How do we deliver vital infrastructure investment into an ageing energy system? The answer throughout this Parliament has been – seek it from overseas. This means the Treasury is not laden with debt and risk is retained by the private sector.
But investors need to consider how safe their investment is, does political uncertainty make a destination uninvestable, are the skills in place to deliver the investment and how certain are you that Government policies will not be changed?
Politicians have been faced with this dilemma on numerous occasions in a post-privatisation era. The Chinese own Weetabix, the Qatari’s own Canary Wharf and the Russians own The Independent Newspaper. Investors have been drawn to the UK for decades, but in a climate of ever increasing risk – financially and politically – it is important to think about how you continue to bring investment forward.
Sir John Armitt CBE has worked on Sizewell B, the Channel Tunnel rail link and most recently as the Chairman of the Olympic Delivery Authority. It is with this background in mind that the Labour Party asked Sir John to consider how we deliver the infrastructure the UK is in need of, whether that is renewing Victoria innovation in the London sewers, or delivering a new generation of high speed rail.
Sir John found that ‘The UK needs affordable clean energy, modern communication systems, flood defences that can cope with the effects of climate change and a transport system that can cope with ever growing demand and which links business with markets and people with families, leisure and job opportunities.’
To deliver on these ambitions and attract the money necessary to make them a reality, he has suggested a National Infrastructure Commission be formed. The Commission would produce a 25-30 year infrastructure strategy, underpinned by evidence-based assessment of the needs across the UK.
Sir John diagnoses the fundamental problem as a ‘…lack of clarity around the UK’s long term needs [making] it difficult to sustain cross-party political consensus on controversial infrastructure issues’. Such changes in direction are of course the opposite of what the market are looking for when selecting where to make their investment.
Ed Balls maintains that an infrastructure commission with foresight and far reaching powers could send the necessary market signals to drive investment.
It was hoped that Sir John’s review would be met with cross-party consensus. Given Matthew Hancock’s response at a recent Policy Exchange event – we can say with some certainty it has not!
Hancock asserts that infrastructure projects must be Government led. Their strength comes from them not being dictated by an independent body, but driven by an accountable Minister, working in collaboration with Whitehall.
This line of argument has been built on by Stephen Hammond MP whose concern is that the Infrastructure Commission gives us an unelected, unaccountable politicised body.
It is clear that there is no cross-party consensus (ironically what the projects themselves are seeking out) and the Armitt proposals will not see the light of day if the Conservative party are the largest party after the election.
But should Mr Miliband be in Number 10 then we can expect the process to select an infrastructure board to begin. They will be faced with the challenge of taking a 30-50 year view of the market – not an enviable task – and certainly not one that is in a position to pick the winners given many will not have been invented yet.
Yet you could argue that the Coalition Government have in fact introduced their own infrastructure commission for one sector – aviation. The Davies Commission is an evidence based assessment of the options on airport expansion. Sir Howard Davies has already ruled out ‘Boris Island’ and will publish his full report following the election in May.
No decision will be taken on the long term future of infrastructure investment until the next Government is formed. What is not in doubt is that whoever forms the next Government will be keen to maintain the pipeline of investment and investors by delivering certainty as best they can.