Infrastructure Procurement

Alan Brown Excerpts

Monday 19th February 2024 Commons Chamber

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

Thank you, Mr Deputy Speaker. I thought you were forewarning Members in this Chamber that they would have to listen to me.

Clearly, infrastructure investment and procurement is a critical Government function. Done correctly, it gives us improved transport connectivity, new housing, vital services such as water and sewerage, telecoms and the correct energy infrastructure needed to keep the lights on. Infrastructure investment can deliver regeneration, additional inward investment, construction jobs and long-term jobs. But done poorly, we pay more, face interminable delays and have less money to invest in other projects.

I intend to cover a few of the projects that UK Governments have had responsibility for and failed to deliver properly, and illustrate just how much that has cost the taxpayer. First, I should probably address a possible elephant in the room. Mr Deputy Speaker, you may well have heard that the Scottish Government have had issues over the delivery of two new ferries. This story seems to have been in the news every single day in Scotland. There are clear lessons to be learned, and I shall return to them.

Without being flippant, let me explain to the House that the ferries are currently expected to cost £300 million—three times the original contractual agreement. Mr Deputy Speaker, let me put this in cards parlance: I will give you the £200 million ferry overspend, then I will raise you the £45 billion on the HS2 phase 1 overspend, the £30 billion overspend on Hinkley Point C, the £10 billion overspend in the Shared Services network replacement, a very modest £3 billion overspend in Crossrail, and a couple of billion extra spent on the Great Western electrification project. Therefore, very quickly, we have a £90 billion overspend before we even get to the black hole that is Ministry of Defence procurement, whose current procurement plan has a £17 billion shortfall—or, in other words, a £17 billion overspend. Some £15 billion was spent on unusable personal protective equipment over two years. We have well over £100 billion of overspend in infrastructure projects without even digging too deeply. That is before we consider the £37 billion spent on the track and trace system.

[Angus Brendan MacNeil (Na h-Eileanan an Iar) (Ind)]

The hon. Gentleman makes some very good points and has opened his speech well by mentioning transport connectivity. I am sure that he is aware that the tiny Faroe Islands have opened a 10.7 km tunnel which connects the island of Sandoy with the main island, at a price of around £90 million to £100 million. Given the sorts of costs that he has cited, for the price of the first phase of HS2 the Faroese could build a tunnel from the Faroe Islands to South Africa. Is there not something particularly wrong with UK procurement? Perhaps that might lie in the Treasury Green Book. He has shown that such waste of money is not getting us anywhere at all.

[Alan Brown]

I agree with the hon. Member wholeheartedly. The Faroese have to be commended for the work that they have done on transport connectivity. There are certainly some lessons that Transport Scotland can learn from that. Perhaps we need to be bolder going forward in terms of what transport connectivity looks like in Scotland.

I shall briefly return to the ferries. It is quite clear from what I have outlined that there has been well over £100 billion in overspend across a few UK projects. The overspend on the ferries in Scotland suddenly becomes loose change down the back of the couch in comparison. Indeed, the overspend in capital costs of the ferries is equivalent to the money given to PPE Medpro, for which Baroness Mone received a healthy £20 million dividend. Indeed, it was the UK Government who awarded a ferry contract to a company with no ferries for £33 million. That puts a lot of things in perspective.

The reality is that the ferries in Scotland are a microcosm of the failures of so many UK Government major programmes. In Scotland, there was the political intervention to rightly save commercial non-military shipbuilding on the Clyde. However, the actual procurement process seems to have been too rushed. It was inadequately specified by Caledonian Maritime Assets Limited and then all the numerous changes to design increased the costs. That is what happens time and again in major infrastructure projects. We really must look at some of those in more detail, study what went wrong and see what needs to change going forward.

Let us start with HS2. The original business case and proposals were for it to extend to Scotland to help with a modal shift away from flying. This was to improve business productivity, which was based on assumptions that getting to London quicker limited down time, without considering the fact that many people now work on the move anyway.

Through time, the argument was then advanced that HS2 was needed to free up capacity on existing lines, particularly the west coast main line, thereby creating more capacity for both passenger and freight services. That principle is fine, and getting more freight delivered by train is good for decarbonisation, but what the different arguments and analysis mean is that there was never an established rationale for the key outcomes for HS2. That has made it easier, as part of the inherent north-south bias of a London Government, to make phase 1 of the project the London to Birmingham link, and to make that the most important aspect.

[Dave Doogan (Angus) (SNP)]

My hon. Friend touches on HS2. I know that he will speak about many more projects, but this is a gusting £100 billion project that was designed to connect the whole length of Great Britain. We knew that we were getting nothing out of it in Scotland. Manchester is disappointed, because it thought that it was getting something out of it. Birmingham was the best connected city to London anyway; it now has another railway line, but one that does not quite make it to London. My constituents in Angus will be footing £92 million of the £100 billion. We could do with a link to Laurencekirk. We could do with fixing the erosion on the Montrose Links. We could do with getting better flood defences in Brechin. We do not know where that money will come from, but we still have to fund £92 million of HS2. Does my hon. Friend think that that is right?

[Alan Brown]

I wholeheartedly agree with my hon. Friend. It is almost like, when we look back historically, the oil and gas revenues paid for HS1 and the channel tunnel, but at the time we were assured that there would be a spur up the east coast and a spur up the west coast of high-speed rail. Now, all these decades later, we still do not have the promised spine, but as he rightly says London and Birmingham are getting better connectivity, even though there is some ambiguity about where the line will terminate in London.

We were told not to worry, and that the Birmingham upgrades would still mean much quicker journey times from Scotland to London. We were assured several times that trains will run from London to Scotland on day one of HS2 services, even though they will be going from Birmingham. Sure, trains to Edinburgh and Glasgow will run, but they are intended to run as one service stopping and decoupling at Carstairs. That is just deemed a minor inconvenience for those of us travelling to and from Scotland.

When HS2 looked at the purchase of rolling stock, the key decision was made that they had to be the quickest high-speed trains. That means that when that rolling stock accesses the existing tracks on the west coast main line, the trains will go slower than existing Avanti west coast services. Not only will we not get high-speed rail to Scotland, we will get a poorer service from the new high-speed rail once it is running on the west coast main line. How can that be a logical proposal for the most expensive infrastructure project ever undertaken by a UK Government?

[Gavin Newlands (Paisley and Renfrewshire North) (SNP)]

My hon. Friend makes a point about the slow speeds. This is not news. A report that had a foreword by Philip Hammond, who was the Transport Secretary at the time—13 and a half years ago—suggested that the rolling stock could indeed decrease speeds, stating that

“journey times between North West England and Scotland could be potentially longer than at present”,

resulting in longer journey times between Scotland and London. Just a few weeks ago, we heard evidence in the Transport Committee that that is still the case, with times increasing by between five and 25 minutes. Does my hon. Friend not think that it is absolutely absurd that we have ended up with a gold-plated commuter line between Birmingham and London and slower journey times for the rest of us north of Manchester, and that that sums up Westminster’s attitude to transport infrastructure spending since time immemorial?

[Alan Brown]

I wholeheartedly agree. I go back to my opening remarks about HS2: the whole premise of it going to Scotland was to encourage people not to fly and to get the train. Now the competition is going the other way; they will be incentivised to fly because the journey times will be longer. It is absolutely crazy.

My hon. Friend the Member for Angus (Dave Doogan) touched on the fact that the costs of HS2 spiralled to over £100 billion. What happened then? The eastern leg was removed. Next to go was the Golborne link, removing the link to the west coast main line and trains running to Scotland. Then the northern spur to Manchester was removed. HS2 does not know whether to terminate at Old Oak Common or Euston, despite upgrades already commencing at Euston Station. Clearly, there is no overall strategic thinking other than a continual form of panicked cost control.

Unfortunately, HS2 is a monument to a poorly developed concept of not knowing what the key strategic objectives would be, unrealistic budgets, politicians meddling in route alignment and increasing the amount of tunnelling, politician panic as costs increase, continual stop-start reviews all costing money, over-specification, unrealistic risk allocation, and clearly not enough up-front design and site investigation work or proper planning with regard to project delivery and discussions with contractors. But hey, as we have heard, passengers from Birmingham might now be able to get to London 20 minutes quicker than they can at present, which is not a bad outcome overall for a £66 billion project that does nothing strategically outside the midlands. That leg was originally estimated to cost £20 billion, so there has been a £46 billion project overspend.

There is another major infrastructure project that is very similar in its overspend, delays and costs spiralling out of control: Hinkley Point C nuclear power station. It is a testament to political determination and aspirations over the reality of nuclear power. It was estimated to cost £18 billion, including contingency, in 2016, when the UK Government gave the go-ahead after a review. Just a couple weeks ago, however, EDF estimated that it would cost £46 billion in today’s prices. By last week, it had already increased to £48 billion. That is a mere £30 billion overspend on what was already the world’s most expensive power station. Instead of generating power in 2025, it will now be as late as 2031. As costs have continued to spiral, the Government’s attitude is, “It’s okay, the risk lies entirely with EDF,” which is completely head-in-the-sand stuff. China General Nuclear, one of the partners in the project, has already reached its cap on the amount of capital it will put into the project, so clearly EDF is having to fund a lot more borrowing. It beggars belief that the Government claim not to be speaking to EDF about this issue, especially when chief executive Luc Rémont stated last week:

“We’re confident we can find a pathway with British authorities on Hinkley Point C and Sizewell.”

In other words, there will be another taxpayer bailout.

One lesson that the UK Government appear to have learned is that a contracts for difference model is not the best way to deliver a nuclear project, but they are now diving head first into the regulated asset base model, which transfers risk from the contractor to the billpayer. That is what the Government want to do for Sizewell C, despite the evidence of failure of the RAB model for a project in South Carolina, in the United States, where ratepayers continue to pay higher rates for a nuclear power station that was actually abandoned during construction. How will the UK Government make sure that this does not happen at Sizewell?

[Dave Doogan]

Is my hon. Friend concerned, as I am, that the UK Government—specifically, the Treasury—seem not to have any concern for nuclear overspends? When it comes to nuclear, regardless of whether it is civil or military, there is no shortage of UK Government funding, yet all across GB there are plans for massive pylon lines going through communities. The pylon lines could be offshored but have to be done at the lowest possible cost, which means overhead lines. There is no parity between nuclear and anything else. Everything else is bargain-basement, Treasury Green Book “let’s screw the contractor down to the very lowest price”, except for nuclear.

[Alan Brown]

Again—no surprise—I wholeheartedly agree with my hon. Friend. It is classic “penny wise, pound foolish” all the time, particularly when it comes to nuclear. The Government are kidding themselves about nuclear, because they still estimate that Sizewell C will cost only £20 billion. We already know that Hinkley, which is the model for Sizewell C, is costing nearly £50 billion, so why pretend that it will cost only £20 billion? They are setting their stall out wrongly and have a blinkered approach that suggests we somehow need nuclear, when clearly we do not actually need it. What they should be investing in is renewable energy, storage systems and, as my hon. Friend says, much better grid infrastructure as well.

[Jim Shannon (Strangford) (DUP)]

I commend the hon. Gentleman for bringing this issue forward. Does he agree that there seems to be a disparity between those who live in towns and those who live in rural areas, where costs are, more often than not, much larger? Does he feel that it is time for the Government to have a centralised access point for infrastructure material, as a way of ensuring that each council area and constituency can access the same material for the same cost and begin to build what is broken in the way that it should be done in each area?

[Alan Brown]

That is a fair point. There is always a rural premium, and people living in rural areas suffer disproportionately when it comes to infrastructure, upgrades, energy efficiency and heating their homes. I have long argued, particularly in relation to the roll-out of energy efficiency schemes such as ECO4, that the Government really need to consider a rural programme. Otherwise, all that happens is that urban homes get upgraded and—

--- Later in debate ---

Motion made, and Question proposed, That this House do now adjourn.—(Joy Morrissey.)

[Alan Brown]

You did warn me, Mr Deputy Speaker, but I still got caught out.

Back to my favourite topic: nuclear and nuclear overspends. I have highlighted the failures of big nuclear projects, as well as the Government’s blinkered approach to nuclear. They need to reconsider the proposals for so-called small modular reactors. First, they are not small, and no proven design is operational anywhere in the world, but it seems that the British exceptionalism that the Government believe in means that Britain will somehow lead the way in all sorts of nuclear power generation.

Just recently, the Environmental Audit Committee has posed serious questions about that to the UK Government. Let us look at the evidence and the facts before us. NuScale, which was supposed to lead the way for SMRs, has already abandoned its proposed SMR in Utah after costs ballooned to more than £7 billion. But the Government, true to form, believe that they will be able to deliver SMRs for about £2 billion a go. That defies all logic and inevitably means yet more future infrastructure delays and overspend.

Compared with nuclear and HS2, the overspend on Crossrail was relatively modest, at just £3 billion. However, Crossrail was another example of bad news being buried until it could no longer be hidden. Years of delay suddenly emerged right at the end when the project was supposed to be at the stage of commissioning new trains. Those delays should have been highlighted much earlier. We need a culture in which delays and potential overspends are flagged up early enough to allow informed decisions to be made about the projects and to enable an understanding of what needs to be addressed in the budgets and programmes.

Another project that should generate regular headlines is the shared services network. That is the new communications network for the emergency services in Great Britain, so its delivery is presumably critical. According to a written answer I received, the original cost of the project was going to be just £1.6 billion, and the old system, Airwave, was intended to be shut down by 2026. Now the shutdown date is not known as procurement is ongoing, and the total expenditure is estimated to be £11.3 billion, so on the face of it, the cost of the project is up tenfold—nearly £10 billion over—yet it flies under the radar, for want of a pun. It is astonishing.

On a positive note of successful infrastructure delivery, it is worth highlighting that the Scottish Government have delivered the longest stretch of new railway since Victorian times with the reopening of the Borders railway in 2015. That is a real success story—one that the Tories said would never happen. Is it ever praised or used by the Tories as a good example? No. Instead, their immediate messaging is about the need to extend the railway further, an aspiration that the Scottish Government share. It seems to me that, at some point, politicians must be gracious about successful projects, and take learning from them for other projects.

Equally, on rail electrification, Scotland has always had a clear and steady programme, unlike the continual chopping and changing of programmes in England. It generates contractor expertise and a steady supply chain, and contractors are confident that there will be a future pipeline of work. The cost of delivering electrification in Scotland is £2 million per km, compared with £3 million per km in England, so the UK Government’s procurement rate is 50% higher than that of the Scottish Government.

[Angus Brendan MacNeil]

The hon. Member is making a fascinating point. Allied to that point is the fact that when it comes to transport, the UK Government make decisions for England and there are Barnett consequentials for Scotland and Northern Ireland, but when Scotland needs something, there are never Barnett consequentials running the other way. We have to hope that the UK Government are overspending or inefficient in their spending so that we in Scotland have money to do something; there is never a point where the magic money tree is shaken for Scotland and then the Barnett consequentials come to England.

[Alan Brown]

The hon. Member is absolutely right. A proper budget-setting process should mean looking at needs, and then deciding what funding is required to suit those needs and what the aspirations are. Instead, at every Budget, we are supposed to doff our cap and be grateful that increased spend in England gives some crumbs to Scotland. That is not proper planning. Again, an independent country that had proper borrowing powers would be able to plan strategically for the future, instead of this haphazard measure that is reliant on the Barnett formula.

[Angus Brendan MacNeil]

I see the Minister laughing on the Government Front Bench, but the serious point is that Portugal’s spending does not depend on what Spain is doing, or vice versa. It spends what it needs, and it does not need the magic money tree shaken in the country next door before it gets what it needs—it does it itself.

[Alan Brown]

I absolutely agree. It goes back to the fact that an independent country making its own decisions would plan strategically and be able to borrow money accordingly. Quite often, borrowing for infrastructure leads to the kind of circular reinvestment in job creation that is a win-win.

If we look at roads, we see that it was the SNP that finally delivered a continuous motorway between Edinburgh and Glasgow. The M74 and the M80 have been completed, as has the Queensferry crossing. Yes, if we listen to the headlines, the A9 has clearly been delayed: a much more realistic programme for the A9 should have been developed before now, and Transport Scotland should also have heeded industry concerns about its bespoke contract models making it difficult for contractors to bid. However, the reality is that the SNP Government have delivered on a limited budget, and while the Tories demand more and more, they are also content with the capital allocation being cut over the next two years.

[Dave Doogan]

I am glad that my hon. Friend has mentioned the A9. Under the Scotland Office, prior to devolution, it came to an abrupt halt at Luncarty, with sporadic dual carriageway between there and Inverness. Like the Borders railway, when the SNP said that we were going to dual it, the Tory Opposition in the Scottish Parliament—having done nothing about it themselves—immediately insisted that we were not doing it quick enough. Does my hon. Friend agree that the problem is that there is such a lack of capital infrastructure investment across these islands that, when it comes to major projects such as the dualling of the A9, it is so difficult to mobilise the expertise, skills, contractors, and plant and machinery? There just is not the culture of investment in the United Kingdom that other European nations demonstrate.

[Alan Brown]

Absolutely. I have long said that when oil was discovered in the north-east of Scotland and the Port of Nigg was developed as a strategic port, any normal country would then have invested in the infrastructure in between. That is when the A9 should have been dualled—when the oil and gas revenues were piling in, and we were using the north-east of Scotland to facilitate that. There should have been a motorway built to Aberdeen, the oil capital of Europe, but the UK Government did not think of upgrading the road or train network to Aberdeen. It is utterly bonkers.

That “bonkers” brings me to the fact that the UK Government are now supposed to be delivering a levelling-up agenda. As we have just heard, that agenda has certainly bypassed Scotland for long enough, but it is another example of political aspirations and a desire to be seen throwing some money about, instead of actually having a coherent strategy based on needs. The UK Government’s levelling-up strategies have imposed strict spending timetables and budget caps that do not allow for inflation, meaning that councils that have been allocated money now have to come up with additional money themselves or cut back on those so-called levelling-up projects, which kind of defeats the purpose of allocating money for those projects.

When we look at projects in the round, it is also critical that the correct funding mechanisms are in place. Labour gave us the private finance initiative model, which proved to be a boon for hedge funds but a complete rip-off for the taxpayer. Again, the SNP Scottish Government learned the lessons from that model and implemented the non-profit distributing public-private partnership model, limiting profits and allowing much greater expenditure on capital projects while not tying hands with revenue budgets.

[Angus Brendan MacNeil]

The hon. Member mentioned a vital point about levelling up. I was on a call today with a colleague on my council, Na h-Eileanan Siar, who said that under European structural funds, it was getting roughly £3.5 million a year, and under the levelling-up money—when it comes—it will be £2.25 million a year, so it is actually levelling down in comparison with what happened before Brexit.

[Alan Brown]

Absolutely. I do not need to tell anybody from the highlands and islands here that so much European money was actually used for transport upgrades for roads and causeways. Again, that was reliant on European money, because it simply was not coming north from Westminster.

To touch briefly on defence procurement, we have the ongoing shambles with Ajax, with a £5.5 billion fixed price contract for approximately 600 armoured vehicles to be delivered by 2025. So far, £4 billion has been paid out, out of that £5.5 billion, for just 44 vehicles delivered, and testing is still ongoing after they were originally deemed undriveable due to the excessive vibration. On defence, we also have the farce of the carriers procurement, and the Trident replacement is sucking the life out of the rest of the defence programme. There are really so many lessons that the UK Government need to learn, and they do not seem to be doing so.

On improvements in infrastructure assessment delivery, I do welcome the setting up of the National Infrastructure Commission and the national needs assessment process. Again, however, the Government do not necessarily seem to listen, especially given what the National Infrastructure Commission has said about nuclear deployment, which the Government just do not listen to at all. The creation of the Infrastructure and Projects Authority does seem to have been welcomed by businesses.

[Gavin Newlands]

I thank my hon. Friend for giving way one last time. When it comes to transport infrastructure, he will be aware from his previous role as the SNP transport spokesperson that Scotland has an overarching transport strategy. In fact, we are on to transport strategy 2, and we have the strategic transport projects review 2, which supports the delivery of that strategy. In England, there is no such overarching transport infrastructure strategy whatsoever. We have heard evidence in the Transport Committee recently that the Government should put that in place, because that avoids all the problems we are now seeing within this procurement. It is just a complete muddle and a mess, because there is no overarching strategy at all.

[Alan Brown]

Absolutely. An overarching strategy again goes back to linking needs and outcomes, and to identifying budgets. It also sends a clear signal to investors and contractors of what is in the pipeline of work, and people can actually gear up and plan ahead accordingly. One other thing about Scotland is having, through all this work, a strategic transport development plan, and then the Tories calling for the UK Government in Westminster to bypass that for a pet project, which again completely undermines our strategic thinking.

All these projects I have spoken about show that risk needs to be correctly allocated. The lessons learned means that sufficient up-front design work needs to be undertaken. We need early contractor involvement and a clear pipeline of projects. These are all matters that the construction industry has actually been calling for for years. We also need politicians to take responsibility, where required, and for politicians to understand that undue interference and the chopping and changing of projects mean an increase in costs and programme delays.

Somehow in today’s political world, we do need to have cross-party working as much as possible. One thing is for sure: we cannot continue to have flagship projects that are handled as badly as HS2, Hinkley and the rest. It is quite clear that some politicians down here really do need to look in before they look out when it comes to infrastructure delivery and talking about that.

[The Parliamentary Secretary, Cabinet Office (Alex Burghart)]

It is a very great pleasure to be given the opportunity to speak in this Adjournment debate on infrastructure procurement this evening.

The hon. Member for Kilmarnock and Loudoun (Alan Brown) and SNP Members—and the many scores of hon. Friends behind me—will be delighted to hear that the Government recently published the national infrastructure and construction pipeline, reflecting our commitment to economic growth and productivity. Over the next decade, the pipeline estimates a planned and projected £700 billion to £775 billion overall investment in infrastructure projects across the country. This is going to provide great certainty to industry, and it makes clear the need to invest in new skills and new talent to the sector.

The new Procurement Act 2023, which I had the pleasure of taking through this House, will create a simpler and more transparent system that delivers better value for money and reduces costs for business and the public sectors, and learns the lessons of recent years. Specifically, in the infrastructure procurement space, the construction playbook sets out how contracting authorities can now ensure that this ambitious programme of public investment is delivered in a way that maximises value for money. The playbook provides guidance and best practice on a range of topics including early supply chain involvement, risk, effective contracting, modern methods of construction, bid evaluation, and creating successful relationships with our supplier base. One in every £3 of public money—some £300 billion a year—is spent on public procurement. By improving the way public procurement is regulated, the Government will save the taxpayer money and drive benefits across every region of our country.

Following the UK’s exit from the EU, we have seized the opportunity to develop and implement a new procurement regime in a way that simply was not possible while we were members of the EU. The Act helps deliver the Prime Minister’s promise to grow the economy by creating a simpler and more transparent system that will deliver better value for money and reduce costs to businesses and the public sector. Crucially, it will provide new opportunities to small and medium-sized enterprises to get a bigger share of that £300 billion a year prize, a great achievement.

[Alan Brown]

What procurement processes are the Government doing now that they were not able to do when they were part of the EU and what difference is that making?

[Alex Burghart]

I am extremely sorry that the hon. Gentleman missed every single stage of the Procurement Act 2023. We have created a brand-new regime in consultation with businesses of all sizes, who absolutely welcomed the decisions that we have made that will reduce bureaucracy and make it easier, removing the hurdles to small and medium-sized enterprises. That is why when we did our consultation it was very warmly welcomed, because people could see it would reduce the costs of entering procurement and reduce the barriers to those businesses getting a share of that public money. I have to say it was welcomed on both sides of the House, by both—[Interruption.] The hon. Member for Kilmarnock and Loudoun (Alan Brown) can refer back to Hansard in his own time, but, having explained how it improves—