The NIP statement’s 150 pages sets out the rationale for why the government has put long-term infrastructure investment at the heart of its growth plan, as well as a summary of recent achievements in these sectors. Only economic infrastructure sectors are addressed, including roads; rail; airports; ports; electricity; communications; and intellectual capital, although most of the value of the pipeline is in the energy (over £215 billion) and transport (over £120 billion) sectors. It does not cover social infrastructure such as health and education, the focus of the government’s relaunched private finance initiative known as PF2.
It reiterates the government’s commitment to a long-term approach to infrastructure that will help address what the NIP describes as “historic problems of short-term decision making, uncertainty in funding and financing, and failures in delivery”.
However, its primary focus is to set out the government’s policy approach in each sector covered by the NIP, as well as elaborate on the pipeline of “Top 40” priority projects or programmes for investment. All of the Top 40 projects are in the public domain, in various stages of consultation, procurement or construction, such as HS2, Intercity Express Programme, Crossrail, Thameslink, Mersey Gateway Bridge, the Thames Tideway Tunnel, the A14 and nuclear generation projects at Hinkley Point C and Wylfa Newydd.
The pipeline also covers large capital programmes of rolling investment frequently consisting of a number of smaller projects or upgrades. As such, the Top 40 programmes include the electrification of trains and rail line capacity improvements; major rail station upgrades; the capital investment programmes at Heathrow and Gatwick and other infrastructure improvements at regional airports; and planned developments for new gas-fired generation capacity, renewable energy, energy transmission and distribution, carbon capture and storage and unconventional gas production. The NIP points out that these programmes fall within the government’s infrastructure pipeline, notwithstanding that they will be procured, delivered and financed by existing regulated utilities in the electricity transmission/distribution, rail, water and regulated airport sectors, because they are indirectly funded by the government pursuant to the capital allocations or provisions included in the forthcoming price control periods for these utilities.
The government states in the NIP that it does not anticipate that each private sector investment in the pipeline will necessarily proceed; rather the market, supported by appropriate UK government policy interventions where necessary, will operate in a way that meets the UK’s overall infrastructure needs. To reinforce this point, it explicitly cautions that in sectors such as energy, ports and waste, the decision to go ahead with individual projects will be determined by the market.
The NIP is a comprehensive summary of the current progress on, and some future milestones in relation to, a range of known infrastructure projects and programmes. But it provides only a glimmer of excitement for those scanning the pages for anything new that will, as the government states, “take further action to drive forward investment in key infrastructure sectors”.
It would have been nice to be able to conclude that this NIP is a step-change from previous ones, and the beginning of detailed proposals for delivery of world class infrastructure in the UK. Unfortunately, the risk remains that interested parties will view the NIP as a political soundbite, rather than a meaningful strategic plan for the future of UK infrastructure that includes measures to address the issues as to why there is little action on the ground in relation to new projects moving forward with momentum.
In relation to funding of infrastructure, a current hot topic, the NIP makes clear that each “Top 40” priority investment is presumed to be eligible for support from the UK government’s £40 billion Guarantees Scheme, subject to the Scheme’s criteria. This includes £1 billion of support for the Northern Line Extension to Battersea Power Station.
More importantly, the NIP trumpets Wednesday’s simultaneous announcement that six major UK insurers are to collectively invest £25 billion in UK infrastructure over the next five years as proof of its ability to deliver the investment required to meet the UK’s infrastructure needs to 2020 and beyond. However, close readers of the NIP, as well as the government’s publication “The UK insurance growth action plan” also published Wednesday, will notice that it offers no concrete proposals to facilitate this. It contains only a one paragraph suggestion, with no supporting guidance, that to increase the involvement of life insurers in the financing of infrastructure investment, “those designing financing should be able to fully understand the conditions under which insurers will be able to provide this investment so they can reflect this in their financing arrangements”. To this end, the insurance industry will work to produce guidance on what Solvency II means for them and other interested stakeholders with the aim of increasing the flow of long-term insurance funds into developing infrastructure.
To read a copy of the National Infrastructure Plan 2013, click here. Should you have any questions or require any additional information, please speak with your usual CMS contacts, or any of the below.