The Treasury has released a working paper on the government’s proposed 10-year Infrastructure Strategy that it says sits at the “heart of its growth mission”. It is intended to end the uncertainty over what work to expect from government that has dogged infrastructure suppliers for about as long as any of them can remember.
The document starts by acknowledging that uncertainty about infrastructure plans and policy has inhibited investment in programmes and supply chains. It recognises that infrastructure investment is essential for delivering the government’s missions in areas such as growth, housing, clean energy and net zero.
The strategy is intended to reduce uncertainty by bringing together a long-term plan for the country’s social, economic and housing infrastructure and setting out an institutional framework to support its implementation. Growth and productivity are to be improved through providing stability and certainty to the market about long term plans.
Achieving this government’s growth and other targets will mean fundamental changes to the UK’s infrastructure over the next decade, the strategy recognises, and a new approach to delivering infrastructure. The strategy says UK infrastructure is often too costly and not planned and delivered in a way that meets the country’s strategic needs. Investment is more volatile than international comparators, leading to inefficiencies caused by peaks and troughs in investment cycles, which drives up the cost of infrastructure projects, reduces industry confidence to invest, and diminishes the public acceptability of programmes.
Construction outturn costs in the UK have risen by around 30% more than GDP per capita since 2007, it says, meaning projects are more expensive relative to the country’s ability to pay for them. Causes of the poor cost performance include delays in the planning system which are being addressed via the Planning and Infrastructure Bill. Measures will include delivering “better, clearer and stronger National Policy Statements”, and faster decisions.
The paper also admits government’s culpability for at least some of the infrastructure costs problems, by failing to provide a stable policy environment and a clear strategic direction.
Despite governments setting out long-term infrastructure strategy and a separate pipeline of infrastructure projects, the first National Infrastructure Strategy, published in 2020, was subject to major changes, such as the cancellation of HS2 phase 2. Industry confidence in the government’s infrastructure policy was undermined as a result, constraining investment and pushing up costs.
The new approach will start with a comprehensive 10 year infrastructure strategy to be published in June alongside a multi-year spending review, that will outline the government’s approach to core economic infrastructure – transport, energy, water, flood risk management, digital, and waste. “For the first time, the government’s infrastructure strategy will also bring together plans for housing and social infrastructure – hospitals, schools, colleges and prisons,” the working paper says.
The Strategy will be aligned with a new long-term spending framework with capital budgets set for at least five years, extended every two years at regular spending reviews. A 10 year set of priorities for infrastructure will also be published.
The devil is always in the detail of course, which we should see in June. But if this new approach leads to more rational procurement of infrastructure that gives the industry and investors confidence that the rug won’t be pulled out from under their feet as political winds shift, then it is something to be welcomed with open arms. The track record on that front is not good however, so don’t hold your breath quite yet. CL
Nick Barrett
Editor