THE LATEST EDITION

November 2018
M T W T F S S
« Oct    
 1234
567891011
12131415161718
19202122232425
2627282930  

Chronic underinvestment in UK infrastructure claims MCA

UK infrastructure is a paradox. We have world-renowned capabilities in architecture, engineering and construction. Yet, with some exceptions, like the Olympics and Crossrail, our record at creating business, service and communications infrastructure is a best indifferent. There is chronic underinvestment. We need to spend around £500bn to bring the UK’s transport, energy and telecoms networks up to the standards of Europe’s best.  Too many projects get cancelled, delayed, or stuck in the planning system. This creates investor uncertainty and high costs. Short-termism and the political cycle threaten major initiatives that by their nature require decades to plan and deliver.

The Coalition seems determined to address this. Ministers tasked Infrastructure UK, the Treasury body that advises on these matters, to produce the first National Infrastructure Plan. The Treasury is working to attract private infrastructure investment, introducing new guarantees to underwrite investors’ risks, recasting public private partnerships, and trying to get pension fund finance into the system. Lord Deighton has been appointed Commercial Secretary to the Treasury, in effect our first Minister for Infrastructure. And in this year’s Spending Review, Chief Secretary to the Treasury Danny Alexander announced a £100bn infrastructure programme, including the biggest expansion of road building in generations.

All very welcome. Small steps in the right direction. Yet only small ones. Fiscal constraints mean private investors will have to shoulder the bulk of the investment load. Yet they’re still not coming forward in the necessary numbers. Despite recent advances, including permission for Hinckley Point C Nuclear Generator, the long-term resilience of our energy infrastructure remains questionable. And continuing controversies around HS2 and airport capacity illustrate the absence of a political consensus and the poverty of our national debates.

So the Management Consultancies Association is calling on government to go further, faster in our report Building Blocks: How Britain Can Get Infrastructure Right.

UK infrastructure needs better planning. Infrastructure is not an end in itself. It is an enabler of growth. Government should define what infrastructure is for first, then determine what projects to back. It should focus on projects likely to reap the greatest benefits, using experts to investigate and determine those benefits. This approach would bring clear principles to otherwise contentious matters like the future of UK airports. It would help government produce better infrastructure business cases. Currently, government struggles to win public support for major projects, like HS2. That’s because it doesn’t focus early and clearly enough on outcomes: what infrastructure changes for the better in the real world. To help government choose the right projects and forge cross-party a new independent Office for Infrastructure should be established.

Our infrastructure needs secure approaches to funding. The Treasury Guarantees Scheme should be extended. Government should also make clear what the funding model is for each project in the National Infrastructure Plan. This will give investors clarity and certainty. Investors need to know how long-term service revenues from assets will be generated. If those revenues depend on public spending, government should make clear what it will fund – and what it will not. Crossrail has succeeded in part because of this sort of clarity. Infrastructure experts can also help government get more pension funding into infrastructure by advising funds, who may be new to this terrain, on how to target their investments.

Above all, the UK needs better approaches to infrastructure delivery.  To help reduce tensions and delays in the planning system, communities affected by infrastructure projects should get a greater share of the benefits, such as a bigger slice of increased business rate income new projects can bring. There should be specific and appropriately resourced delivery structures for major projects. The Olympics shows the benefits of these sorts of structures, where experts with proven track records are specifically recruited and rewarded to deliver projects. Experts should also devise and commission projects, to avoid errors in project design that are expensive to eradicate.

Implementing the 21 recommendations in our report would take the UK a long way towards infrastructure excellence. Yet the report also showcases successes the UK can build on. We may not build enough high-quality assets. But as the Olympics, Crossrail and a host of less glamorous initiatives show, we have the capability to do so. The UK’s world-class infrastructure advisers are already helping to marshal project finance, develop business cases and manage complex programmes, both here and across the globe. They pull together the very dispersed and complex value-chains required to deliver infrastructure projects. Already a major export, they should be at the heart of efforts to make the UK a centre of infrastructure expertise and excellence. Currently these experts are often used late in the day to get failing projects back on track. Getting them in early to help choose and plan the right projects is a better – and cheaper – way to employ them.

Paul Connolly is Director of the MCA Think Tank. Building Blocks can be found at the MCA Website, www.mca.org.uk

Leave a Reply

You can use these HTML tags

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>