Concerns have been raised over department’s future capabilities after chancellor slashes its operational budget in last week’s spending review




Chancellor George Osborne cut the Department for Transport’s operational budget by 37% in last week’s spending review, from £2.6bn this year to £1.8bn in 2019/20. However, spending on transport infrastructure over the next five years will rise 50%, with a total £61bn allocated in line with existing commitments to fund HS2, Network Rail enhancement projects and new roads.

The brunt of the DfT’s operating funding cuts will fall on the department’s £685m a year resource grant to Transport for London which will be completely phased out by 2019, reflecting government reforms to devolve full retention of business rates to local authorities.

The Treasury said it expected the DfT to make further savings by capitalising on competition for franchise contracts to reduce rail industry subsidy. In addition, the DfT anticipates making efficiency savings in Whitehall and at its agencies worth £94m.

While confirmation of the government’s commitment to infrastructure investment was received positively, questions were raised over whether sufficient operational funding had been made available for the department to administer it effectively.

Richard Threlfall, KPMG’s head of infrastructure building and construction, said the DfT’s reduced operating budget “surely raises concerns over the department’s capacity to drive forward its substantial pipeline of projects”.

Osborne also announced that the government would be establishing a new £300m Transport Development Fund to support development work for transformative transport infrastructure projects such as Crossrail 2 and Transport for the North’s strategy.

Meanwhile, England’s £345m a year Bus Service Operator Grant is to be preserved.


Related coverage in the latest issue of Passenger Transport:


‘Tough choices’ for TfL as DfT axes grant
£685m a year resource grant will be withdrawn in 2019

BSOG survives spending review
Grant was saved to reflect Equalities Act 2010

Reforms for rail compensation
Treasury reduces threshold for claims


This article appears inside the latest issue of Passenger Transport.

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