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Infrastructure policy needs more clarity

Ministers must set out clear, costed infrastructure spending targets and act decisively to set the best balance between taxation and user charges, says a key ICE report published today.

flooding

Flooding: Clear policies must prioritise which infrastructure must be the most resilient, says the ICE report

Its State of the Nation: Infrastructure 2014 report grades the UK’s transport, energy, flood, waste and water networks from A to E.

No sector scores higher than B - meaning “adequate for now” - and the local transport, flood management and energy sectors are highlighted as areas of concern.

The report gives low grades to transport, flood management and energy, citing:

  • a narrowing gap between energy supply capacity and energy demand
  • inadequate flood resilience due to spending cuts
  • declining local roads maintenance, also a result of public spending cuts.

The water, waste and strategic transport sectors also need to be future proofed so they can deliver the transition to a low carbon economy and meet the needs of society and the environment, says the ICE.

It urged the government, industry and academia to stimulate a mature, evidence-based debate about the most appropriate levels of service required from infrastructure.

This will allow better and more transparent prioritisation.

“The prioritisation across all the different facets of infrastructure balanced against the other needs of society - which are huge - in an economy which, even with modest growth, is going to be funding-constrained is extraordinarily difficult,” said ICE vice president and State of the Nation report chairman Keith Clarke.

“Funding will always be constrained as there are only two sources - tax and user charging - both ultimately falling on the consumer.

How the sectors were rated

  • Local Transport: Grade D - “at risk” (2010 Grade: D)
  • Flood Management: Grade C - “requires attention” (2010 Grade: C)
  • Energy: Grade C - “requires attention” (2010 Grade: D)
  • Strategic Transport: Grade B “adequate for now” (2010 Grade: B)
  • Water: Grade B “adequate for now” (2010 Grade: B)
  • Waste: Grade C+ plus “requires attention” (2010 Grade: C)

 

“The balance between the two is a choice for the government of the day, but irrespective of where it comes from, both are constrained resources and must be used efficiently,” he said.

“A primary issue is to decide why you are doing projects; and first off, to maintain the projects you currently have. You should not build new projects unless you can maintain the assets you have already got; that is a given,” he added.

Clarke said that the UK’s infrastructure cannot be resilient to everything and that it will become increasingly difficult to run all services in all conditions.

“As the 2013/14 winter floods showed, unplanned interruptions in our networks are costly to society and the economy.

“They happen because we are trying to run all services at all times. This is deemed unacceptable as the public expects a certain level of service. Government ultimately bears the risk for the resulting impact.”

He said that it was becoming increasingly important that infrastructure be prioritised according to the need to keep it in operation.

Extreme weather

“It is becoming clear that extreme weather events will become more frequent, and it is time that factors such as availability, resilience and the ‘domino effect’ across the networks when one network fails - as we saw recently when our flood defences were overwhelmed and this in turn disrupted transport, energy, water and waste networks - are rooted into the criteria used to make decisions on which projects go ahead so new infrastructure is more ‘future proofed’.

“Clearly there are some difficult decisions ahead regarding just how resilient the UK should be, and also what networks can and should operate 24/7 in what conditions.

“We can then plan more effectively - avoiding costly unplanned disruptions - and adapt. Management of the public’s expectations on availability during adverse conditions will need to form a key part of this process,” he said.

The State of the Nation report also acknowledges that the civil engineering industry will require a wider range of skills and competencies in future.
Engineers’ technical skills must be complemented by professionals who understand finance, marketing, leadership and the management and the impact of global influences, it says.

At the same time, building information modelling (BIM), the low carbon agenda, off-site construction, globalisation and innovative approaches to resilience improvement are changing the skill sets that engineers and engineering require, it says.

The need to comply with environmental regulations and the use of environmentally sensitive materials and practices have also altered the skills required in the civil engineering sector.

Innovation and research and development are central to global competitiveness, and demand for service-based products for the domestic and export markets is also likely to increase says the report.

Key ICE recommendations

power plant

Energy: Market reform must be ratified soon

On strategic decision making and leadership, the government should:

  • Expand the criteria used to prioritise infrastructure projects to reflect major future challenges. The report says criteria should account for resilience, availability, the need to move to a to a low carbon economy and better acknowledge “interdependencies” across networks - or how one sector impacts on another.
  • Be prepared to make tough choices about the required levels of infrastructure resilience and the appropriate levels of service and availability. Ministers should then work with the industry to manage public expectations.
  • Ensure the regulatory environment incentivises private operators to build resilience into their infrastructure.
  • Be appropriately resourced to make and implement decisions affecting the UK’s resilience or competitiveness, such as aviation capacity.
  • Provide more clarity, certainty and transparency for potential infrastructure investors in the National Infrastructure Plan project pipeline - by including more detail on projects earmarked for private finance, their status, planning approval, ownership structure and revenue streams.

On energy, local transport and flood management:

  • The Environment Agency and lead local flood authorities should fully implement a holistic approach to flood management. This should include a wider range of measures in addition to conventional flood defences - including improving the physical resilience of communities by making property and infrastructure more flood resistant.
  • Government should enact the secondary legislation to implement energy market reform by the end of this Parliament, establishing long-term investor confidence and entrenching cross-party support for electricity decarbonisation.
  • Ministers should commit to a long term flood reslience capital and maintenance programme which protects funding beyond the current five year cycle.
  • Government should extend devolved transport powers and funding through the creation of more powerful, fully integrated transport authorities in city regions.
  • Government and local authorities must establish a more ambitious joint programme to clear the road maintenance backlog, and commit to a more cost effective, planned, preventative maintenance
    regime.

 

State of the sectors

The State of the Nation report highlights key sector specific issues which must be addressed by ministers and policy makers

  • Energy Over the next decade, around a fifth of the UK’s electricity generating capacity (fossil and nuclear) is expected to be retired, putting further pressure on de-rated capacity margins which are only 4% at peak demand periods.
  • Strategic transport Congestion costs could more than double to £3.6bn between 2005 and 2025. Rail passengers travelled 59bn km in 2013/14, an increase of almost 50% since 2003/04. This is putting rail capacity under pressure. In aviation, UK airport delays are above the European average with significant capacity challenges in the South East of England likely without new runways.
  • Local transport Road maintenance spending has declined by 11% in real terms from 2010/11 to 2014/15. This has left one-third of local roads in urgent need of attention.
  • Flood management Maintenance is also a concern. Funding for watercourses - including flood barriers and pumping stations; managing grass, trees and bushes on flood embankments; and inspection and repair of flood defence structures - will be as low as £39M by 2014/15. Between 2015 and 2021, the government will spend £1.4bn less on flood management than the Environment Agency estimate is needed.
  • Water The sector continues to perform well and proposed changes to economic regulation should provide water companies with opportunities to rely less on large capital projects and use soft engineering techniques and technology. Water availability, particularly in the South East and London is the main challenge.
  • Waste Policy in England lacks direction and investment has suffered. The devolved nations have outlined clear waste strategies. The UK is obliged to reduce levels of biodegradable municipal waste (BMW) sent to landfill by 65% by 2020, compared with 1995 levels. The UK has to meet European Union targets to recycle 50% of household waste by 2020 and recover 70% of construction and demolition waste by 2020.

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