More major road projects face cancellation due to inflation and poor oversight, according to a report by a government spending watchdog.
The National Audit Office identified a £3.3bn increase in the cost of planned investment into the strategic road network for the period between 2020 and 2025.
In a report published today it also found that more than half of a £1.16bn contingency budget to address emerging risks had been misspent during the planning phase prior to 2020.
The NAO report said: “The extent of inflationary cost pressure is beyond the levels that can be absorbed by [England’s major-roads body] National Highways and it may have to delay work, de-scope projects or cancel projects to remain within its overall budget.”
It said that the Department for Transport (DfT) is experiencing cost pressures from inflation across its programme of transport infrastructure work in rail and road.
“DfT cannot absorb the level of inflation risk within its budgets and deliver its work as planned,” according to the NAO. “It is not clear how DfT and National Highways will absorb these costs.”
The watchdog added that an external review had identified “several weaknesses in National Highways’ governance of the contingency budget, leading to it being used to resolve cost increases it was not designed for”.
Looking ahead, the NAO said that only 7 per cent of the £11.5bn the government has committed to the next version of the strategy (RIS3) will be spent on high-value-for-money projects.
It said a plan by National Highways to add an additional 31 projects “may not be feasible or affordable”.
Meg Hillier MP, chair of the Public Accounts Committee, said: “With rising inflation, difficult prioritisation decisions lie ahead. It is even more vital that the department learns from past mistakes in its third Road Investment Strategy, by improving its approach to portfolio risk management and its understanding of benefits.”
Among a series of recommendations, the NAO called for improvements to National Highways’ approach to monitoring and managing portfolio risks.
Nick Harris, National Highways’ chief executive, said: “We’re confident that we manage portfolio and project risks well, while recognising that there is always room for improvement as we mature our processes ready for RIS3.”
A DfT spokesman said global factors including the COVID-19 pandemic and inflation were to blame for higher costs and a minority of projects being delivered later than originally proposed.
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