Ahead of the Autumn Statement this briefing reviews the progress of infrastructure policy developments and also what developments we know are still to come.
The government established the National Infrastructure Commission to provide “unbiased analysis of the UK’s long-term infrastructure needs”, in October 2015. The government intends to establish the Commission through statute and will consult on the legislation in late 2015.
Since 2011 the government has set out its infrastructure priorities and re-states its overall approach to infrastructure in the annual National Infrastructure Plans (NIPs). These are published around the time of the Autumn Statement. This year this will be delivered on 25 November.
Intermediate Infrastructure Delivery Updates are published each spring, normally around the time of the Budget. The government also publishes an annually updated Infrastructure Pipeline (the Pipeline) which includes details of all major (costing over £50 million) projects planned or underway in the UK. The Pipeline shows that there are fewer projects which impact on larger regions, but that they tend to cost more, perhaps unsurprisingly. In the regions there are more projects and these are generally less expensive because of their comparatively smaller scale. The government has designated 40 of the projects which feature in the Pipeline as the 'Top 40 infrastructure investments' and these include HS2 and Hinkley Point C, and the development of the Innovation Catapult Centres.
The three key criteria guiding the government in deciding which projects to invest in or support are:
- projects must have a high potential contribution to economic growth, with particular emphasis on increasing productivity and enabling innovation
- investment must deliver, enhance or replace infrastructure of national importance
- projects must attract significant private sector investment (NIP13, Dec 2013, p77).
With these criteria providing overall guidance on the direction of infrastructure policy, the government have outlined their approach in seven key sectors: Transport, Energy, Communications, Water, Flood, Intellectual Capital and Waste.
While there have been calls for housing to be brought into the Nationally Significant Infrastructure Projects (NSIP) regime under the Planning Act 2008, government reforms on this fall short of full inclusion. However, the provisions of the Housing and Planning Bill published in October 2015 provide the Secretary of State with the power to grant development consent for housing which is linked to an application for a NSIP. Read our separate briefing on this 'How the Housing and Planning Bill seeks to transform housing delivery' here.
Policies announced in October 2015
The Chancellor George Osborne announced several policies connected to infrastructure funding and planning in his speech to the 2015 Conservative Party Conference; a government press release summarises these announcements, including:
- National Infrastructure Commission (NIC) to be formed as an independent body.
- British Wealth Funds local authority pension funds are a large potential source of infrastructure funding. The 89 existing pension funds are to be pooled into six British Wealth Funds. The new funds will "follow international norms for investment, meaning larger sums being invested in infrastructure".
- Infrastructure premium the Chancellor announced that city regions with elected mayors will be able to levy up to an additional 2p on business rates in order to fund infrastructure investment. City regions that wish to pursue this policy would have to secure the support of the relevant Local Economic Partnership (LEP). Announced 5 October 2015.
The National Infrastructure Commission (NIC)
On 5 October the Chancellor announced a 'major plan to get Britain building' which included further details on the NIC. The Commission's set aim is to offer “unbiased analysis of the UK’s long-term infrastructure needs.”
Close to the beginning of each Parliamentary session, the Commission will provide a comprehensive report on the UK’s infrastructure needs over the next 30 years. These reports will be updated on a rolling basis and the government will be obliged to respond to all of the NIC's recommendations, either by accepting them or suggesting alternatives.
The government of the day will set the broad terms of reference for the Commission, including a limit on the potential cost of recommendations and the parameters of the Commission’s research.
The Commission will have around 25 to 30 staff, will be based in the Treasury building in Whitehall and will have statutory powers to draw expertise from other government and arms-length bodies.
The government intends to provide a statutory basis for the Commission in legislation which is to be consulted on later this year.
The NIC's terms of reference
On 30 October (at the national Railway Museum in York) George Osborne launched the NIC more formally and stated that infrastructure would be at the heart of the Spending Review on 25 November 2015. The current terms of reference were outlined, in summary, that the Commission will examine three infrastructure requirements identified by the government and then report back by Budget 2016. It may also publish the issues which will be addressed in its first five year report.
The three areas that the Chancellor has asked the Commission to report back on (by March 2016) and on which the NIC has issued a call for evidence on are:
- Transport connections in the North of England, particularly East/West, cross-Pennines connections.
- Future investment in London’s transport infrastructure to examine priorities for road, rail and underground, including the North/South Crossrail 2, but not airports.
- Energy storage and interconnectivity. The focus being the overall security of the UK’s supply and reducing bills for consumers. It is asked to consider whether National Grid should become more independent, and whether the grid operates to balance supply and demand in the best way. It is also asked to consider the barriers to energy storage, and how to improve interconnections.
In his letter to Lord Adonis on 30 October, the Chancellor stated that he would launch a consultation on plans to put the Commission on "statutory footing and confirm its independence". The legislation would also ensure the departments cooperate and share information with the Commission.
What is next?
The current pace of change is fast. While legislation is still progressing the government continues to make policy announcements heralding further changes and there are also a number of decisions outstanding which will have a significant impact on infrastructure development going forward.
The consultation on the NIC is waited and it will be interesting see what status the NIC's recommendations and advice will have in future infrastructure decisions. It may be that these will feed into the "new long-term National Infrastructure Plan for the key economic infrastructure sectors – transport, energy, flood defences, water, waste, communications and science" which was promised as part of the government's Productivity Plan published over the summer and with which it signalled direction in a number of sectors.
With effect from 1 January 2016 Infrastructure UK (the body which together with the Treasury issue the NIP) and the Major Projects Authority will merge, creating the new Infrastructure and Projects Authority (IPA), bringing together government expertise in the financing, delivery and assurance of projects, which will include large scale infrastructure projects. The IPA will be reporting jointly to the Chancellor and Minister for the Cabinet Office.
Outstanding are the government's formal response to the Airport's Commission final report delivered on 1 June 2015. The government pledged to "come back to Parliament in the autumn to provide a clear direction on the government's plans". Read our briefing on the Airports Commission final report here. Future airport development has the potential to involve significant transport development and unlock housing developments.
The power and renewables sector is waiting on a number of developments. While Chancellor George Osborne announced that he had approved an initial £2bn loan guarantee for Hinkley Point C in September, EDF also admitted that the 2023 first power date could no longer be met and that a new date would be given when the company takes a final investment decision which is still outstanding.
During this Parliament most policies and funding targeted to reduce emissions are due to end. Significant new policies are therefore required to ensure that progress towards decarbonising the economy will not fall behind what is required to meet legal obligations through the 2020s. Speaking at the Institute of Civil Engineers in London on a new direction for UK energy policy on 18 November 2015, Amber Rudd referred to the country's 'perverse' dependency on coal, even with the 'huge growth in renewables', and stated that the government would be launching a consultation in the spring 2016 on when to close all unabated coal-fired power stations to include a proposal to close coal by 2025 and restrict its use from 2023.
On gas Amber Rudd said that while the country currently import around half of our gas needs "by 2030 that could be as high as 75%. She said "That’s why we’re encouraging investment in our shale gas exploration so we can add new sources of home-grown supply to our real diversity of imports." Referring to the economic benefits in building a new industry she said that the country should build on its world class oil and gas expertise "so that our shale potential can be exploited safely".The government is progressing draft regulations on fracking operations and associated surface activities in protected areas (read our separate 'Shale update' here), a decision on a number of oil and gas exploration blocks remains to be announced. A first tranche of 27 blocks was granted petroleum exploration and development licences, but a response to the consultation on a larger tranche of 132 blocks has not yet been published. An announcement is expected, subject to the outcome of the consultation which closed on 29 September 2015.
The UN COP21 climate conference in Paris is still scheduled to go ahead as planned at the end of November, while the Climate Change Committee (CCC) is due to publish its advice on the fifth carbon budget by the end of 2015. The CCC has said that this will take into account any further delays to new nuclear build and the risk that they may reduce the contribution that it will be able to make towards power sector decarbonisation. Also expected in the are the totals for the Levy Control Framework (LCF) beyond 2020 and the government's plans in respect of future Contracts for Differences (CFD) allocation rounds.
Imminent are the Spending Review and Autumn Statement which will this year be delivered together on 25 November 2015. On 30 October the Chancellor already set out some of his priorities for the Review and pledged £100 billion in infrastructure spending by 2020, to include full funding for the £15 billion Roads Investment Strategy.
There may be further announcements, and if not next week then if the government sticks to time they may come shortly after which will make for a busy run up to 2016.