UK requires National Infrastructure Commission

November 2013 | FEATURE | SECTOR ANALYSIS

Financier Worldwide Magazine

It is a commonly held belief that infrastructure projects promote economic growth. Certainly, investment in modern infrastructure projects can help to lay the foundations for economic development going forward. Not only does the construction of large scale infrastructure projects such as roads, bridges, railways and power facilities create jobs; upon completion, they can also help societies to develop wealth and improve standards of living.

Yet despite the intrinsic benefits infrastructure development provides, the UK is currently without a clearly defined, cohesive infrastructure plan for the future.

Although the country has had its infrastructure successes – the delivery of the London Olympic park under budget and before deadline, HS1 and the Crossrail railway are prime examples of UK infrastructure projects done right – these instances are very much contrasted by a number of infrastructure hot potatoes. The protracted bickering over the feasibility and deliverability of the HS2 railway line, and the potential third runway at London Heathrow are both examples of the sort of dithering that has come to be expected from UK infrastructure projects.

Against the backdrop of political wrangling, Sir John Armitt, former chairman of the Olympic Delivery Authority, has proposed the creation of a National Infrastructure Commission (NIC), which would be responsible for setting clear priorities for UK infrastructure investment over the next 25-30 years. The Armitt report, commissioned by Labour in 2012 and compiled by Sir Armitt, states that “cross party political consensus” is required to encourage the development of, and investment in, long term transport, communications, energy and flood defence projects. The report urges politicians from all parties to make infrastructure development a “national priority alongside education and health”.

Furthermore, according to Sir Armitt, the UK has wholly failed to renew or enhance its infrastructure as and when needed, despite being one of the first countries to develop its physical infrastructure. To that end, in its report on global competitiveness the World Economic Forum ranked the UK 24th globally in terms of the overall quality of its infrastructure. According to a statement by Sir Armitt, “over the last 40 years UK infrastructure has fallen behind the rest of the world. London 2012 proved we are capable of planning and delivering complex and innovative infrastructure projects with local and national cross-party support.”

The NIC, as outlined in the Armitt report, would be an entirely independent board which, each decade, would undertake an evidence based assessment of the country’s infrastructure needs over the forthcoming 25-30 year period. The permanent commission would focus primarily on infrastructure projects which it deemed to be ‘nationally significant’ as defined by the 2008 Planning Act. The commission would also consider economic growth forecasts, population trends and technological changes. The environmental issues and regulatory requirements of the different industry sectors would also be taken into account. The NIC would echo the approach of similar bodies which have been established in other countries such as Australia and New Zealand.

Furthermore, the NIC would look to win “national and local cross party political consensus, public support and investor certainty”. Once the NIC has completed its assessments, its recommendations will be passed to the government to obtain the approval of Parliament. Under the Armitt plan, government departments would have a year to draw up comprehensive plans on how schemes would be delivered. That would include sources of funding, timeframes and the vehicles to be used to help build the project.

In many respects Sir Armitt is correct: the UK has lacked a coordinated approach to infrastructure development for some time. Although a national infrastructure plan is produced annually by Infrastructure UK, their work, according to Sir Armitt, is in no way strategic; furthermore, Sir Armitt notes that the organisation is not an independent body.

Accordingly, it is of paramount importance that the manner in which UK infrastructure projects are funded is addressed as quickly as possible. While the creation of a committee to plan the schemes in the long term would be a significant step in the right direction for the country, the NIC on its own would not be sufficient. The funding of major infrastructure projects can often be a highly politicised issue, and it is a topic that the Armitt review does not even begin to approach. Clearly, under the auspices of the NIC the government would still be responsible for allocating funding for future infrastructure schemes.

However, the reality of infrastructure projects in the UK is that considerable private sector investment must be sought if long term requirements are to be fulfilled. Indeed, an estimated 80 percent of projects in the pipeline are reliant on funding from the private sector. Until these questions of funding are resolved, the UK’s national infrastructure network will continue to fall behind its economic rivals.

Richard Summerfield