Industry welcomes 6% rise in spending

14 June 2006

Figures showing spending on highways and transport is set to rise by more than 6% in England this year, despite a freeze in government support, have surprised the industry.
A survey of all English highway authorities has revealed roads budgets will grow more than the other main service blocks, contradicting predictions that maintenance would be cut in real terms after chancellor Gordon Brown froze revenue support until 2008 in the last spending review.
The current spending figures, published by the Chartered Institute of Public Finance and Accountancy suggest that highway officers have persuaded councillors to protect service levels from construction inflation of 6%-plus.
Councils will spend £106 per head in 2006/07 on roads and transport – a rise of 6.4% on last year. The cultural, environmental and planning block, which includes waste management, is next, with 6.2%, followed by education (5.2%) and social services (4.5%).
Police and court services have to settle for less than 4%, while housing, fire and central services face cuts in real or cash terms.
The overall increase in council tax was 4.5%, and total service expenditure is expected to rise by £4.3bn to £88.2bn – an increase of 5.2%.
Some authorities are funding their increased budgets from reserves. Appropriations from reserves account for 4% of total spending. But the drawdown is not excessive – the total level of reserves is rising more than 60% to £13bn.
This was a response to pressure from auditors to boost depleted reserves, said Graeme Fitton, chair of the County Surveyors’ Society finance committee. Given the two-year freeze in revenue support from April 2005, it was encouraging that many authorities were topping-up revenue budgets with capital from prudential borrowing, he said.
But since unsupported borrowing impacted directly on council tax, this option was closing down. Take-up of capital allocations through local transport plans could also be affected, Fitton warned. ‘This is a move in the right direction, but still effectively, a standstill.’
Matthew Lugg, chair of the UK Roads Board, was surpried at the size of the increase for highways. ‘This isn’t the situation as I understand it.’ Lugg pointed to the fact that even the best-performing authorities had been unable to claim their full local transport allocations for 2006/07, due to the fact that this was unsupported borrowing which they could not afford.
A spokeswoman for the Asphalt Industry Alliance gave the news a cautious welcome. But she stressed: ‘Traditionally, this is a Cinderella industry, and if there has been an increase in funding, it is likely that this is because it has not received enough funding in the past.’

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