Infrastructure Procurement

Angus Brendan MacNeil 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.

--- Later in debate ---

[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.

[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.