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Category : Business

Finance minister Lord Sassoon reveals first fruits of cost review aiming to shave 15% from public sector construction spend

The government is on course to hit its target of making savings of between £2bn and £3bn on the bill for the nation’s infrastructure by 2015, the Treasury said on Monday.

Lord Sassoon, the commercial secretary to the Treasury, said cost cuts of £1.5bn had been identified – including £600m on road schemes and £400m from London Underground (LU).

“It is vitally important that utility bill payers and taxpayers get good value for every pound spent on infrastructure,” Sassoon said as he announced the findings of the cost review launched in 2011. “Every pound saved through this cost review programme is a pound more that can be spent on new infrastructure in the UK.”

Sassoon said the savings were the first fruits of a three-year plan to shave 15% from construction costs on big public sector capital projects. The government plans to spend between £15bn and £20bn a year on infrastructure and has identified 40 priority projects.

A detailed list of savings published by the Treasury shows that the biggest single item is a £700m cut in the estimated £4.1bn cost of the planned Thames tideway tunnel, a scheme to improve London’s sewers.

The cost reduction has come from removing the so-called “optimism bias” in the original estimates for the project – a sum factored into the plans to take account of Whitehall’s belief of cost overruns in the original budget.

Other examples include the joint procurement by LU and Crossrail of escalators and the joint planning of 14 road programmes by the Highways Agency.

Sassoon said: “The first annual report shows we are on track to deliver the savings we identified last year.

“What is particularly encouraging is that these savings are being delivered through close and fruitful co-operation between the public and private sectors.”

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