure to be at the committee, which I used to be a member of. I thought the committee might be quite interested to know, on this point, that, since I was last in government in 2017, at the Treasury, the management of infrastructure projects has much improved.
That is partly because of the establishment of the IPA, which is a real centre of expertise, as I think you heard last week. It is partly because responsibilities are now much better understood, so modern management thinking is much more apparent, with the SROs actually reporting in to responsible Ministers.
It is partly because infrastructure is higher up the Government’s lists of priorities, certainly since I looked at it before. For example, the Exchequer Secretary answered on levelling up. When I was at the Treasury, when we had a budget we used to cut the announcements by region and had briefing on the different regions, partly because we wanted to explain to people, even at that time, that we were helping some of the poorer regions of the country with infrastructure proposals.
Now we have much more of an effort. We have something called Places for Growth, which I am responsible for, where we are moving chunks of the Civil Service out of London. I was at the Darlington economic campus last week. We have a Treasury Permanent Secretary now running that. That is allowing them, working with the IPA and the Government property body, to think more—to answer Lord Grocott’s question—about how we can provide for infrastructure. This is obviously long term, because infrastructure takes time, but, in terms of direction of travel, I was quite pleased, going in with my normal slightly cynical views, to see what improvements have been made.
In terms of the co-ordination, as I said, there is a better understanding of individual roles. The NIC independently advises government on what infrastructure is needed. I think you have taken evidence from them. The Treasury and the IPA advise on how it can be delivered and paid for. Their remit is set out in a mandate. The Cabinet Office helps with the infrastructure cycle, because we are also responsible for procurement and improving procurement. That helps to improve things. A point I wanted to add is that we also co-ordinate independent assurance reviews and major project reviews ahead of Treasury approval.
The Chair: Are these carried out by the IPA?
Baroness Neville-Rolfe: Those are carried out by the IPA.
The Chair: It is classic project management office work.
Baroness Neville-Rolfe: Yes, and that is the big change.
The Chair: It is being done properly for the first time.
Baroness Neville-Rolfe: We now have proper project management offices. When I was a Minister before, I was responsible for smart meters and I used to tear my hair out because the project was behind and not as well organised as I think your committee would want.
Lord Stunell: We have taken evidence that there has in the past been an interdepartmental ministerial group looking at some of these infrastructure projects. The evidence we took was that that has somewhat dropped out of use. Is that because you found an alternative way of managing that co-ordination, or is there some other reason behind that?
Baroness Neville-Rolfe: We have fewer interministerial groups than we had under the previous regime. Ministerial groups get set up when there is a need. We had this project called SPEED.
The Chair: Do you not have SPEED?
Baroness Neville-Rolfe: The point about SPEED is that it made a lot of these changes.
The Chair: Does it still exist? This was brought up in previous evidence. I have not seen an announcement that Project SPEED has been terminated, job done.
Baroness Neville-Rolfe: I do not think it has been terminated but, in practice, its recommendations have been incorporated into the kinds of things that I have been describing, so the spirit lives on, but that is more a matter for the Treasury.
James Cartlidge: It is more about the embedded learnings from it. It is not a one-off, after which this all ceases. It is about trying to embed those improvements into the system.
The Chair: To probe a little further on Lord Stunell’s question, you are saying that, as the project is developed, it goes through an approval process and then moves to implementation. There is no panoptic oversight from the centre of government that involves Ministers. There is the IPA doing its project management role, very helpfully. The Chief Secretary has probably dropped out by now, because he has approved the expenditure, so he is not watching the nuts and bolts.
There is no Minister for infrastructure. There is no Cabinet committee for infrastructure. I obviously do not know—maybe you do not know—how often the progress of infrastructure appears on the agenda of the full Cabinet. We are trying to find out, since it is a matter of ministerial accountability, how and whether it works.
James Cartlidge: I would not say that there is no Minister for infrastructure. There is no single Minister for all infrastructure. I have responsibility from an economic point of view, because I am responsible for growth and productivity in HM Treasury, and infrastructure is extremely important within that. It is one of the key reasons why we devote so much attention to it: because it is a way of increasing growth and productivity together.
We work together with Cabinet Office. I spoke about the institutional framework, which we are ultimately accountable for: I am directly accountable for the NIC within my portfolio and, together with Baroness Neville-Rolfe, for the IPA. The IPA gives these quarterly updates on delivery. As I said, we must not forget that, once projects are under way, most of the day-to-day work is being done within a particular department—where there is ministerial accountability, obviously.
The Chair: Which Minister, or Ministers, reads, or read, the quarterly reports from the IPA? To whom are they made?
James Cartlidge: They come to the Treasury and Cabinet Office together, because we, jointly, are responsible for the IPA.
The Chair: You read those reports. If there is warning in a report that things are going off the rails but nothing is done about it, I can say that in ministerial terms the Exchequer Secretary and the Cabinet Office Minister would be the ones accountable for not having picked that up or pursued it.
Baroness Neville-Rolfe: Yes. I would make two points. We have a RAG system. I do not know if that was explained to you last week.
The Chair: We know about that. That operates at project level.
Baroness Neville-Rolfe: It does, but if you have a red rating, the Minister concerned will be concerned.
The Chair: That is the Minister in the department.
Baroness Neville-Rolfe: Yes, but we also look across the piece at the number of projects rated red—it is currently 11%—and we put in central effort to moving these things towards amber. That is one of the changes that has come in and has made a difference.
The other accountability is the annual major projects report, the IPA annual report, which the Minister in my position and Ministers in the Treasury look at very carefully, because you are looking across the piece at the progress of infrastructure.
The Chair: Who then kicks back on the project? I used to get these reports for TfL when I was on its board. They were independently done as well. We had a project management office with independent advice. They would come up to a board committee and they were red, amber or green. There would be a narrative explaining why it was all late and not on the rails, and so on. I knew it was my job and the job of the board committees to kick people to get explanations as to how this was all going to get back on track. Is that being done centrally, or is it left to the department, the departmental Minister and the SRO?
James Cartlidge: As I said, day-to-day accountability is very much with the SRO at the responsible departmental level. It would be a huge amount of onerous ministerial time if, each time a quirk was reported on any individual project in government, it was sent to some centrally co-ordinating Minister. That would probably be undeliverable, bearing in mind that, in reality, all projects vary greatly in scope, size and so on. That is why, primarily, this is departmental, in the way you are describing it would have been for TfL, which is obviously not a department but is equivalent in that sense.
Baroness Neville-Rolfe: There is a good focus on this red response programme, which I explained. Officials advise Ministers on red responses, so you ensure that follow-up assurance action plans are carried out within an approximate 12-week timeframe. I do not know whether you heard about this.
The Chair: Do you mean departmental Ministers?
Baroness Neville-Rolfe: Yes. That empowers, if need be, in a case conference, and recommendations are put up jointly to HMT and Cabinet Office. With the help of the IPA, we are able to move things forward. That is the way things get done.
Clearly, there is a democratic element, in that if people are not happy about projects they ask questions in Parliament. Indeed, there are debates on these things. That is another opportunity for Ministers to look at and explain some of the more high-profile projects. I wanted to explain what the system is right across the board. We are talking about 260 projects, of which about 70, I think, are infrastructure projects.
James Cartlidge: Can I make one final point, which is just to reassure you? I think you want to get a sense that there is co-ordination. I think we are showing that today, but we want to emphasise the role of the institutions within this. It is quite deliberate that we have that sort of set-up and that we have experts, which is what they are. The NIC chair, John Armitt, is a distinguished engineer. The expertise is there to help us as part of that framework.
I am bound to quote the IMF, which is perhaps the most respected international economic body. The IMF public investment management assessment of UK infrastructure, which I believe was last year, said that the UK is well positioned, given that it has “robust institutions throughout the public investment cycle. Overall, the UK manages its public infrastructure well across the three phases of planning, allocation, and implementation”.
I stress that there is a balance to be struck between central co-ordination and accountability, which is fundamental in a constitutional sense, and allowing the departments individually to deliver, but have that support through the institutional framework that we have set out.
Q51 Baroness Eaton: Good morning. It has been really interesting to hear about the improvements that you feel have been and are being made to the processes. Public attention is often drawn to very large overspends and delays in projects. Can you tell us how the approvals process could be improved to make it more likely that projects adhere to cost and schedule?
James Cartlidge: That is a very good question. You are right that there may be some, dare we say, disproportionate coverage of when large projects overrun. On many there are underspends and so on, but that is what happens when you have a large portfolio of projects.
We are always looking at ways in which we can improve the approvals process. I will give you some key examples. The 2020 Green Book review led to a stronger emphasis on the need to consider value for money when shortlisting options and trying to anticipate delivering better value for money overall.
We work closely with the IPA to deep dive into major programmes and projects that are at risk of not delivering as planned.
The Treasury approvals process, including the TAP—the Treasury Approvals Point—which you will be familiar with, and the Major Projects Review Group, which you mentioned earlier, Chair, helps to ensure that officials with the right range of expertise and experience can use the findings of such reviews to challenge SROs on benefits realisation and risk management plans. We also recently updated the guidance that outlines the Treasury approvals process to clarify the guidelines around the process of the scrutiny of business cases.
This may sound like a lot of process work, but I am afraid that it is. That is the nature of the beast. As you know, we have been looking a lot at the Green Book and we are also looking at optimism bias—that wonderful phrase—at the moment in order to ensure, essentially, that we can understand how it works in practice, with the ultimate goal that, when projects are started, there is less likelihood that you will make overoptimistic assumptions about timing and cost.
The Chair: May I ask a question about optimism bias? In my experience, at an early stage of a challenging project optimism bias might be added to the extent of 60% of the estimated costs. As further work is done, the optimism bias should reduce. I have never seen a major project that has not ended up with a budget that is effectively the initial budget plus the optimism bias. It all gets spent, and more sometimes. We can take HS2 or Crossrail as an example. Rail projects start out with large amounts of optimism bias. By the time they are finished, the optimism bias has all been incorporated into the budget, not reduced at all. Do you recognise that? Are you comfortable with that?
James Cartlidge: We are evaluating optimism bias as part of how we proceed with major projects. I hope we will come forward with some further work on that later this year. That is my optimistic assessment.
The Chair: Let us hope that bias is correct. I would be very interested to see that. I am sure the committee would, but personally I would be very interested to see that. If somebody could draw my attention to it when it is published, I would be grateful.
Q52 Lord Haselhurst: Large projects usually obtain legal permission by way of a hybrid Bill or a development consent order under the Planning Act 2008. These leave many detailed planning permissions to be obtained subsequently. What is your view on trying to introduce an approach that provides all necessary planning permissions before construction begins?
The Chair: I believe that is the case in Spain, for example.
Baroness Neville-Rolfe: I can try to tackle this area, which is actually quite complex, so perhaps the committee will bear with me. The advantage of hybrid Bills and development consent orders is that they allow permission to be given to the principle and scope of a major infrastructure project. That allows the decisions on important projects to be taken by national Governments. One can think of big infrastructure projects where you need that.
There are certain aspects of the scheme, which is what the question is about, that would be more appropriately taken at the local level. There is a balance here. It is also important for infrastructure developers to have some flexibility to manage aspects of a project during construction. Those of you who have been involved in development will know that. You need to involve the local authorities and regulatory bodies at the most effective time for delivery.
Bringing all those within the ambit of a hybrid Bill or, indeed, a DCO would save time and money in construction, but it would extend the period of the hybrid Bill process and, more importantly, deprive local councils of their right to challenge some of the detailed designs at local level. That is the problem. We have ended up where we are with this mixture. Overseas examples are good to look at. I am always fascinated to look at them, but the circumstances are different and we have this strong local element in our planning system.
The Chair: How does it benefit the country at large that a large project has to go back to a local authority for detailed planning permission on the number of vehicle movements allowed at a particular site, where it is often held up for a long time and locally contentious? Frankly, having been a councillor, the councillors would be happier if they were not asked.
James Cartlidge: That would be a very high level of centralisation, if you do not mind me saying.
The Chair: The question is whether you want to get on and build it, and how much taxpayers’ money you want to spend. I completely understand the constitutional question about the balance of powers, but there is a financial question about the balance of expenditures. You are adding considerably to expenditures by requiring detailed planning permissions for all sorts of minor things, which are consequential on a principle that Parliament, or the DCO, has approved, but even the DCO gets a form of parliamentary approval, as you know.
Lord Haselhurst: Is there any way in which, somewhat drastically, one could block off unexpected developments that arouse local concerns, for example a dinosaur bone or ruins of a Roman villa being found, or sabotage by those who are totally opposed? This also adds to delay and is in danger of making a mockery of our ability to get on with things that are seen by most people to be in the national interest.
James Cartlidge: An important point to stress is that DLUHC is looking in great detail at NSIPs and the process, and will be publishing something very soon in relation to this. That will probably be the main next stage through which we look at the detail of how these things work.
There is an observation that I would make. I was a counsellor very briefly. It seems hard to envisage a situation where you would not have local authorities involved, and they would remain statutory consultees. On many of these decisions, it seems relatively common sense to state that they would probably need to make the decision. There would be very many practical reasons for that. I am not sure how easy what you are suggesting would be to deliver, but I do not think there is any realistic chance of that being changed at the top level for the time being. Having said that, as I say, DLUHC is looking at these detailed points as part of its current study, which will be published shortly.
Baroness Neville-Rolfe: I think some of your concern is about delay, which is a concern that I share.
The Chair: It is also about cost.
Baroness Neville-Rolfe: Unfortunately, the two tend to go together. In the NIS, the Government set an ambition to cut timescales by up to 50% for some projects entering the system.
The Chair: I was giving you a way of doing it.
Baroness Neville-Rolfe: We are looking at updated national policy statements, in things such as energy, national networks and water resources. These can help, but I would come back to the point that we have to strike a balance between allowing large projects to proceed efficiently and being sensitive to local concerns. The system does not always work perfectly. I used to work in business and was a client of the system.
Alongside proceeding with the DCO or the Bill, you have to think about what is going to happen and what you can provide for in advance, and work with local councils. I appreciate that local councils are not always as well resourced as they need to be. There is a shortage of planners and so on. I do not think our feeling is that the answer would be to move to a completely centralised system.
The Chair: You can make a distinction. It does not have to be a centralised system, because it could be decontrolled to some extent. For example, you could say that local authorities continue to have the final decision for planning permission on any permanent structures that will remain afterwards.
James Cartlidge: I will give you a very gentle reminder, if I may, that we are the Treasury and the Cabinet Office. Once you are into that level of discussion about planning and local authorities, that is DLUHC’s bailiwick.
The Chair: You may not want to answer because you feel that it is outside your remit, but I will still make the point, because it is very related to infrastructure. You could say at the same time that, while it is not centralised, planning permission is not required for things such as movement of vehicles and operational matters related to the delivery of the project, as opposed to the over-site development that will remain with the project.
James Cartlidge: I will make one anecdotal response. I took a debate for the Treasury last week. It was the last debate of the week, the Back-Bench business debate on Thursday, on the landfill tax. It just so happens that one of our colleagues in Reading raised the issue of an incinerator that was being built and the impact of lorries on the centre of Reading. I said the same thing to him in the Chamber, which is that really that is a matter for DLUHC, but it shows that these things can have an impact.
It is not realistic to think that you could not have local representatives involved. These things can create great controversy at a local level. Arguably, do you want to have a completely distant planning authority? I put that out there, but, ultimately, these are DLUHC matters. The good news is that we have further work coming on that very soon.
Q53 Lord Berkeley: I for one welcome this new work that you are about to produce. The involvement of local authorities is extremely important. That is my personal view. It is not the only thing that causes delay. There is a four-stage approval process, with business case approval, which many projects have to go through. That is a good one too.
As you know, we took evidence from the IPA last week. There are 266 projects or something on the major projects portfolio. As Baroness Neville‑Rolfe said, quite a few of them have had a red signal not only for one year, but, in one or two cases, for several years. You have said that the document goes to Ministers. That is fine. The question then is what they do about it.
The red signal means that the project is at risk for completion at all. That is a pretty serious criticism. We never seem to hear of any discussion on or solution to these, and you just get another red signal coming up the next year. For something like the Ajax tank, it more or less says that it will never work. In that case, why are we doing it?
Baroness Neville-Rolfe: We have touched on quite a lot of the answers to this already, so I will not repeat myself. I do not think it would be right for us to try to deal with the specifics of the Ajax tank. As I have already explained, the system is highly effective, with 89% of projects that received a red stage gate assurance moving to amber within 12 weeks. Coming from business, I think that is a good turnaround.
Looking at the annual reports in 2021 and 2022, we have seen a big improvement, with projects rated green or amber at 82%. That is a significant increase compared with 2021. As we have already explained, the Minister responsible gets the report. As somebody who used to be responsible Minister, in this case for smart meters, I can tell you that we keep a pretty close eye on progress. The work that the senior responsible officer can do to help you, with your periodic meetings on your very important project that you are trying to move forward, makes a big difference. In the past, it seemed to be very difficult to improve things. I think that, in a sense, is what you were saying about the Ajax problem.
Lord Berkeley: Has any project been cancelled as a result of too many red blobs or one blob? That is surely the ultimate.
Baroness Neville-Rolfe: We are not aware of any instances of a ministerial direction being issued to continue a GMPP project that has received an IPA red rating. I think that is a three‑quarters answer of yes.
The Chair: My slow brain does not pick up the right number of negatives in that. You are not aware of any Minister having issued instructions for a red-rated project to continue, but they would continue without ministerial instructions. Have I repeated you correctly?
Baroness Neville-Rolfe: No, because they have a red rating, so you then have to take action to put them right. That is the whole point about the red rating system.
The Chair: Could you explain?
Jonny Medland: If the question is about examples of projects that have been red rated on a sustained basis being cancelled, we can take that away. The point I would make is that some projects may be red rated for an extended period where the appropriate response is not necessarily to cancel them, because it is essential that they are completed.
The example I would give here is the emergency telecommunication services across the country programme, which I know has been red rated for a sustained period. The decision has been taken to continue with that programme, because it is simply essential that we have an emergency telecommunication service that can operate across the country. We can take away details of which programmes have been cancelled and revert to you.
The Chair: On the process question, are you saying that continuing with that emergency communications programme, despite all the red warnings, required or did not require a ministerial direction?
Jonny Medland: We can take that away and confirm. My understanding is that it did not require a ministerial direction to continue.
The Chair: To be clear, the default position is that the project continues unless the Minister steps in and stops it.
Jonny Medland: In the event that a project is red rated, the default position, as the Baroness set out, is for the IPA, working with the responsible department—
The Chair: Yes, to turn reds into ambers and ambers into greens. I understand what they do. It will continue, even if they fail, unless the Minister steps in. That is what you are saying.
Jonny Medland: It will continue unless there is a decision ultimately to stop the project, yes.
The Chair: That would be a ministerial decision.
Jonny Medland: Yes.
The Chair: To come back to the question Lord Berkeley asked—
Lord Berkeley: Could I ask the question please, Chair?
The Chair: No, you have asked a question that we have not had an answer to.
Q54 Lord Berkeley: My question, then, is this. If the project is going ahead in spite of a red rating, presumably there is extra cost involved. Is there then a ministerial instruction to the department concerned to spend more money to make it happen, which is required if it is over budget?
James Cartlidge: The simplest answer, I am afraid, is that it will depend on the specifics of the case. That would not be the first resort that the Treasury would want to see happening in a case like that, and it should not be. We are talking a great number of projects and it would depend on the specific circumstances.
Jonny Medland: The other thing I would add is that it would be possible for a programme to be red rated precisely because it was underdelivering and therefore not overspending.
The Chair: Lady Cohen, you have had your fox shot by Lord Berkeley.
Q55 Baroness Cohen of Pimlico: No, not entirely. To me, the key question is whether any of these red projects have ever been stopped.
James Cartlidge: We had agreed we were going to check the exact position.
Baroness Cohen of Pimlico: That is the point. If you never stop a red project, the system does not work. I can imagine it would cause a terrible fuss to stop one. Have you ever done it?
James Cartlidge: I have been a departmental Minister on only one other occasion, in the Ministry of Justice. I am not going to talk about specifics, but, to be clear, it is not uncommon to have projects where there are issues. You work through them. We must not get carried away with the idea that having a red flag means that the whole thing has to be stopped. My Cabinet Office ministerial colleague showed that we have a fantastic rate of turnaround early on, which is precisely why we have the systems we do.
One reason why we can be much more optimistic now is the institutional framework and the support we get from the IPA, which is a key factor in delivering that. The focus, ultimately, should be on outcomes. I am sure we agree on that. What infrastructure are we delivering and to what quality?
The grade 1 independent analysis on a global basis is the International Monetary Fund. We know that the IMF is not always complimentary. When it visits, you do not necessarily expect good things to happen. As I say, its assessment of our framework and our infrastructure was very positive. I can give you another quote: “The National Infrastructure Strategy is the product of a strong policy architecture for economic infrastructure planning”. There are so many positive quotes. They thought that our Green Book system was a gold standard. That does not mean that every project is green—not for a minute—but it means that you have a framework and a system that can deal with that and address those, which by and large is the case.
Baroness Neville-Rolfe: The challenge we have with projects that are in difficulty is that they are not normally on the list. They have not been given money. They have been through the process of prioritisation. Think about something like the emergency services mobile communications programme. As the Exchequer Secretary explained, you have to replace the airwave service used by the emergency services. You have to find a way forward. That was exactly the problem I had on smart meters. You will remember that they were not talking to each other. We had to put more investment in to change the system so that the smart meters were of a sort that worked properly. There is a balance.
If you are in business, it is a lot easier, to be honest. If you have an investment in another country that is not working terribly well or not returning, you can close it down, although that is quite difficult for the employees. It is not quite like that with major infrastructure. The system has not been in place for that long, but we will take a look and see what examples we can provide for your committee.
Baroness Cohen of Pimlico: If the system never cancels a red project, I am a bit doubtful about it. There has to be a mechanism—
James Cartlidge: No, not if the answer is that we are resolving the issues. That is a really good outcome. I am not suggesting that definitively; we will look at it, but it is a good system.
Q56 Lord Best: My question is about whether government has a clear overriding percentage of GDP that it is prepared to spend on major infrastructure projects. We saw that the NIC has a fiscal remit to propose interventions that are consistent with gross public investment in economic infrastructure of 1.1% to 1.3% of GDP. Is this like the defence percentage and the overseas aid percentage? Is it a fixed number?
James Cartlidge: You have kind of answered the question. It is a very good question. Going back to the spending review, which, as I said at the start of the meeting, is central to the process of agreeing infrastructure spending, you will all recall that we had an exceptional one-year SR in 2020 because of the pandemic. Over 2020-21, in those combined spending reviews we announced £600 billion in public investment.
You are absolutely right, Lord Best: it is the percentage of GDP that we ultimately look to. You asked whether the Government have a clear idea about what they are willing to spend. You are right: this is talking about that in terms of the economy as a whole.
Just to clarify, in SR 2021 the figure was increased. As you rightly say, the fiscal remit that we give to the NIC was between 1% and 1.2%. We specifically increased it to the range of 1.1% to 1.3%, which then applies over 30 years—that is, 2025 to 2055. Again, that is underpinning this sense of long-term planning.
I probably would not say that it is along the lines of the NATO pledge or, indeed, the ODA pledge. It is different. It is us allowing the NIC to do its job, which is to make strategic judgments on infrastructure. To do that, clearly it has to have an idea of what is realistic and feasible, so we give it this range. That is why the word “remit” is better. It is not a target as such. It is about trying to enable this very expert strategic body to give us an insight as to how we should go forward and inform future spending decisions, which ultimately materialise through the SR in these individual infrastructure awards.
Lord Best: That sounds entirely sensible. Richard Threlfall, the global head of infrastructure, government and healthcare at KPMG, who gave evidence to us, said that this made no sense. He said that the NIC should be asked to look at what the benefit of investments should be, regardless of a fiscal envelope required. That would push the debate about whether we should be investing more in our infrastructure.
James Cartlidge: I respect his position. It is an interesting point, but you will not be surprised to hear from me, as a Treasury Minister, that we would never want to be in a position where we are taking a view regardless of fiscal impact. We feel that all government policy must be rooted in fiscal discipline and in having a stance that is sustainable through the public finances. That is very much where our focus is today, particularly in this inflationary environment in which we find ourselves.
Through the process of deciding infrastructure-specific bids, yes, you have to have a really robust way of assessing cost-benefit. That is why we have made changes to the Green Book. We made specific changes in 2020 to accord with our strategic view, particularly around levelling up, et cetera. You are right in that sense, but we want to be able to say to the NIC, “We’re giving you a credible and, by the way, increased remit back to 2021”.
It allows long-term planning, which I hope you will all agree is something you would want to see in infrastructure policy, but balanced against fiscal credibility and allowing us as a Treasury to be satisfied that these decisions are ultimately rooted in a sustainable path going forward for the public finances.
Baroness Neville-Rolfe: I would add a point. Although we are not responsible for spending decisions in the Cabinet Office, we work very closely with the Treasury on value for money and on national infrastructure projects. That is part of our agenda of efficiency, with the Cabinet Office Minister very often sitting alongside the Chief Secretary to the Treasury and looking at how we can get more out of the resources that we are devoting to this.
Mainly through the IPA—this is an area that I am very interested in myself—we work with industry and departments to try to drive more efficient delivery through tools on cost estimation and benchmarking. Transforming infrastructure performance is a programme. Delivering better outcomes, such as the place-based regeneration we talked about a little earlier, and using social infrastructure as well as economic infrastructure are important elements in deciding what to spend on infrastructure and making sure that money is spent well. It is not only the percentage that we spend; it is also how we are spending it.
Q57 Lord Carrington of Fulham: Taking it a bit further to when projects are completed, there is a perception—probably driven by the fact that so many high-profile projects come in either very late or very over budget, or, indeed, do not work once they are put in place—that they are not achieving what they were touted as going to achieve when they were in the planning process.
Post-project evaluation becomes extremely important as a learning tool, if nothing else, to control this. What is the mechanism for post-project evaluation? Is that something that HM Treasury and the Cabinet Office get involved with? Is it done at ministerial level or by the National Infrastructure Commission, or is it rather seen as being unimportant because the project is done and there were special circumstances: “We found the dinosaur bones. We found the Roman villa. That was what caused all the problems, so just forget it and get on with it”?
Baroness Neville-Rolfe: I could not agree more with you. We are trying to improve our frameworks for evaluation. That is part of the professionalisation of this area. We have established an evaluation task force, along with the Green Book review that has been talked about already and the key role of the NIC. The Evaluation Task Force is a joint Treasury and Cabinet Office unit that works across government. It has an account manager model. You engage departments on their projects so that they deliver more and better evaluation.
A key point, of which I am very well aware from business, is that it is all very well having post-project reviews, but you need to embed evaluation in the process from the start. We are also working to try to ensure that the spec for these projects brings evaluation in and that you get a feedback loop so that you learn from errors and things that have gone wrong. We have highlighted a lot of the errors today, but some projects, or parts of projects, have gone right. Even for Crossrail, some of that was very good. For example, it used employees from right across the country, including poorer areas.
The spending teams also have a role to play because they are monitoring and assessing spending, benefits and savings on a regular basis as part of their job. The problem is that the projects are typically over a very long period. We can try for the future to embed this Evaluation Task Force thinking. I do not know whether we publish the reports, but some element of transparency is very important in the lessons learned.
I see that as part of this cycle of improvement, procurement, running a project and then evaluating it. That has been a step change in government over about 10 years, but it has taken time to bed in. You are right to emphasise evaluation.
Lord Carrington of Fulham: Could I also just expand a little bit? The other side of evaluation is the performance of the contractor. With a big project, there is always a tendency for contractors to game the spec of the contract they have or, in other words, to try to make more money out of the contract than anybody envisaged up front that they were going to make.
There are some perfectly good examples, but one springs to my mind. Every time I go to the British Museum, I am always amused by the fact that they rebuilt the central court and specified what they thought was going to be the right stone for the new entry. Of course, the contractor realised that he could use a much cheaper stone in the nature of the contract he had. He got away with it, and there was nothing the British Museum could do. They could not afford to knock it down and they could not sue the contractor because presumably the contract had been drawn up wrong.
There is a whole process in this, which is both the project itself and the contracting process. In other words, are you dealing with the right contractors? Do you have the right legal structure in place? Is that evaluated? Sometimes we get the impression that the same contractors come in, even if they have badly performed.
Baroness Neville-Rolfe: That strays into my procurement responsibilities. Some of you will know that we have been putting the Procurement Bill through this House to reform that. We are trying to bring in new and different firms to get more competition, with a much greater degree of publishing of specs and things. That will help.
As part of the professionalisation, we now have big procurement numbers, if you look at it right across Whitehall, led by the professional service from the Cabinet Office. These are exactly the sorts of things they are looking at. We will have the PRU. I do not know what the R stands for, but it will be a procurement unit in the centre. Once the Bill becomes law, it will look at systematic issues. That will give an opportunity for new people to win these contracts.
Going back to the British Museum contract, the spec was wrong. Did they embed evaluation in soon enough? Did they have the right contract? I hope that, by sharing best practice, we can address those kinds of mistakes. High-profile mistakes are good, because they teach people for the future.
The Chair: We have had the Government’s response to our major report on public transport in towns and cities, which you chaired, Lady Neville-Rolfe. It agrees with us and is complementary on many points, but what it is most persistently resistant on is that post-project evaluation is something that the DfT should be undertaking. I thought you would like to know that.
Q58 The Earl of Lytton: Good morning to you all. I have a deceptively simple question, I suspect. Moving on from the question about dealing with the processes for what you might call the contractual side of things, what changes in the governmental processes are needed to make it cheaper and quicker to build large-scale infrastructure in the UK? What sort of systems are in place to measure and report back on that? This is about the governmental processes.
Baroness Neville-Rolfe: I will start by only half answering the question, because I want to emphasise a point that has not come out from the question but is essential to government process, which is improving skills. That is key.
Competent leadership makes a huge difference to the success of infrastructure projects. We now have a Major Projects Leadership Academy at the Saïd Business School in Oxford; training for Ministers, which I am sure will be music to the committee's ears; and training for accounting officers so that they can manage delivery well.
The IPA also has a projects academy, looking at leadership and technical skills, and a professional accreditation scheme. Also very important in evaluation are construction, planning and digital skills, which one of your earlier reports highlighted as being a bit of a gap. That fits into the question about the effectiveness of construction, which Lord Carrington mentioned.
We need that if we are to deliver our infrastructure ambitions, improve growth and productivity, level up and all the other things the Government want to go at. I was going to repeat what my colleague had said about the IMF. Clearly, that gave us some cause for celebration. There has been some favourable coverage only today, which you might want to pick up on.
James Cartlidge: One really important thing we have not spoken about much today, but which is central to this, is private investment and the private sector. Explicitly to Lord Lytton’s question about making projects cheaper and quicker, and being able to finance them, it is fundamental.
Just in the energy and water sectors alone, in the last 10 years there has been £200 billion of private investment in this country, which is an enormous amount. We are very conscious as a department, and I am as the Minister responsible for growth and productivity, that we want to be a jurisdiction that is internationally attractive to what is mobile investment after all.
The article Baroness Neville-Rolfe was referring to—I saw it in the Times; I am sure it was covered in many places—was about the response of executives to the UK. Apparently, global chief executives rank the UK as the third-most important country for investment, jointly with Germany and behind only the US and China. That was in the Times today.
The key to that, or certainly one of the most important government policy elements of it, is that they see a jurisdiction that is stable and has good-quality regulation. The economic regulators are really important in this. In other words, it is a trusted environment for investing in. They want to see fair returns, et cetera, but they also bring technology and innovation. That is a key way in which we can see potentially lower costs over the long term in these projects, whether that is through modern methods of construction or other technology that the private sector is likely to bring forward.
Finally, I am bound to make the obvious point that what we could all do with right now, in all aspects of our life, is a reduction in inflation. That is why the Prime Minister has made the important pledge he has on halving it, which in practice means working as closely as possible with the independent Bank of England and having fiscal policy that ensures we have discipline and we keep under control all possible inflation pressures that we can control.
That underpins our disciplined approach to public finances, but also sends a signal that we want to encourage and incentivise private investment so that we can afford the huge scale of investment we need over the long term, particularly in an area such as net zero.
The Chair: Could we give Lady Thornhill the opportunity to ask a question?
Q59 Baroness Thornhill: I would like the opportunity to apologise. I have been sitting on the Metropolitan line for an hour and 10 minutes. It did allow me to read the papers again. My interests are in the selection of projects and in the planning. I will look at your answers to that on the playback.
I would like to pick up on something the Minister just said regarding the cost and benefits process. You said that you made some changes with regard to policy and levelling up. I would be interested in whether you could talk to us a little bit about that.
I know from much more minor-scale projects I have been involved in that sometimes there is a degree of saying, “We hope it will achieve this. We have to tip the cost-benefit analysis in a certain direction to let a project fly because it is innovative and different, and this the missing ingredient we need in that part of the country?” You did say that you had made some adjustments.
James Cartlidge: Yes, this was in 2020. We made some changes to the Green Book. The main one was around levelling up. The word I would use is “strategic”. We made changes to the weight given to the strategic considerations. I will try to give a hypothetical example, but there are many caveats attached to this. It is certainly not replicating any real case I have seen.
You would have the argument that, if you had a proposition in the south-east or London, where it is always economically relatively busy and there are more movements of goods vehicles or whatever, therefore, arguably, in theory there will always be a stronger case on a pure cost-benefit basis for whatever the proposed project was. As you say, these could be quite relatively low-scale schemes, although they tend to be disproportionately extremely important, in constituency terms, for Members of Parliament, I can assure you.
With a greater emphasis on the strategic importance of levelling up, you are looking at parts of the country that, relatively speaking, have not had as much inward investment or economic growth, et cetera. In absolute terms, they may not have as many lorry movements or the sorts of things that will support the business plan, but the strategic importance is now in the very fact that these are areas that we want to see levelling up.
At the top level of policy, we have a concern that all Governments have had in this country about the imbalance between London and the south-east, and the rest of the country, in a cliched nutshell. We all know roughly what the argument is, and we all accept it. It was about giving greater weight to it in that sense.
Baroness Neville-Rolfe: I just wanted to add a cultural point. Attitudes within the bureaucracy are extremely important in these decisions and in making sure we are investing across the country. Before you arrived, I was saying that we have a programme called Places for Growth, which is about encouraging Civil Service clusters, including senior officials, outside London.
I was in the north-east on Friday and I visited York Central. That is a very good example of a proposal that will be coming through. It is next to the station. It involves huge investment in the railway museum. That will become larger. A substantial amount of money is being made available for that, but it will also bring housing and a huge commercial development, which will help pay for it. That is being championed not only by Homes England but by the government property people, the private sector and the museum’s directorate.
We now have senior civil servants, including a Permanent Secretary, on the Darlington Economic Campus up in the north of England, thinking differently. These are the sorts of cultural changes that can help quite a lot and are important as well as the top-down instructions that we Ministers give. I hope we will have a little more stability, but we accept that sometimes we move on. That kind of change makes a difference too.
Q60 The Chair: We have heard very positive things in evidence about the systems government has put in place in recent place and how they are seen by many as an international standard. You have quoted from the IMF today. That is not evidence that surprises or takes us aback.
Given how expensive it has been historically to build infrastructure in the UK and its proneness to delay, when will we start to see fruits in practical terms from attaining these standards and start seeing projects being delivered on time, on budget and cheaper than they might have been in the past? I do not expect it to be tomorrow.
James Cartlidge: It will not be tomorrow. It is already happening. If I may, I will give you what is perhaps one of the most positive examples. I am very proud of being associated with it since being elected in 2015.
When I was first elected in 2015, by far the most common constituency case we received was about lack of broadband. A few months later, they would say, “Hold on a minute. Someone in the village has actually got some. What’s going on here?” I now hardly ever receive any casework about broadband.
To me, the real clinching point about this is that we had a pandemic in which people did not have to go into work because they could work remotely. The judicial system was able to function because you could have remote court hearings. There are many other examples like that. In fact, during these very regrettable rail strikes, people have been able to work from home again or at least to have Zoom or Teams meetings. Everyone in my constituency, with a few exceptions, despite it being pretty rural, will have been able to continue their jobs. That is a transformation made possible by infrastructure investment in this country, which we have delivered.
We are now on 92% for 4G and we are heading to 95%. We have the £5 billion investment in gigabit broadband. That is a great success story. Digital is one of the most important aspects of infrastructure architecture. It is one where we have made enormous progress. There are many positive stories. As you say, the framework through which we have delivered this has been, we are proud to say, praised by the IMF.
Having said all that, the whole point of it is to learn lessons. That is why the IPA works as it does, issuing these quarterly reports, and why we have cross-departmental responsibility for them. We are constantly wanting to learn lessons and improve, but there are some very positive stories there.
With the step change in investment that we have made in infrastructure during this Parliament, we can be very optimistic about seeing further benefits from that drive to improve our country's infrastructure.
Baroness Neville-Rolfe: Changes take time to work through, but in individual projects you are seeing improvements. I was hearing that the digitalisation of Hinkley, which is not always the easiest project, has turned out to be a model that can be used on other nuclear infrastructure.
You also have to remember that there have been quite a lot of supply chain and labour problems following Covid. Because we now have the embedded institutions that we have been discussing, they have kept going and they have not been as totally distracted as perhaps other aspects of government have inevitably been because of Covid and Ukraine.
That gives us a little bit of cautious optimism. We are beginning to improve these things. Of course, we can do a lot more. Anything your committee can recommend, whether it is successes to highlight or lessons to learn, we would be very interested in.
The Chair: Thank you very much indeed for your time.
