Building infrastructure

Posted on August 4, 2015 · Posted in Accounting & Business

Party political unanimity during an election campaign can be hard to find. Yet there is all party agreement that infrastructure is – literally – the building block on which economic growth is constructed. The problem is that demand for new public infrastructure seems limitless, while the money available for it during austerity is in short supply.

The Royal Institution of Chartered Surveyors – RICS – is a vocal advocate for improved infrastructure and has issued a call to action to coincide with the General Election. In its report ‘Property in Politics’, RICS urges all the parties to recognise the role of infrastructure “in driving the UK’s economic growth and building better communities”.

The existing pipeline of infrastructure projects in the UK Government’s National Infrastructure Plan appears massive at a cost of £375bn. But this is a 20 year programme – and money does not go far when it comes to major schemes. RICS says the programme needs to be expanded, not least because doing so is key to rebalancing the economy.

For RICS, the key to greater infrastructure investment is in making projects more attractive to private sector investors. This involves a more streamlined planning system to reduce delays, an Infrastructure Commission and a National infrastructure Delivery Plan. RICS worries that major projects come forward through a queueing system, rather than prioritised according to strategic importance. Similar demands are put forward by the CBI, which says its members believe UK infrastructure is of poorer quality than that in much of Europe and that its condition is getting worse.

Infrastructure has become a major policy issue in the run-up to the General Election. In recent months the coalition Government made a series of major policy announcements. These promise improvements to regional transport connections alongside devolution to city-regions. Part of the backdrop to this has been maximising the benefits of the HS2 rail line from London to Manchester and Leeds. Local agreements have been reached with groups of councils in Manchester, Leeds, Sheffield and Birmingham which include significant new spending on rail and road infrastructure.

None of this has been politically contentious and these projects look set to go-ahead whoever forms the next government. The centre-piece of the Labour Party’s proposals is the creation of a National Infrastructure Commission to plan infrastructure programming over 25 to 30 years. Its remit would include the key economic priorities of energy, transport, water, waste, flood defences and telecommunications. The Commission would regularly assess sector needs, identifying funding sources, timeframes and delivery structures.

The last Labour government relied heavily for infrastructure on the Private Finance Initiative and on Public Private Partnerships. As at March last year, there were 728 current PFI projects, of which 671 were operational, with a total capital value of £56.6bn. But the scale of criticisms about PFI has led to them falling out of favour. Initially the coalition Government tried to rework PFI, remodelled as PF2. But problems remained of high costs, limited contract competition and capital spending being treated as revenue.