This week’s National Audit Office (NAO) report underlines the scale of the task facing the government when it comes to kick-starting the long-awaited roll out of its infrastructure plan. The fact is that, for all the months of public sector austerity, under performing growth means we could yet be heading towards a triple-dip recession.
This means that, half through its term of office, the coalition can have no illusion about the fact that public funds for vital energy, water and waste, transport and communications infrastructure are limited.
As the NAO points out, the result is that the government is looking to private companies to wholly own and finance around 64% of the £310bn of new infrastructure planned - £257bn of which is needed by 2020.
That is a huge challenge. In just eight years the private sector will have to have not just done the deal on £165bn of investment but also followed through with delivery. We have written a huge amount over the last few years about the welcome step change in attitude now taken by government towards infrastructure investment. And we have written positively about the fact that the National Infrastructure Plan (NIP) sets out the scale of what work is needed.
But this week’s NAO report makes stark reading in its bluntness. The NIP is clearly less of a plan, more of a wish list which perhaps makes it even harder for the private sector to commit support.
“The government must take forward the plan to build the confi dence necessary to attract investment, while addressing factors which make investors inclined to defer decisions,” says the report. “If financing and
affordability considerations limit the amount of investment which can be supported, government will need to either act to address these constraints or refine its priorities for infrastructure investment.”
In short, the NIP still has some way to go to boost certainty or confi dence in public infrastructure policy to the degree needed to lever in vital private investment.
Top of the list of problems, according to the NAO, is the inaccurate identification of the need for infrastructure in the NIP, followed by the ongoing uncertainty about policy which still dogs virtually every sector.
Add to this the huge political risk surrounding the unquantified impact of user charging on consumers of privately financed infrastructure, the potential taxpayer exposure to losses and the high cost of UK delivery. It is easy to see why, despite £40bn of government guarantees, the private sector is not rushing to get involved.
Action must be taken to clarify the risks. Finding £165bn in eight years is a huge task but the prize for the construction industry is huge. And as the NAO makes very clear, this has to start from basic decisions about what is required. We need decisions about policy not projects - coming from the very top.
- Antony Oliver is NCE’s editor