In the last Autumn Statement before the 2015 General Election, the Chancellor George Osborne has announced £460 billion worth of public and private investment across key infrastructure sectors.
The key points of interest to infrastructure planning are summarised below.
Money for Roads
The release of £15 billion for 84 new (or previously cancelled) road schemes that will add 1,300 miles of new lanes to motorways (assuming they go ahead) will be a major boost to the economy and construction industry (both of which are currently struggling to maintain growth). This will include the construction of a tunnel passing Stonehenge on the A303, improved M25 junctions and money to upgrade the A1 in the North East.
Plans were announced for a garden city in Bicester, Oxfordshire, which will provide 13,000 new homes funded with nearly £100 million of public spending and loans.
Allocation of £2.3 Billion to Bolster Flood Defences
Details of a six-year programme have been announced. Approximately £2.3 billion (ring-fenced in the 2013 Spending Round) will be allocated to upgrade Britain’s flood defences, and it is expected that around 1,400 projects will get funding, protecting up to 300,000 homes.'
In a related announcement, the Government have also stated that they expect talks to commence early in 2015 with Tidal Lagoon Power, the entity that is aiming to build the world’s first tidal lagoon power plant in Swansea Bay, in order to establish whether the project is affordable and provides value for money to the tax payer.
State to Plan, Build and Sell Houses
There are plans for the Government to take a “hands on” role commissioning the construction of new homes via the Homes and Communities Agency. Until now, state intervention has been limited to selling off surplus government land for development. A pilot scheme, already under construction, will use taxpayer’s money to help build 10,000 new houses at a former RAF base in Northstowe, Cambridgeshire. This would make it the largest planned town since Milton Keynes.
Plans to Invest £1 billion in Primary Care Estate
A £1 billion investment in new primary and community care facilities has been re-announced. The funding will pay for new for new surgeries and community care buildings across the country.
Of this sum, £200million has been ring-fenced to pilot new models of health provision care including allowing acute hospital trusts to establish primary care services on their property and for GPs to increase the amount of diagnostic work they can undertake themselves without having to send a patient to hospital.
National Infrastructure Plan (NIP) Update
The Autumn Statement includes the publication of the NIP update 2014 outlining the achievements of the NIP 2013. Project finance opportunities will come largely from the energy sector, with nuclear accounting for almost £45 billion of the total to 2020-21.
A key announcement was that a cooperative agreement has been signed with sponsors and contractors towards the financing of the Moorside nuclear power plant. Other areas making up the project finance opportunity are renewable projects (£15 billion), the £2.8 billion “Super Sewer” project and OFTO contracts (£2.5 billion).
Commentary A lot of the investment we have heard about in the run up to the Autumn Statement sounds positive –£15 billion for roads, £2.3 billion for flooding and £1 billion for the primary care estate.
However, once the announcements and plans are unpicked it is apparent that there isn’t much “new” money, simply a number of reannouncements which have previously been accounted for.
The investment in Roads was first announced by the Prime Minister last month at the CBI Conference. (Indeed, improvements to the A303 were first proposed by the then Transport Minister Sir George Young in 1996, ahead of the 1997 General Election!)
Likewise, both the 2012 and 2013 Autumn Statements also contained ambitious announcements for “radical new approaches to housing”, whilst the £1 billion investment in the health estate was first mooted in October when NHS England published its “Five Year Forward View”.
Many of the projects referred to in the NIP update, including the Thames Tideway Tunnel and HS2, have been part of the Government’s National Infrastructure Plan for some time now and their future is by no means certain. Furthermore, the only PF2 element of the NIP is the existing Priority Schools programme, which leaves a question as to how much of the new infrastructure spending (including the roads projects) will be project financed.
One of the most interesting aspects of the Roads Programme is reform of the Highways Agency which is in the process of being transformed into a “GoCo” (a government-owned company), giving it independence from the Department of Transport with its own fiveyear ‘roads investment strategy’ budget.
The rationale behind turning the Agency into a company is that its budgets will be protected for five year chunks to eliminate the stopstart of road scheme planning which has dogged the sector in the past. It should also provide contractors with visibility – and certainty - of future projects.