The Need for Speed – In Infrastructure
The Government’s own advisers can see icebergs on the horizon, but would an incoming Labour government be able to clear up the mess?
Steve Wardlaw, May 2024
“Failure to go further, faster over the next five years on plans for infrastructure delivery could constrain economic growth and threaten climate targets, according to the government’s official infrastructure advisers.”
The opening of the NIC Infrastructure Review Project is stark. It signals just how sizable the task ahead is for any incoming government.
With a typical ‘end of administration’ semi-rebuttal, a Government spokesperson replied:
“We’re making sure we have the infrastructure we need to grow the economy, improve people’s lives, and tackle climate change – having already increased electricity generated from renewable sources to nearly half in 2023, giving more powers to cities to build the transport they need, and providing billions to tackle potholes up and down the country.”
Nevertheless, the current administration’s failure could leave a headache for an incoming Labour party, with potential for the new government to fail in its aims and/or give the opposition a few easy targets early on in Labour’s first term.
This piece analyses the NIC review’s outcomes, notes the successes and looks at how the next administration can best deal with those ‘non-successes’.
The NIC is now warning that the country is already in a situation where it needs to ‘catch-up’ – with spending needing to reach £30bn a year for the next decade (as opposed to the £20bn a year over the last decade) and also private investment needing to reach around £50bn a year. The chair Sir John Arnott notes that the next five years are critical. Note that these tie in with Labour’s first term and also its decade of national renewal.
Some specific policy failures noted by the NIC are:
The reallocation of funding for the cancelled HS2 has been earmarked for ‘local transport’ but there still needs to be a replacement plan for rail services in the north or else there is a risk of ‘future capacity challenges’. The NIC is non-political but this is a reference to constrained growth. This is not an option for an incoming administration that is looking to grow its way to cover the costs of net zero and other investment.
While there is a nod to the successes of moving to renewable energy, it is noted that the planning system still does not work for onshore wind. And while the NIC does complement the government’s decision to accept the Electricity Network Commission’s recommendations on grid renewal and expansion, I would note that this requires ‘full and rapid’ implementation. It remains to be seen if this will be done.
The report notes that 24% of UK fossil fuel demand is generated by heating buildings. The NIC has long recommended the roll-out of heat pumps but the government is not on track to meet its own target of 600,000 annual installations by 2028. The NIC asks for a comprehensive strategy together with long-term funding.
Water is a major problem with consumption not being reduced, leaks not being fixed and a long-term adverse trend in weather conditions compounding the situation. This is not being fixed.
How a new administration could tackle the situation
The NIC review has been even-handed in its feedback, but there are clear holes, and we need to recognise that this administration is not going to plug them (see the above rebuttal). That leaves the next administration with a headache – the need to invest:
massively
quickly
attractively
Labour has made clear its plans for a national wealth fund that will work with GB Energy for green jobs. A figure of £8bn has been mentioned but much of that has already been earmarked for other infrastructure benefits (eg £1.8bn much needed for UK ports). Labour needs to be clearer about how (and if) it can meet the NIC’s recommendation of a spend of £30bn a year, and if not how spend will be prioritised. This – being politics – may not be something that can be detailed and publicised too far before an election, but Labour needs to be clear that the ground work is being done.
Similarly, there is a need for speed. Labour has been clear that it is looking at a revision of planning laws. This is something that a current Conservative administration has been unable to do, because of significant opposition from within its own party. However, it is clear that across several areas where action and reform are needed – energy, housing, transport etc – swift and decisive action is needed to allow significant construction and development. The fact that this current government has ignored the need for this reform has meant nothing more than massive construction costs (compared with other European countries) and delays to infrastructure that would have increased our productivity.
Politicos are often obsessed with the ‘first 100 days’. There is a reason for that. This is the period where an incoming administration messages its intent and resolve across all policy areas. The most common complaint with hindsight is that a new government was not bold enough. To be clear, this CANNOT be what happens with a new Labour government. There is no time. Rapid reaction to prevent a terminal decline is needed, so Labour’s first 100 days will need to include the following if the infrastructure problem is to be solved:
total and rapid overhaul of planning – maybe with even a window of national emergency where the government gives itself an override for important national infrastructure
detailed plans for GB Energy – how it is structured, clear aims and guidelines of its KPIs, with a skeleton interim team to hit the ground running. This would include folding in GB Nuclear and even parts of the UK Infrastructure Bank (see my previous pieces on this)
water – a long-term plan, not for ownership for the government to have control of capital spend, perhaps by lending and having lender-style controls over the actions of the water companies
rail – a similar concept with GB Railways. This is perhaps the most advanced, but there needs to be further detail integrating this into the work of stronger local mayors. This is particularly the case in the north but everywhere net zero and productivity demand action.
a commitment to avoid current duplication. As per the NIC again, “Updated National Policy Statements for energy, national networks and water resources should ensure faster decision making on major projects, but opportunities remain to go further by expanding community benefits for hosting infrastructure and reducing duplicative environmental assessments”
And what does ‘attractively’ mean here, as referred to above? It is clear that, with the right framework, there is significant private investment that can be harnessed for infrastructure national renewal. The NIC report sums up the need for private investment:
“Alongside public investment, there will need to be a sustained increase in private investment in order to close the infrastructure gap. Key enablers to attract this investment in a competitive market are policy stability, regulation and planning reform”.
The shadow chancellor has made this framework clear in her recent Mais lecture – first, stability of government and its plans including an industrial strategy and, secondly, planning reform will encourage public-private partnerships. However, as oft repeated, we need to see details at some stage. For now, Labour needs to make clear that it is already working on that detail and will have it ready.
Summary
Any incoming government will have a mantra of ‘much to do, no time to do it’. Taking into account the current background, this time it is true more than ever. The UK will need to rely on growth more than ever to renew this time (ie no Blair globalisation dividend nor Thatcher North Sea oil revenues). This requires rapid, detailed action from day one. It is imperative that a potential incoming government is doing this implementation work now, and can demonstrate that, to give the electorate comfort that a Labour government will be the safe pair of hands that the country currently needs.
Cover: stock