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Credibility of infrastructure plans questioned

The Government’s latest plan on infrastructure spending is too broad and lacks focus, say the Public Accounts Committee.

The group of MPs have questioned whether the Treasury’s £310bn National Infrastructure Plan is just a “long list” of projects, as opposed to proper prioritisation of spending.

The report suggested widespread plans for programmes that included hundreds of individual projects were not “credible” given the barriers to raising finance in the current climate.

Lag-time between inception and the start of work on projects was also noted to be impacting plans for economic growth.

On engaging with the market, the report stated: “Investors told us that there were aspects of the UK infrastructure market which encouraged investment. For example, the networks for transmitting water and energy, where investor returns were regulated and relatively predictable, created a stable environment which made it easier to obtain debt finance more cheaply.

“However, they noted that for them to invest in other areas of public infrastructure would require greater clarity over government policy. E-ON told us it would continue to defer decisions on energy generation investment until the Energy Bill had been enacted and there was clarity over the extent to which the Government would support wind power.

“This support may involve guaranteeing payments to the generators for the capacity they provide irrespective of whether the conditions are right for wind power to be generated.

“We have already voiced our concerns over similar guaranteed revenue arrangements for companies involved in the transmission of electricity from offshore wind power.”

Concerns about the subsidisation of private sector profit generation was also raised in the report.

John Cridland, CBI director general, said: “I have a queue of businesses at my door telling me delivery of the Government’s Infrastructure Plan needs speeding up. The new guarantees scheme has so far only managed to deliver two projects. More are in the pipeline but we need them delivered.

“We need ministers to pick three or four big infrastructure projects that demonstrate to investors what we can acheive and then doing everything in their power to see them through.

“We need to get the planning system working effectively, use the guarantees scheme flexibly and get these projects over the line. This is how we demonstrate to global investors that UK infrastructure is a prize worth pursuing, drive construction activity and build a platform for future prosperity.”

Simon Walker, director general of the Institute of Directors, said: “The UK’s infrastructure is in dire need of an upgrade, but government dithering is holding back urgent improvements. For schemes that need funding, capital expenditure has been cut too far, putting too much of the burden on users. Projects that should be ready to go are being held up in the planning system.

“And government indecision is preventing schemes that don’t need a penny of taxpayers’ money, such as a third runway at Heathrow, from going ahead altogether.”

This was posted in Bdaily's Members' News section by Tom Keighley .