Brexit could force multibillion-pound projects to be scrapped, says NAO chief

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Billions of pounds’ worth of public projects will have to be scrapped by Theresa May because of a “tidal wave” of pressures from an impending Brexit, the head of Whitehall’s official spending watchdog has said.

The comptroller and auditor general of the National Audit Office, Sir Amyas Morse, said the government would have to treat leaving the EU as an “emergency” and that government departments would be forced to decide which plans could be cancelled or suspended.

Major projects such as the Hinkley Point C nuclear plant, a third runway at Heathrow and the ambitious HS2 rail project would have to be reassessed as the government decides which can be done without, he told the Guardian.

Others which will be re-examined include the £7bn refurbishment of the Palace of Westminster, the London commuter line Crossrail 2 and former chancellor George Osborne’s northern powerhouse strategy.

Britain’s most senior auditor gave his alarming verdict on Whitehall’s readiness as the prime minister comes under increasing pressure from European leaders to start talks on the UK’s exit from the EU as soon as possible.

“It’s a tidal wave coming up the beach,” he said. “It is an emergency. If we don’t get it right, it will affect our economy and standards of life in this country. To say we are going to carry on and do everything we did before – I just don’t think that’s going to be sustainable.”

“We probably won’t face something like this again. You can truly use the word emergency about getting a Brexit right,” he said.

Morse, the government’s chief auditor who has a statutory responsibility to scrutinise all public spending, has spoken out in a rare interview – a reflection of his concern that there is little time to waste.

He warned that the UK’s decision to leave the EU would mean government resources, including civil servants, IT professionals and legal advisers, being directed towards managing Brexit and therefore away from delivering major infrastructure projects.

Aiming his words at Downing Street, he said that government departments must be forced to reduce their commitments to major projects, which are valued at £405bn, because some government departments are facing cuts of up to 40%.

“We need to ask ourselves, can the public sector deliver Hinkley Point C, a third runway, HS2, a northern powerhouse, nuclear decommissioning, Trident renewal and restoration and renewal of the Palace of Westminster all at the same time?

“All these projects are drawing on the same pool of skills and many of these contain optimism bias that they will be able to meet their skill needs at an appropriate cost,” he said, while declining to speculate on which should be scrapped.

“You are going to have to rein in projects … and say, what is the benefit? How damaging is it not to have it for a period of time? Can we afford it?” he said.

“There is a policy at the moment to have lots of infrastructure projects. I say fine, but some of them will have very big consequences in terms of your ability to deliver your other goals.”

A Brexit would mean that other government activity would inevitably have to be curtailed, but there was a danger of it being left too late. Morse said the initiative to cancel projects quickly had to come from Downing Street.

“I think that a lot of this will happen anyway as the [Brexit] plans build up,” he said.

“But it [would be] so much better if it happens facing forward and the government takes a grip of it rather than saying: ‘You know, we have been overtaken by events and now we are rushing around arbitrarily stopping things,’ which could be chaotic and costly.”

Morse said each government department will have to conduct a “stocktake” to ensure that Whitehall has the capacity and the public money to deal with the challenges of extracting Britain from the EU.

“Everything from EU science research funding to aviation policy to fisheries policy will need to be looked at and new systems and business operations put into place to fill the gap left by the EU,” he said.

He added: “Brexit means lots of additional work for departments. We really have to create some capacity to be able to handle that surge in demand.”

The challenge of a Brexit also has to be completed in the face of large-scale staff cuts across Whitehall, he added. “This is while the budgets for most departments have [been subjected to] very aggressive reductions. In the Department for Business, Innovation and Skills there is a reduction of central costs, I think, of 40%,” he said.

He said a “digital capability gap” meant that even before Brexit the government needed to find about 2,800 new staff with IT skills to undertake projects already planned over the next five years. This gap, it has been estimated by the NAO, would cost £213m to fill with full-time civil servants and £418m if the work was handed to contractors.

Ministerial ambition also made it hard for the government to think rationally about which projects were “must have” and which were “would like” and expendable, he said.

“It comes partly from the natural enthusiasm of ministers who want to announce major initiatives and a natural enthusiasm of civil servants to be seen as ‘can do’,” he said.

“It is not a very attractive prospect for a minister to stand up and say: ‘Well, I haven’t really initiated anything in my time at this ministry but I have done a very prudent job managing the projects inherited from my predecessor and, by the way, when I retire, someone else will be able to see the completion of these projects and get the credit.’ These are not criticisms of any particular government, this is just how it is.”

He also warned that the government should also prepare for a possible “Scotxit”, given that Scotland voted to stay in the EU, which could be even trickier than a deal with the EU.

“That will be a negotiation you will be able to see from the moon,” he said.

Powered by Guardian.co.ukThis article was written by Rajeev Syal, for The Guardian on Thursday 21st July 2016 22.00 Europe/London

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