Infrastructure is not an end in itself. It is an enabler of growth. Government should define what infrastructure is for, then decide which projects to back
UK infrastructure is paradoxical. We have world-renowned infrastructure capabilities. Yet our record at creating business, service and communications networks is indifferent. There is chronic underinvestment. Fiscal constraints mean the lion’s share of the £500bn needed to bring our infrastructure up to scratch will have to come from the private sector.
Yet investors are scarce. Projects requiring decades to deliver fall foul of political short-termism, get cancelled or delayed, frustrating investors and driving up costs.
The coalition seems determined to address this. Ministers have tasked Infrastructure UK, a Treasury advisory body, to produce the first National Infrastructure Plan. They’ve introduced a guarantees scheme to underwrite investor risks, and are working to get pension fund finance into the system. And in the Spending Review, chief secretary Danny Alexander announced a £100bn investment programme.
Welcome steps in the right direction. Yet only small ones. The Management Consultancies Association is calling on government to go further and 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 choose the 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 airports policy or HS2. It would help government produce better infrastructure business cases. Currently, government struggles to win public support for major projects because it doesn’t focus on outcomes: what infrastructure changes for the better in the real world.
To help government choose the right projects and forge cross-party support 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 make clear what the funding model is for each project in the National Infrastructure Plan.
This will give investors certainty. Investors need to know how service revenues from new assets will be generated. If revenues depend on public spending, government should make clear what it will fund – and what it won’t. 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 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 recommendations in our report would take the UK a long way towards infrastructure excellence we need.
Paul Connolly is director of the Management Consultancies Association Think Tank. Building Blocks is available at www.mca.org.uk
