Government's spending watchdog has warned 15% spending review cuts agreed by the Department for Transport (DfT) may lead to financially unsustainable budget reductions in road maintenance.

Among £1.23bn funding cutbacks to national and local road maintenance, the Highways Agency - which faced the DfT's biggest single spending reduction - is tasked with making ‘unspecified' efficiency savings worth £223m, according to a National Audit Office (NAO) report issued today.

Such funding uncertainty combined with existing £435m maintenance and standards budget cuts threatens deterioration in road quality over the course of the spending review period and higher long-term costs to both the DfT and local authorities, the report warns.

To counter this, the study ‘Reducing costs in the ‘Department for Transport' recommends officials monitor closely the condition of national and local roads, balancing minimum standards needed to meet its objectives against avoiding future costs.  DfT staff are also urged to improve their understanding of the cost-effectiveness of £2.7bn spending devolved to Transport for London and £2.6bn allocated to local authorities for 2010/11.

Welcoming the department's investment in working with councils to identify and share how maintenance efficiencies can be made, the NAO suggests such good practice should extend to other areas of third party spend to inform how cost savings are achieved, their impact on quality and meeting objectives. 

Amyas Morse, head of the NAO praised the DfT for its speed in preparing for the spending review. ‘However, while the department had elements of a strategic vision, there was no real long-term plan for reducing costs sustainably,' said Mr Morse.

Click here for report:  Reducing costs in the Department for Transport