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Government infrastructure commitment looks uncertain

As the party conference season drew to a close last week those looking for consistent — and reassuring — infrastructure policy from the main political players were left wanting.

While there was the odd nod to the idea that infrastructure investment helps the economy, new or grandiose commitments were sadly lacking.

Though that might be expected with the conference season coming less than a year after the Comprehensive Spending Review, it provides little comfort to those wondering where the next infrastructure pounds will be spent.

Other arguments suggest that now could be exactly the right time to make new commitments to infrastructure development as the industry anticipates the publication of the second annual National Infrastructure Plan (NIP2) from Treasury body Infrastructure UK. That aims to be the government’s guiding principle behind
how to spend the £200bn that the Treasury has accepted as the best estimate of investment needed over five years.

The plan stayed on track this year as the government sought to ensure that the industry did not fall into a period of inactivity, but industry observers fear the effects of a lack of new announcements will be felt very soon.

It’s a warning the ICE has already sounded. “The real show of government’s commitment to infrastructure as a long term driver of growth will be the imminent second edition of NIP. A plan that is simply a long list of projects stretching into the far future or a cross Whitehall compendium of initiatives, will not succeed,” said ICE director general Tom Foulkes last month. “It must be tightly focused, setting out what the UK needs from its infrastructure and clear steps to attracting the necessary investment.

“It should also map out how government will create a political, regulatory and commercial environment that is conducive to achieving the goals of the plan. NIP2 presents an opportunity that cannot be missed,” he said.

The concerns are real. Last month government figures showed that new construction orders were down 16% for the second quarter of 2011 against the previous quarter, meaning they were at their lowest since the third quarter of 1980.

The roads sector is the focus of much concern — particularly because it is a sector that traditionally generates so much revenue for contractors and consultants. The NCE Contractors File 2011 shows that 36% of all contractors’ revenue came from the roads sector — far outstripping rail, the next most lucrative sector, which generates 16%.

So are there any clues that road building may have a bright future? The good — if anticipated — news is that the Mersey Gateway bridge was given a final sign off for central government funding on the day transport secretary Philip Hammond gave his speech to the Conservative conference.

And he suggested that roads were a key part of government spending on transport. “Some of our transport investment plans, like High Speed 2, are long term,” he said. “But others, like new road schemes, rail electrification, and the Mersey Gateway Bridge can be implemented more quickly. Not only delivering long term improvements to productivity, but also creating jobs when they are needed most.”

Chancellor George Osborne also told the Conference that capital spending on roads and railways was “actually increasing”. However, the fact cannot be ignored that following last year’s spending review, Hammond put on hold £2.3bn worth of work, on managed motorways. Vital schemes for boosting the economy such as upgrading the A14 through East Anglia or increasing capacity on the M25 Dartford Crossing also remain stalled. Work that is available is having to be delivered at a much reduced cost — and profit — as the Highways Agency aims to cut the cost of the 14 major projects it will deliver between now and 2015 by 20% (NCE 22 September).

In addition, severe cuts being experienced by local authorities mean that smaller scale roads spending is under threat. “Local government’s ability to invest in road maintenance and construction has been badly affected by cuts in its allowances, while the Highways Agency’s ability to fund major new projects like the recently-completed Hindhead tunnel is diminished,” wrote Civil Engineering Contractors Association external affairs director Alasdair Reisner in the NCE Contractors File.

Offering a stark reminder, Hammond told the House of Commons Transport Select Committee last month that high speed rail’s significance was heightened by the fact that the government had deprioritised roads because of their lack of green credentials.

Government claims to be committed to its green policies, but Osborne used his conference speech to insist that Britain should cut carbon emissions “no faster or slower” than its European neighbours. An indication that perhaps he would be prepared to step back from last year’s claim that the new coalition government would be the greenest government ever.

It will be interesting to see whether the government will rethink, renew and discover the best way to ensure infrastructure investment continues beyond NIP2.

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