The update on the National Infrastructure Plan published alongside the Autumn Statement contains some welcome initiatives. But like the original Plan, does it promise more than it can deliver?
Two years ago the coalition government produced its National Infrastructure Plan, the first ever for the UK, outlining a bold vision for the future of the UK’s economic infrastructure. However, progress has not been as fast as the government would have hoped. In the absence of public finance, pension funds have put only their equivalent of loose change on the table, with just £2bn committed, and many projects appear to have stalled.
The government’s whole infrastructure policy has lost credibility as it struggles with the debacle of the cancellation of the West Coast Mainline franchise, and continued uncertainty around the Southeast airport expansion. So it was perhaps some relief that the Chancellor of the Exchequer published an update to the National Infrastructure Plan to coincide with the Autumn Statement.
The update aims to calm nerves and bring about certainty for industry and investors. It outlines 550 infrastructure projects valued at over £330bn, an increase in real terms of over £70bn over the previous pipeline from 2011. Perhaps reflecting the comments of Sir John Armitt, former chair of the Olympic Delivery Authority, who stated that ‘if the government wants to boost the economy it should focus on small and medium-sized projects ... rather than major infrastructure such as HS2’, the plan’s main beneficiary is the road network.
Key upgrades to the A1, capacity enhancements to the A5 and M1, and congestion-busting improvement works to the M25 were announced as part of a £1.5bn investment programme. £9.4bn of investment was also committed to the rail network between 2014 and 2019, and £3bn of funding was promised to the Green Investment Bank, which became operational in October 2012 to invest in new green technologies.
The biggest disappointment for the government has been the failure to secure pension fund support beyond £2bn. This was a far cry from the £20bn the chancellor had envisioned, so a cautious welcome for the commitment to £40bn in guarantees that will be provided to ensure that priority projects can raise finance. UK Guarantees, set up by the government to kick-start critical infrastructure projects that may have stalled because of adverse credit conditions, will use the government’s fiscal credibility to underwrite these projects.
Already one project has been announced, as the chancellor revealed that a UK Guarantee would allow the Mayor of London to borrow £1bn to support the Northern Line extension to the Battersea Power Station development.
Industry figures will be encouraged by the news that Paul Deighton, former chief executive of the London Organising Committee of the Olympic and Paralympic Games, in his first duty as Commercial Secretary to the Treasury, will undertake a detailed assessment of Whitehall’s ability to deliver infrastructure as part of an enhanced role for Infrastructure UK. Many will hope that he will bring to the UK’s infrastructure the same single-minded attitude that delivered the Olympics and Paralympics earlier this year.
Away from the National Infrastructure Plan itself, one other item of interest and worthy of note was the government’s first stage response to Lord Heseltine’s review. Local Enterprise Partnerships, the much maligned replacements to the Regional Development Agencies, have been asked to develop strategic plans for local growth consistent with national policies. Larger than local, they will set out plans beyond local authority administrative areas, bringing back the joined-up thinking that RDAs were originally set up to deliver. £250,000 will be made available to each LEP to support delivery of the plan and each partnership can nominate one infrastructure project to receive a low-cost loan, up to £1.5bn nationwide.
The update announced by the chancellor is full of good intentions. However, success will be judged by how many of the projects actually get off the ground. Past experience suggests it will not be as simple as the government makes out. Delays not only threaten the recovery but also the country’s long-term competitiveness. Perhaps it is just as well that we aren’t waiting on another commission.
John Lehal is managing director of Insight Public Affairs
