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Scrutinising the UK PM’s National Infrastructure Plan

Gaurav Sharma 25/10/2010 At an event which is decidedly business investment oriented as it should be - UK lobby group CBI's conference always has a keynote speech from the Prime Minister in office at the time. Having covered it for years, I've heard Messrs Blair, Brown and now David Cameron speak, with one subtle difference - the PM of the day at this year's conference put infrastructure investment at the heart of his speech and not its periphery like his predecessors. Setting out his stall, PM David Cameron said he had not come to the CBI to indulge in some "sterile debate between laissez faire and hands-on government. 'The question isn't should government be involved?' because it is involved." The PM noted that modern infrastructure was crucial for UK's economic growth. In fact the word "infrastructure" was mentioned seven times in his speech and he went one step further by announcing what he coined as the UK's first ever National Infrastructure Plan - jointly published by HM Treasury and Infrastructure UK."Other countries understand the importance of modern infrastructure to economic growth. China has been building tens of thousands of miles of roads, a new network of intercity railway lines and a dozen or so nuclear plants. While...we've been standing still," he said.

UK Prime Minister David Cameron speaks at the 2010 CBI Conference in London © AFP

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Even in this austere era, the PM said his coalition government will invest over £30 billion in transport projects over the next four years - which is more than was invested over the past four years. The HSR link from London to Birmingham, Crossrail, Thames Gateway, London underground modernisation, Mersey Gateway, improvements to the East and West Coast mainlines have all been given the green light and there would not be a compromise over these projects according to the PM. Under his new infrastructure plan - a copy of which was obtained from HM Treasury and Infrastructure UK by Infrastructure Journal - the government would unlock £200 billion worth of public and private sector investment to deliver infrastructure projects over the next five years. Moving beyond transport infrastructure - the PM mention broadband projects, technology and innovation centres and offshore wind infrastructure with the latter receiving up to £60 million towards facilitation and encouragement of private sector involvement. Furthermore, he said that Crown Estate would also work with interested ports and manufacturers to realise the potential of their sites for renewable energy drives. Alas, talk of the spending review cannot be avoided, but the PM stuck to his guns. "The review was about taking Britain out of the danger zone. The IMF, OECD, you, the CBI and 35 business leaders who wrote to the Daily Telegraph last week have backed the approach we have taken in tackling the deficit," he said. The National Infrastructure Plan (2010) notes the Spending Review has increased the capital envelope by £2.3 billion a year by 2014-15 relative to the Budget plan in order to ensure that capital projects of high long term economic value are funded. It adds that too often, in the past there has been an emphasis on individual projects rather than taking into account the wider picture and the dependencies between sectors.

Regional Examples of UK Capital Projects as outlined in the National Infrastructure Plan © HM Treasury / Infrastructure UK (Click on image to enlarge) Citing a 2009 KPMG report, the document notes that a lack of clarity on the future investment pipeline can undermine confidence for private investors and businesses. The PM,

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it seems, is intent on avoiding this going forward and is clear about one thing - infrastructure investment should be made by the private sector wherever possible. However, the government recognises that it will need to intervene in certain markets to incentivise necessary investment where there are high social or environmental costs preventing the investment, high risks associated with the investment, such as immature technologies and where the infrastructure is in the wider national interest and of strategic importance to the national economy. There was also more clarity on the Green Investment Bank (GIB). The government would initially capitalise the new GIB with £1 billion of funding coupled with what HM Treasury describes as "additional significant proceeds from the sale of government-owned assets." The formalities are expected to be completed by spring 2011. Local infrastructure will be boosted by a Regional Growth Fund (RGF); details beyond a white paper are awaited. The government will also publish a National Broadband Strategy in December 2010. National Infrastructure Plan added that the government was also working on options for encouraging infrastructure investment from new sources of efficiently priced private capital. The findings of a review are expected to be published in 2011. A regulatory shake-up is also on cards. The DECC is currently conducting reviews of the roles and functions of Ofgem and Ofwat, while some regulators are reviewing their approach to price setting. Additionally, the Department for Business, Innovation and Skills in conjunction with Infrastructure UK, will publish a common set of principles for economic regulation. The PM said that he would like to achieve an affordable mix of public and private sector investment overall. He clearly feels an infrastructure partnership with the private sector would boost productivity for the long term. In a business setting, where a crucial subject, is one of the many which are deliberated upon - the fact that infrastructure was central to the PM's speech - seemed to pleasantly surprise the CBI.

CBI Director General Richard Lambert © CBI

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Richard Lambert, the outgoing director-general of the CBI, whom I last interviewed in 2007 in the dim aftermath of the collapse of Northern Rock, welcomed the emphasis placed on UK infrastructure by the PM. "The emphasis was on the need to re-boot the country's infrastructure, with a coherent vision of what needs to be done over the next five years to secure economic growth. It was encouraging that he encompassed all parts of the economy, from broadband to ports and from transport to energy," Lambert said. The PM, in his own words, believes the UK's best years are ahead and that infrastructure is central to bringing about economic dynamism. That remains to be seen; after all to quote his colleague the UK chancellor - "We're all in this together."

This feature was first published by Infrastructure Journal on October 25th, 2010. An online copy of the feature may be seen here.

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