UK: The "A-2015" Highways Agency Roadmap

Last Updated: 18 June 2014
Article by Robert Meakin

The destination

In line with the Government's "Action for Roads" Command Paper issued last July, and its subsequent consultation process (which concluded in April), the draft Infrastructure Bill proposes to transform the Highways Agency by April 2015 from an entity run directly by the Department for Transport into a government owned – but "independent" – company. As a consequence, it will have much greater freedom to make decisions affecting the strategic road network, without the need for ministerial scrutiny in every case.

The Bill provides for a "Road Investment Strategy" to be produced to determine the levels of performance and investment that are to be delivered (probably over a five year period, similar to the model already in use on the railways), and a committed revenue stream will provide enhanced certainty for contractors (replacing the previous "brake/accelerate" approach to funding). The government has estimated that these changes to the Agency could save the taxpayer GBP 2.6 billion over ten years.

The vehicle

These structural reforms should constitute at least a first step on the journey to a more dynamic road network for the 21st century – but how will the new company operate in practice?

The Bill itself sets out the overall strategic parameters of the relationship between the government and the company, in a way that seeks to protect the public interest, without the need for daily intervention in its activities. The detail of the governance regime, however, will be set out in three additional key documents:

  • A formal Licence will be issued by the Secretary of State, setting out key conditions for the company's operation of the network
  • A Framework Agreement will be entered into between the Government and the company, setting out the procedural interface between the two, defining roles and responsibilities, and laying down policies as to financial independence, reporting, monitoring, audits etc
  • Finally, Articles of Association will set out the company's constitution and internal rules and procedures, in line with normal principles of corporate law

The (backseat) drivers

As sole shareholder, the Secretary of State will appoint the Chair of the company who, in turn, will nominate the CEO, and the majority of the board – subject to approval by the Secretary of State. The latter will also have the right directly to appoint a non-executive director to provide support and advice to the Chair.

In addition to its other normal rights as sole shareholder (such as calling an EGM or dismissing board members), the Secretary of State is also likely to retain a number of sanctions to deal with poor performance by the company. These may include financial penalties (for example, the Bill provides for fines in the event of a failure by the company to comply with the Road Investment Strategy, or with directions or guidance issued by the Secretary of State). They may also include the withholding of incentives for management, and/or the loss of operational independence, whilst remedial measures are implemented.

It shouldn't be thought however that oversight will only be exercised by the Secretary of State. The company's CEO will be formally answerable to parliament for the expenditure of taxpayers' money, whilst the Bill provides for two external bodies to hold the company to account – one within Passenger Focus to represent the interests of road users, and the other within the Office of Rail Regulation to oversee cost and efficiency.

In addition, the company will, of course, ultimately face action in the courts, if it fails to comply with its legal duty as a highway authority to maintain its road network in a safe and serviceable condition.

The roadmap

Whilst there will almost certainly be delays, with the odd pothole and traffic jam looming (the run-up to a General Election, for example....), we now know a lot more about the route ahead. Directions will become clearer still, when promised first drafts of the Licence, Framework Agreement and Articles are published over the course of the summer. We will continue to provide journey updates in later editions of this briefing on these drafts and progress.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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