Chancellor’s £4bn black hole will hit road maintenance

10 October 2007

Local authorities are likely to have little option but to slash highways repairs budgets until 2011, after the chancellor left councils with a £4bn black hole.

Chancellor Alistair Darling’s Comprehensive Spending Review ushered in the ‘period of austerity’ council leaders had feared by providing annual revenue funding increases of 1% per year, an extra £5.6bn over the three years.

The Local Government Association estimated that extra burdens and demographic changes would cost £9.6bn, leaving engineers fearing that maintenance budgets would be cut.

LGA chairman, Sir Simon Milton, said there would be ‘tough choices’ following ‘the worst settlement for local government in a decade’, not the ‘greater flexibility’ the Government promised, providing no indicative allocations for individual services. An extra 400,000 elderly people to care for and looming financial penalties for missing waste targets will conspire to make highways a low priority, according to senior county officials.

Matthew Lugg, director of environmental services for Leicestershire County Council and chair of the County Surveyors’ Society engineering committee, said: ‘We’re going to be squeezed big time. There’s no way social services will be able to keep their yearly increases down to 1%, so highways budgets face real-terms cuts.’

The revenue scarcity was also likely to be accompanied by a reining in of capital budgets, with local transport spending effectively frozen until 2010/11 (see below). Lugg said it was now incumbent on engineers to champion ‘value-for-money’ investment in roads.

The chancellor did, however, leave the door open to alternative funding, with £2.25bn in private-finance initiatives available for transport, and the new option of a local supplementary business rate. This local levy of up to 2p on the pound on relatively-large companies would raise £12M a year in a southern county such as Hampshire, £7M in Lancashire, or around £5M in a city such as Bristol.

But, while the Government highlighted that this could be used ‘to upgrade existing road infrastructure’ where this promoted economic development, Lugg predicted that the idea would ‘go down like a lead balloon’. He added: ‘The last thing we’d want to do in the East Midlands is put an extra tax burden on local businesses.’

Darling also announced, as expected, that local authorities would be required to make cashable efficiency savings worth 3% of their budgets each year, or £4.9bn over three years. Finding such savings would be ‘an ever bigger challenge,’ according to Richard Fish, also on the CSS engineering committee, and there was no guarantee the money would be returned to highways.

A DfT spokesman claimed the settlement would ‘allow the Government to continue to improve transport in cities and regions around the country’. The £1.3bn for local and regional transport was ‘a preliminary figure’ to be finalised over the next two months.

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Chancellor’s £4bn black hole will hit road maintenance

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