There were no blockbuster announcements concerning infrastructure in the Budget.
The competitive tendering of onshore electricity transmission, support for North Sea oil and gas, and some additional targeted support for regional schemes, are welcome.
The Budget did set out new goals for Digital infrastructure. The Treasury and DCMS published their Digital Communications Infrastructure Strategy. This announced a series of regulatory measures, as well as a new objective that ultrafast broadband of at least 100 Megabits per second should be available to nearly all UK premises. It also committed support for broadband in rural areas, extended the broadband connection voucher scheme, and allocated £600 million in government money to support the delivery of the change of use of 700MHz spectrum, to enhance the UK’s mobile broadband connectivity. Specific support using the infrastructure Guarantee Scheme will also be targeted at suppliers, such as Virgin, who are looking to expand their broadband networks.
But aside from these variations, the position remains broadly the same as set out in the National Infrastructure Plan, revised in late 2014.
Against that backdrop, the MCA and AECOM held a joint event on the eve of the Budget, entitled Where Next for UK Infrastructure? The event provided an opportunity to assess whether the MCA report of 18 months ago, Building Blocks: How Britain can get infrastructure, right remains relevant. Alan Couzens of Infrastructure UK, the Treasury body that advises Government on these matters, outlined the current state of the National Infrastructure Plan, and there was expert panel input from Mike Hamer of AECOM and Russell Dallas of Mott MacDonald.
The audience, a mix of client organisations and MCA members working in infrastructure, welcomed the commitment the Government had shown to infrastructure in this Parliament, and its ever-improving engagement with the supplier community. Alan Couzens demonstrated that much of the predicted National Infrastructure Plan pipeline of over £300bn of finance going into infrastructure, largely private money, was now committed. However, he noted that the new activity created its own problems, such as price inflation. Contributors to the debate indicated that this might increase the already apparent need to secure more private investment. With some estimates suggesting modernisation of the UK networks needs £500bn (at 2013 prices), the funding gap could remain very significant, despite the best efforts of the Government. Investors will continue to demand certainty about the security of the project pipeline, and their sources of returns, to enter the market.
The degree to which Building Blocks was still considered relevant and the very favourable comment it attracted, especially among client organisations, were gratifying. Government is moving in the right direction on a number of its 21 recommendations. For example, 50% business rate retention for local authorities provides some local benefit on the infrastructure-related business regeneration for localities that commit to projects. But Government could go further. 100% retention of new business rates, such as is being offered to Manchester, could strengthen incentives. It was also noted that the proposals being taken forward by the Labour Party for the creation of an independent infrastructure commission were very close to a similar recommendation in the MCA report – indeed closer in some particulars than the original proposals made to Labour by Sir John Armitt. The use of arms length bodies, specifically recruited to oversee the lifecycles of public projects, a model so successful in the Olympics, remains one that participants in the debate wish to see more widely adopted. And the potential of Digital to extract better performance from existing assets or to support the efficient development of new ones was touched on.
But the MCA recommendation that resonated most with participants was around vision. Whether an incoming Government sets up an independent body to oversee infrastructure or not, participants felt that it would need to do more to relate projects to purpose. The new Government should link its infrastructure planning to what kind of economy and society it wishes to promote. Otherwise the National Infrastructure Plan will remain vulnerable to the accusation that it is not part of a strategy but simply a list of projects.
Debates about the relative priority of supporting broadband infrastructure or building high speed rail networks would take place in an informed context. The value of proposals would be mapped against a vision for industry, transport, technology and services. Such a vision could drill down to questions of skills and job opportunities. If our future is in physical goods and services and tourism, then mobility in improved freight and people networks will be needed. In promoting projects, the inconvenience of new build could be counterbalanced by reference to relevant job creation and the economic necessities of the vision. If our future is in Digital, relative judgements about transport networks and broadband investment could be sensibly made. And a clear vision would allow the balance between commercial and public service infrastructure to be struck. If our future is in Digital – or in high tech manufactures, or world-class transportation – then investment in the learning environments needed to train a suitable workforce will have infrastructure implications.
The UK has some of the finest infrastructure firms in the world, working in finance, planning, architecture, design, engineering and project management. And as our event with AECOM showed, we have one of the finest infrastructure advisory capabilities in the world. The new Government will do well to harness our member firms’ expertise to help not only in delivering infrastructure projects but also in creating a vision of what those projects are for.
Written by Paul Connolly, MCA Think Tank Director.