Lord Berkeleyasked Her Majesty's Government:
Why the Department for Transport allowed the Highways Agency to overspend its budget by £456 million; what were the reasons for the 137WA overspend; and what action they are taking to ensure that overspend by the Highways Agency does not occur again. [HL2236]
§ The Minister for the Cabinet Office and Chancellor of the Duchy of Lancaster (Lord Macdonald of Tradeston)The department did not allow the Highways Agency to overspend; it occurred as a result of technical resource accounting and budgeting changes that would not have been necessary under cash accounting. My department and the Highways Agency are working closely to avoid a recurrence.
In 2001–02 the final audited expenditure position showed the following breakdown of underspending and overspending.
Overspending against voted provision is shown as a positive amount.
Resource £ million Capital £ million Total £ million Departmental Expenditure Limit (DEL) 128 -142 -14 Outside DEL and AME -10 -10 Conventional spending 118 -142 -24 Annual Managed Expenditure (AME) 338 338 Grand Total 456 -142 314 The Highways Agency underspent on its conventional expenditure programme (equivalent to the old cash expenditure) by £24 million, in line with its forecasts.
However, some technical accounting classification issues emerged in the first year of full resource accounting and the consequences of these came to light only after the end of the financial year. Regrettably this was too late for We department to seek proper parliamentary approval for the expenditure. As a consequence, this produced a resource overspend and a capital underspend against the voted provision within the departmental expenditure limit.
More significantly, within the annually managed expenditure (which covers resource accounting and budgeting non-cash items such as depreciation and write downs) the Highways Agency failed to budget correctly for the depreciation of bridges and structures, for the write-downs required on opening new roads and for the creation of some provisions for future maintenance. These led to the overall overspend of £314 million.
The department took account of the emerging audit results before submitting its Spring Supplementary Estimate for 2002–03 and is reviewing its future requirements in the light of this better understanding.
Full details of the circumstances of the budget excess are detailed in the Comptroller and Auditor General's report to the 2001–02 accounts for the agency (HC 326).