Committee blasts Government infrastructure plans

29 April 2013
By Edd Gent
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The Public Accounts Committee has urged ministers to be

The Public Accounts Committee has urged ministers to be "realistic" about how much investment can be raised for infrastructure

A committee has branded the Government’s £310bn infrastructure proposals as “not a real plan with a strategic vision”.

The Public Accounts Committee said the Treasury had not properly prioritised 200 key projects, and urged ministers to be "realistic" about how much private and public investment can be raised as the economy stalls.

It also warned that consumers will shoulder the main burden of the costs through higher rail fares and utility bills.

The criticism came in a report into the National Infrastructure Plan, which was launched in 2010 and last updated in December, which lists projects costing a total of £310 billion – with around £200 billion of that expected to be wholly funded by the private sector.

“Investment in infrastructure is crucial for stimulating economic growth. However, the Treasury’s Infrastructure Plan is simply a long list of projects requiring huge amounts of money, not a real plan with a strategic vision and clear priorities,” said committee chair MP Margaret Hodge.

“Most of the £310 billion of investment needed will come from the private sector, with households shouldering the cost through higher energy bills and fares. Family budgets are already badly squeezed and inevitably those on the lowest incomes will be hit hardest.

"The Government needs to urgently assess the impact on consumers and how this can be contained.”

The committee stressed that investment in power generation facilities, roads, railways, airports, ports and communication systems is "crucial for stimulating economic growth".

But the group added: "We are not convinced that a plan requiring £310 billion of investment in infrastructure is credible given the current economic climate, the cutbacks in public finances and the difficulty in raising private finance for projects on acceptable terms."

The Treasury says it has prioritised 40 programmes, but many of those cover broad areas and there are actually 200 individual projects "whose relative priority is not clear", according to the committee.

The cross-party group of MPs went on: "Given the financial constraints affecting both the government and consumers' ability to fund infrastructure expenditure on this scale, the Treasury should assess how much investment can realistically be financed and develop a coherent strategy using tightly defined criteria to identify and prioritise project."

The report cautioned that investors would be reluctant to come forward with money "until government policy is clear and consistent".

"The Treasury should work with departments to ensure that the consideration of policy proposals takes into account their potential impact on infrastructure investment and that unexpected changes are minimised to provide greater certainty to investors over government plans," it added.

Hodge also pointed out that the government "may have to use taxpayers' money to attract investors through direct grants, guaranteed incomes or agreeing to bear certain risks".

She added: “Many infrastructure projects impact on energy supply and are therefore particularly time critical. It is likely that the UK will have to buy ever more energy from overseas and at a higher price due to the failure to secure investment, partly a result of deferring decisions until after the Energy Bill.

“All governments change their plans but uncertainty over future government policy can make investors very nervous. This can lead to additional costs if they require a higher return to reflect the risk.

“The Government must ensure that there is sufficient certainty to secure the necessary private sector investment in a climate where the competition for capital is internationally competitive.”

A Treasury spokesman said: "We do not agree with the committee's depiction of the Government's infrastructure delivery plans. Planning and delivering vital long-term infrastructure is a central economic priority.

"That's why we launched the first ever National Infrastructure Plan, setting out a strategic approach that monitors the performance of our key infrastructure sectors and identifies the projects needed to build an economy fit for the future.

"Government regularly monitors progress and at the Budget published details of delivery of the top 40 infrastructure projects. As well as switching billions of pounds from current to capital spending, we are also using the Government's balance sheet to provide vital funding.

"Last week, Drax Power became the first recipient of a UK Guarantee, with the Treasury underwriting £75m of investment in biomass energy."

But John Cridland, CBI Director-General, sided with the committee saying the Government’s plan were not achieving the desired results.

“I have a queue of businesses at my door telling me delivery of the Government’s Infrastructure Plan needs speeding up,” he said.

“The new guarantees scheme has so far only managed to deliver two projects. More are in the pipeline but we need them delivered.

“We need ministers to pick three or four big infrastructure projects that demonstrate to investors what we can achieve and then doing everything in their power to see them through.

“We need to get the planning system working effectively, use the guarantees scheme flexibly and get these projects over the line. This is how we demonstrate to global investors that UK infrastructure is a prize worth pursuing, drive construction activity and build a platform for future prosperity.”

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