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Infrastructure cash injection faces obstacles

Party conference season has once again seen many announcements intended to please the electorate, among them government plans to release £500M for infrastructure projects.

Liberal Democrat Treasury secretary Danny Alexander announced the so-called Growing Places Fund, to be extracted from existing budgets at the Department for Communities and Local Government (DCLG).

What the cash in Alexander’s fund will be spent on remains to be seen - DCLG controls local authority spend so the options are pretty broad. But in these austere times, any additional spending on much needed infrastructure must surely be welcomed.

The coalition government has repeatedly stated that infrastructure spending is a way to boost the economy - even if there will be less of it during this Parliament.

Intelligent Spending

This means that money that will be spent must dispensed in a more “intelligent” manner to ensure it has maximum impact, says to EC Harris head of regeneration Richard Jones.

This means ensuring that relationships between property owners and developers are strong and non-adversarial.

“We need to scrutinise schemes to ensure they are viable and there is not an adversarial relationship between the council and the developer,” he says.

Previously developers would fund small-scale traffic improvements as a trade-off for planning approval.

Such moves may not be feasible with such tight finances, says Jones.

“A developer’s margin is based on risk,” he says, adding that if there are likely to be risks in to the project due to planning problems or conditions imposed to spend on local amenities, then this can push up risks, and therefore costs.

Jones says numerous schemes have fallen through because the local authority and the develop have failed to agree on who pays for some of the associated infrastructure.

One example is Premier League Tottenham Hotspur FC’s plan to develop a new stadium in the London Borough of Haringey.

The club has already spent £85M on developing the scheme, yet the project has stalled on the issue of how much the club should contribute to local infrastructure upgrades.

Once a project is agreed,it is also essential that a form of procurement which will attract sufficient industry interest is used.

Transport Scotland was forced to ditch plans to use private finance to fund its Borders Rail project - a 48km new rail line from Edinburgh through Midlothian to Tweedbank two of the three bidders pulled out.

There is continuing speculation that the project may be delayed and now Network Rail has stepped into help deliver the scheme as a conventionally funded scheme.

Regeneration Schemes

Early suggestions are that Alexander’s £500M will be spent through Local Enterprise Partnerships (LEPs) which were set up to replace Regional Development Authorities (RDA)as funders of local infrastructure projects.

This likely to mean a growth in small, local schemes which deliver a rapid return on investment.

RDAs were centrally funded by government, but the new LEPs are privately funded and are focused much smaller geographic areas.

As a result, Jones says that funding must “follow the money”, with less emphasis on traditional regeneration schemes common with RDA funded projects which often took time to deliver economic benefits.

“They will be funding schemes that deliver returns [on investment] as quickly as possible,” he explains.

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