Great is the joy over the government’s announcement of a National Infrastructure Commission. But the task it now faces - to ensure the UK gets affordable, intelligently prioritised and tech-smart projects - is equally large
I would like to formally propose a new national day of celebration: National Infrastructure Day. In return for another bank holiday we will all commit to raise money for Crossrail 2, HS3 or the A50 round Uttoxeter by selling cakes outside our local railway station or bungee jumping off the Skye Bridge. The official date is 5 October. It was the day the UK government announced the creation of our National Infrastructure Commission.
I still think I must be dreaming. It was only four years ago that I was present at a round-table discussion where a senior member of the then coalition government described the idea of a long-term infrastructure plan as “a bit Stalinist”. And it was only six months ago that this incoming government declined to adopt Sir John Armitt’s proposals for an independent infrastructure commission. But the chancellor is in fact passionate about infrastructure; that I now believe. And above all he is deeply politically astute and the opportunity to pinch a good Labour idea and a good Labour peer at the same time was too good to miss.
Andrew Adonis has moved quickly to appoint his interim commissioners. The small group brings together individuals of the highest calibre and experience. They need it. In the cold light of day the task facing the commission is immensely challenging. Three aspects of what the commission needs to grapple with strike me as particularly hard.
First the affordability envelope. The initial announcement of the establishment of the commission was liberally sprinkled with references to affordability – a rear-guard action by Treasury officials, desperately trying to avoid a catastrophic breach in the austerity dam. I do have some sympathy for them – being outflanked by their own chancellor must feel very disconcerting. And affordability does matter, but we currently consider it far too simplistically, by only thinking about the size of our budget today.
The chancellor is in fact passionate about infrastructure; that I now believe
Our infrastructure investments are for the long term, and if we make the right decisions our investments yield a return by increasing the country’s economic growth. What the commission needs to try to establish is the long-run affordability envelope, taking into account economic growth, the timing of that return, the desirability of intergenerational subsidy (how much should we invest today for the benefit of our grandchildren?) and the extent to which financing structures can match future payments to future return.
And of course this calculation is circular – the more we invest in projects yielding a positive return, the more our long-run affordability rises. This creates the foundation stone for our country to invest in growth, rather than manage its decline.
Second the basis of prioritisation. For any given long-run affordability envelope the commission must necessarily form a view as to which investments in the country’s infrastructure are the most important and should proceed most quickly. This prioritisation needs to be underpinned by a social and economic assessment framework – one which can cope with comparing not just one road scheme with another but a road scheme with a new garden city, or a new wind farm. And of course none of these investments exists in isolation. The new garden city needs new roads and sustainable power, and schools and hospitals and sewers and parks. Cities like Manchester have made great strides in recent years in taking on these hard decisions using an objective framework but at a national level the interdependencies are of mind-boggling complexity and we are light years away from being able to understand and resolve them.
How is the commission to take a view on the dominant technology of 2020, let alone 2050?
Thirdly, the pace of technology. In 2010 the Department of Energy and Climate Change published forecasts for UK solar to 2020. The “High” case suggested less than 1GW by 2015 but in September this year installed capacity reached 8.1GW. The rapid emergence of solar farms in the UK has taken almost everyone by surprise. At this pace of change how is the commission to take a view on the dominant technology of 2020, let alone 2050? The only feasible approach will be to develop a series of scenarios and look for the investments which offer the best return under the majority of them. It will favour infrastructure that is more flexible and adaptable. The days of reinforced concrete are numbered.
These challenges will concentrate the commission’s mind over many years. But the public is impatient and political support fickle. So the commission has also been set three immediate tasks, looking at transport in London and in the North, and supply and demand for power. These are huge questions on which to opine in the space of four months, and how the commission copes with them will make or break its reputation and its future. The industry must rally round and offer it every support, so on 5 October each year we can toast its success, not mourn its demise.
Richard Threlfall is head of infrastructure, building and construction at KPMG