Time to see ‘Transport Spending’ in a different context

THE OUTCOME of the government’s current Spending Review is due to be announced in two weeks time on 11 June. It will set spending plans for a minimum of three years and will prioritise delivering the government’s core missions, including securing economic growth, renewing the country’s infrastructure and creating substantial new housing capacity.

Improving transport provision as such is not a core mission, but over the past few months many authorities and interest groups having been leveraging the argument that better transport is an essential element in supporting the other missions. As part of a judgement on competing calls on resources, how the Treasury has viewed those claims - of which we report on several more in this issue - will be an important outcome to digest.

Amongst the issues determining the allocation will be the fact that Departments are expected to make better use of technology and seek to reform public services, to support delivery of the government’s plans for ‘a decade of national renewal’, with publication of the Industrial Strategy and 10-year Infrastructure Strategy coming alongside the Spending Review itself.

The Chancellor Rachel Reeves is expected to set out plans for day-to-day spending for four years to 2028–29, and for capital spending for five years to 2029–30. As background to her decisions Reeves has faced the difficult challenge of an unstable global economic situation, including President Trump’s unpredictable tariff negotiations, and the new pressure to bolster defence spending, not to mention address domestic political issues on matters like restoring the Winter Fuel Allowance, reversing planned cuts in benefits spending, and other seemingly enduring priority spending areas like health and social care.

What we do know is that the Labour Government has been re-casting the processes of making spending decisions. These include establishing a regular cycle of two-yearly spending reviews (setting resource budgets for three years), the 10-year infrastructure strategy and five-year capital budgets to provide greater certainty and stability.

Traditionally, the spending reviews have tended to be seen as pitting departments against one another in competition for resources, rather than coordination to an overall objective. To change that, Chief Secretary to the Treasury Darren Jones has been promising a more open-book approach. The Treasury’s “cards will be on the table,” he says, with shared dashboards giving greater visibility about spending plans and the overall envelope to avoid time and energy “arguing about what the truth is”. Technology is seen as helping, in theory at least, sweep away outdated analogue processes, while ‘mission groups’ aim to foster cross-departmental cooperation, with multilateral talks replacing the usual closed-door, Treasury-led bilaterals.

The intention is ambitious: ‘This will not be a business-as-usual Spending Review’ it is claimed. ‘The government has fundamentally reformed the process to make it zero-based, collaborative, and data-led, in order to ensure a laser-like focus on the biggest opportunities to rewire the state and deliver the Plan for Change,’ we are told. That is the theory at least, but it has not stopped stories emerging of manoeuvring by ministers to protect their own departments, notably threats attributed to Deputy Prime Minister, Angela Rayner, for her Ministry of Housing, Communities and Local Government to have requisite funds to achieve the Government’s ambitious housing development plans and associated infrastructure requirements.

Indeed, decisions on where to focus the much-vaunted need to invest in infrastructure to achieve economic growth are at the core of what the Treasury has had to consider in the Spending Review. In support of this approach, the former National Infrastructure Commission has been transmuted into the National Infrastructure and Service Transformation Authority (NISTA), with a remit to support the implementation of the 10-year infrastructure strategy. NISTA is a joint unit of the Treasury and Cabinet Office whose aim is to unite long-term policy and strategy with best-practice project delivery, so as to transform the delivery of infrastructure, service transformation and other major projects, to ensure the government’s investments are driving growth and delivering the government’s missions. As reported in LTT of 15 May, the newly announced CEO of NISTA is Becky Wood, a civil engineer by profession, whose experience includes a decade-long role at the Department for Transport, where she acted as senior responsible officer for major projects such as Crossrail, Thameslink and the acquisition of new trains under the Intercity Express Programme.

So could we be about to see a substantial change in approach to transport investment, to reflect both the government’s general enthusiasm for new infrastructure to boost economic growth, and for new approaches to achieving better outcomes, as well as to remedy the DfT’s past shortcomings in managing investment, which led to the truncation of HS2 and the abandonment of the Smart Motorway programme. On the other hand, transport investment is a tanker that is very slow to turn around, with many parties benefiting from the present arrangements, so we might well end up with more of the same, with only cosmetic changes.

could we be about to see a substantial change in approach to transport investment, to reflect both the government’s general enthusiasm for new infrastructure to boost economic growth, and for new approaches to achieving better outcomes, as well as to remedy the DfT’s past shortcomings in managing investment

There is a distinction to be made between, on the one hand, most areas of national infrastructure where a good case can generally be made for more investment – electricity supply and distribution, water and waste services, fast broadband, flood defences; and on the other hand, transport infrastructures – road, rail, airports – which are, arguably, substantially mature, with limited benefits from additional capacity on account of diminishing returns, except in specific circumstances linked to other policy objectives.

The DfT has specifically recognised the problematic case for rail investment where many claimed ‘vital’ schemes fail to generate a convincing case, particularly where poor value for money is indicated when applying conventional cost-benefit analysis, driven in part by changing travel patterns, as well as the general high cost of building rail infrastructure. The Department has been loathe to do so for roads, however, where very similar considerations apply.

In fact, despite the requirements of the ‘Green Book’ there appears to be a disconnect between the way the DfT has seen fit to specify its own Transport Analysis Guidance and how the Treasury now wants to judge the long run benefit of transport investment. The failures and inconsistencies of the DfT’s policies and practice for major infrastructure investment have become numerous and noteworthy.

Against this background the spending review has, as ever, triggered the familiar submissions of sectoral wish-lists for more resources across the board in transport as elsewhere, which, were they all to be totted up, would comprise an eye-watering and totally impossible level of overall expenditure. Even those rehearsing the argument between private versus public transport, and economic vs sustainability priorities invariably fail to recognise the constraints of a viable quantum of overall resource.

For example, though clearly not in favour of major new road building, the Green Alliance submission to the Spending Review claims that renewing the UK’s transport network is fundamental to achieving the government’s growth, clean energy and health missions. “The system is inefficient, unreliable and historically underfunded and is now holding back the economy. The spending review in June 2025 will be central to turning this around.” This widely made plea extends to the proposition that the balance of expenditure is not fairly made around the country, another familiar complaint, further elevating extravagant claims about the investment needed to deliver on commitments for inclusive regional growth, achieved through better transport- perhaps most notably the new £14bn Yorkshire White Rose rail plan we report in this issue.

Although the spending round is fundamentally about the allocation of resources, discussions have unavoidably extended to the size of the Government’s overall funding pot, which means available taxation income and borrowing capability. New income taxes and VAT were ruled out in the Labour manifesto, but if additional revenue is sought there remains the opportunity of making taxes fairer on transport, particularly, the Vehicle Excise Duty and Fuel Tax, which has neither been increased in recent years, nor updated to reflect the switch to electric vehicles. Ending tax breaks for aviation, which is one of the most polluting forms of transport, would both raise revenue and create a fairer system. Shouldn’t the Treasury be taking the lead here, rather than the DfT?

The Chief Secretary has set out plans for an overhaul of the government’s central finance system, aimed at improving the timeliness and accuracy of data shared by departments and ending the current system of them tracking their own spending and performance, then sharing data with the Treasury via traditional documentary transfers and spreadsheets. In a speech at the Institute for Government, Jones said that at present the Treasury does not have real-time access to departments’ finance and performance-management data, and also cannot see departmental spending and its impact in real time.

He said that over the next three years the new approach to understanding, tracking, and evaluating spending across departments would be rolled out as part of the ongoing shared services programme across government.

The risk is that departments whose spending has reportedly been on the chopping block, the DfT included, will have resorted to old- fashioned political lobbying, whilst viewing the suggested procedural adjustments as just background noise as they focus solely on their own bottom line

The Chief Secretary added that knock-on advantages of the change would be that departments should have fewer key performance indicators to comply with and report on and “better levels of delegation”. He said giving HM Treasury direct access to departmental spending and performance data would save the considerable effort and interaction that the current system entailed, allowing departments to focus on their real work. Jones said by 2028-29 the system should be integrated across departments with ministers able to see in real time what programmes are over-spending, which projects are delivering, and how departments are performing against their budgets and objectives.

But for all the structural tweaks, the real test of the Chancellor’s upcoming PSR statement will be how this new approach feeds into actual spending allocations and whether individual departments have been able to demonstrate that collaboration boosts their chances of getting programmes funded. The Treasury could promote this more directly itself by setting cross-departmental budgets for cross-cutting priorities. The risk is that departments whose spending has reportedly been on the chopping block, the DfT included, will have resorted to old-fashioned political lobbying, whilst viewing these suggested procedural adjustments as just background noise as they focus solely on their own bottom line.

What could this look like for the Department for Transport? Well, one example might be collaborating positively with the Ministry of Housing, Communities & Local Government (MHCLG) to ensure that transport investments contribute to local economic growth, in particular the provision of more sustainable new housing development, in for example, the proposed dozen new towns. The Planning and Infrastructure Bill is a flagship policy for the Government, with significant economic backing and crucial implications for transport. If the DfT worked closely and constructively with MHCLG on delivery of its objectives, it could use the partnership as a strategic lever to strengthen the case for delivering its major infrastructure priorities with a budget not for itself, but the more general national objective.

The most cohesive approach to such planning and transport integration and spending approval has, arguably, to date concerned the capital for which a long-term funding deal for Transport for London (TfL) is a major part. Could this be the model for a more rational way of passing resource from central to local government, with an echo beginning to take hold in the other major metropolitan mayoral combined authorities with the ‘CRSTS plus’ ideas embodied in the recent multi-element ‘single pot’ settlements with the Greater Manchester and West Midlands Combined Authorities and their mayors.

Similar strategic concerns are being raised across other metropolitan areas and regional bodies concerning overall economic and social objectives and the key transport improvements needed to support them as part of Government’s growth and housing strategies. For example, the case for the priority ‘Oxford-Cambridge Growth Corridor’ has been set out in England’s Economic Heartland’s submission to the Spending Review, including maximising the benefits of East West Rail in delivering the best possible economic, social and environmental outcomes.

The Local Government Association’s cross-party leadership group has similarly stressed that the services delivered by councils are a key part of the country’s economic base, with a business case for increased investment and financial support to give their member authorities the tools to help communities thrive.

Meanwhile the Treasury has had other sectors making the case for particular resources to underpin mission-led, reform-focused and technology-enabled expenditure, notably how the Spending Review should address ageing IT while investing in new technologies to support the use of artificial intelligence. Patrick Vallance, minister for science, research and innovation, has said recent digital and tech strategies speak to the new administration’s commitment to emerging technology and AI adoption and funding. He believed that the upcoming long-term funding round will enable government to make the required investment to support its ambitions, including cybersecurity, cloud-based computing and the technologies that harness the benefits of AI for the public sector in improving public sector productivity and deliver a better user experience for citizens. Vallance’s ministerial post sits within the Department for Science, Innovation and Technology – which now houses the expanded Government Digital Service and leads on tech and data transformation across Whitehall.

In the context of such cross-cutting issues it begins to seem that just asking ‘how did transport do’ in the spending round, or more specifically ‘how did the Department of Transport do,’ are the wrong questions. Routing money predicated on achieving wider purposes through the structures and culture of a body narrowly focussed on delivering particular transport schemes and policies (and the DfT has a fairly poor record in that regard) looks increasingly out of kilter with what either the nation as a whole or the regional and local elements of it actually need when it comes to the most beneficial allocation of scarce resources.

Peter Stonham is the Editorial Director of TAPAS Network

This article was first published in LTT magazine, LTT916, 29 May 2025.