Good news for roads and rail, but questions remain over infrastructure policy says expert

Out-Law News | 28 Jun 2013 | 9:37 am | 2 min. read

The Government has published a £100 billion "pipeline" of long-term infrastructure investment priorities, but an expert has warned that "huge policy decisions remain to be grappled with" to encourage private sector investment.

Jonathan Hart of Pinsent Masons, the law firm behind Out-Law.com, said that many of the schemes included in the Treasury's 'Investing in Britain's Future' proposals (82-page / 3.4MB PDF) had been labelled "not in a fit condition to be proceeding into procurement" by the Major Projects Authority in its recent annual report. However the published proposals contained "good news" buried under the "bid to seek headlines", he said.

"There are going to be some hard questions as to how hard financial commitments will be provided if the schemes in question are not in a fit condition to proceed," Hart said. "Additionally, there is the question of timeline: the key date being mentioned was the electorally important '2015'. Many commitments given were in respect of the 'end of the decade'. How the infrastructure industry gets to 2015, let alone 2020, or potential investors' interest is going to be maintained is another question altogether."

"On the positive side it has been good to hear confirmation of support for High Speed 2, commitment to the Highways Agency roads pipeline, extra money for road maintenance, money for addressing the repairs backlog in respect of schools and agreement of 'strike prices' for renewables, to free up investment in wind power schemes. Seed-corn commitment has been provided for looking at Crossrail 2," he said.

The proposals, summarised in a speech by Chief Secretary to the Treasury Danny Alexander, follow the Chancellor's allocation of £50 billion to capital spending in 2015/16 as part of this year's Spending Round. This figure includes an additional £3bn per year from 2015/16 as a result of government departmental efficiency savings.

In his speech, Alexander promised the "largest programme of rail investment since Victorian times" as well as considerable investment in roads, housing and broadband. He also announced a two-year extension of the UK Guarantee Scheme to the end of 2016, which gives Government backing to privately-funded major infrastructure projects which are struggling to obtain funding.

Specific commitments on rail include funding for HS2, a proposed high-speed rail network that will link Northern England to London. The Government has set a budget of £42.6bn for construction costs and £7.5bn for rolling stock, which is around £10bn higher than originally put forward. A further £2 million has been allocated to carry out a "feasibility study" on a second Crossrail link across London, although Alexander said that "at least half of the cost of the scheme" would need to be met by private investors.

"The announcement on Crossrail 2 should be seen for what it is: a challenge to the Mayor of London to identify the private development funding contribution which apparently needs to be for 50% of the scheme that is going to need to be found," said infrastructure expert Jonathan Hart. "The other major news, in respect of rail electrification, would appear for the greater part to have been announced on a number of occasions beforehand – and in any event is tied up with the finalisation of the Office of Rail Regulation's settlement with Network Rail."

"In relation to the roads programme, the bigger question is what form the commitment from government is going to take to the Highways Agency pipeline and where the money will be coming from. The future of the Highways Agency with responsibility for implementing so many of these schemes is up for change, with the recommendations of the Cook Review being put into operation. History suggests that agencies which themselves are being transformed are often worst equipped to oversee major procurement programmes," he said.

The Highways Agency, currently an executive agency which is part of the Department for Transport, is to be converted into a publicly-owned corporation, Alexander said. The Government will also deliver "all the major projects" currently identified by the Highways Agency, including decongestion projects. A further £10bn has been committed to road repairs and maintenance between 2015/16 and 2020/21, with £4bn allocated at national level and £6bn to be allocated to local authorities, he said.

An update to the Government's National Infrastructure Plan will be published alongside this year's Autumn Statement, according to the Treasury.