Of real interest is what the chancellor said about funding, says Simon Rawlinson, head of strategic research & insight at EC Harris
With little new money to direct towards “spade-ready projects”, the government has focused considerable effort on the development of the long-term National Infrastructure Plan.
Sixty per cent of the projects in the pipeline are privately funded, and over 20% will be funded via a PPP model. A key objective, acknowledged by the government in its capping of rail and LRT fares, is that fare and bill payers - who will pick up two-thirds of the cost of the investment - must benefit from projects that are delivered in a cost-effective and timely manner.
The steps outlined in the NIP to help ensure that this is the case are focused on the supply side:
- A new cabinet sub-committee to drive public sector efforts to enable effective infrastructure delivery. This will include consideration of how the government can either support investment with public capital, by taking on some aspects of investment risk or by development in policy;
- Further clarity on planning and other aspects of consent - including a restated remit to promote sustainable development;
- Efforts to promote joined-up thinking across projects to make best use of assets - laying communications cables through the Channel Tunnel, for example.
Two of the most interesting statements in the NIP are related to funding. First, the Treasury believes that there is little systematic spending constraint affecting either public or privately funded projects on the approved £250bn pipeline of 500 projects. This is a welcome sign of confidence, although the continuing fundability of projects will no doubt be affected by the availability of both project and long-term investment finance.
Second, the Treasury acknowledges that the rate of investment beyond the current pipeline will need “new ways of engaging with private finance”. With a further wave of investment likely beyond 2015, the Treasury’s engagement with the pensions industry, and proposals to extend road tolls, will be just two of many new ways to deliver the infrastructure needed to maintain the UK’s competitive edge.