A new National Infrastructure Delivery Plan (NIDP) (available here) outlining the government’s infrastructure priorities for the next 5 years has been published, improving visibility for the investor community and the supply chain. The plan details the government’s infrastructure plans for £483 billion worth of planned investment in all sectors across the UK to 2020-21 and beyond which for the first time also includes the delivery of social infrastructure.
A focused plan
As with its predecessors, the NIPD incorporates the National Infrastructure Pipeline, which contains £425 billion worth of planned private and public investment in economic infrastructure to 2020-21 and beyond. In addition to this is the planned social infrastructure investment. The NIPD focuses specifically on £300 billion of investment in the National Infrastructure Pipeline which will be delivered over the next 5 years. While the government has committed to invest over a £100 billion of public capital in infrastructure during this parliament, around 50% of the wider investment in economic infrastructure is expected to be financed by the private sector. To this end the government’s investment commitment and a more focused infrastructure delivery plan is a welcome development for the private sector whose involvement will be central to infrastructure delivery.
To support the implementation of the NIDP the government has also set up two new bodies. The Infrastructure and Projects Authority was formed on 1 January 2016 and brings together Infrastructure UK and the Major Projects Authority into one organisation responsible for infrastructure delivery. A National Infrastructure Commission has also been established to advise on infrastructure priorities, which will be led by Lord Adonis who is currently advising the government on infrastructure strategy.
Refreshed top 40 priorities list
The NIPD introduces a refreshed list of the government’s forty priority infrastructure projects and programmes. Breaking down the planned investment by sector it is apparent that the government’s concentrations in respect of economic infrastructure remain energy and transport (road and rail), together representing over 90% of the planned investment. Priorities have not changed greatly from previous iterations, but the list now also includes key social infrastructure projects. Projects and programmes removed from the list have either now been completed or no longer reflect the current government policy; for example, in the energy sector investment in carbon capture and storage, onshore wind and biomass has gone but the government will be supporting electricity generation through gas, the new nuclear plant at Hinkley Point C, offshore wind, as well as interconnector investment and exploring the potential for shale gas in an environmentally sound way.
Inclusion of investment in social infrastructure
For the first time the NIDP also contains plans to support delivery of housing, regeneration and other social infrastructure. In addition to the £425 billion investment in economic infrastructure underpinned by the Infrastructure Pipeline, the NIPD outlines details of an additional £58 billion public investment in social infrastructure. This includes investment across housing and regeneration, education, health and justice. In particular, the NIPD provides detail on how the government has committed funds to major capital investment in schools, hospitals, healthcare facilities and prisons and on its plan to deliver 400,000 new homes.
The NIPD confirms that the government will continue to use a wide range of investment sources to deliver the planned investments. The government is extending the UK Guarantees Scheme to March 2021 and is seeking to encourage the involvement of institutional investors. This includes the European Investment Bank which in 2015 increased lending to the UK to €7.7 billion, €5.5 billion of which was provided to infrastructure, and the €21 billion European Fund for Strategic Investment established in 2015. UK pension schemes are already involved in financing infrastructure; the government is keen for this to continue and in particular is looking to encourage investment by local government pension scheme funds. The NIPD also refers to direct funding from taxation, and in relation to roads will be providing a Roads Fund with the money raised from Vehicle Excise Duty (also known as car tax or road tax).
Referring to the successful outcome of PF2 in the case of the Priority Schools Building Programme and the Midland Metropolitan Hospital, the NIPD highlights PF2 as an attractive contracting approach for both the public sector and investors. Accordingly, the government intends to identify a pipeline of public sector projects which will be procured using the PF2 structure.