Infrastructure
Infrastructure planning and prioritisation
03 November 2010
The Government published the National Infrastructure Plan 2010 on 25 October 2010. This set out a number of key priorities and plans for UK infrastructure. There was also a commitment to publish a more detailed version of the plan by the end of 2011, setting out the long-term investment needs and priorities for economic infrastructure for the UK, along with the priority actions to deliver them. There are three main elements to this:
- establish a common set of planning assumptions, i.e. economic growth forecasts, population growth forecasts, impacts of climate change;
- identify relevant constraints, including establishing a framework for assessing overall affordability; and
- publish high level Green Book Supplementary Guidance on assessing economic infrastructure in early 2011.
What is meant by planning and prioritisation
A long-term plan for UK infrastructure is essential to:
- make choices which will support sustainable economic growth, help meet environmental targets, maintain secure energy supplies, ensure that infrastructure is robust, resilient, reliable and integrated and can meet local and national needs;
- provide market stability and predictability to private sector investors and the infrastructure supply chain with a consistent pipeline of investment; and
- manage affordability on behalf of the tax payer and the consumer.
The experience of other countries, such as Australia and Canada, has shown how national infrastructure plans mature and improve as understanding and confidence builds. Infrastructure UK will lead work across government to develop this plan over the next few years.
By the end of 2011, the approach being developed by Infrastructure UK will identify:
- the strategic outcomes that are sought and investment programmes that are required for UK infrastructure, including the urgency with which outcomes need to be achieved (for example to meet critical reliability, resilience, legal and policy obligations) and the key programmes of action to deliver them;
- the ability of existing Government actions to support their delivery; and
- the need for new or revised actions to support targeting of investment or other interventions as required.
The strategic outcomes and investment programmes identified may, by exception, include some specific projects where these are particularly significant. However this process is not designed to produce a detailed list of projects setting out the location or timing for each piece of infrastructure that needs to be developed.
These actions may relate to public spending by central and local government but will also relate to how government and regulators encourage and remove barriers to private sector investment nationally and locally. This will be done across government, regulators and the private sector and will help to give greater transparency and certainty to private sector infrastructure investors and providers.
Four stage approach to planning and prioritisation
Infrastructure UK has developed a four stage approach to support enhanced decision making about long-term, cross sector economic infrastructure plans and to identify actions required to support infrastructure development.
1. The Government will agree a common set of long-term planning assumptions, building on existing analysis, on the drivers of infrastructure demand in the future, including expectations of future economic growth; the number of people using UK infrastructure; and standard and legal obligations such as targets to reduce carbon emissions or for the quality and reliability of services.
2. Infrastructure UK will work with Departments to translate these planning assumptions into sectoral investment needs, taking account of cross-sectoral interdependencies (such as the need for low carbon energy to support low carbon vehicles) and the capacity of existing infrastructure to cope with additional demand or higher standards. This will focus mainly on programmes, rather than specific projects and will cover the action and investment needed across both the public and private sectors.
3. Infrastructure UK will aggregate investment needs across sectors, and analyse them against a series of constraints including value for money for the UK as a whole (including affordability to consumers and business), the availability and certainty of funding from users or taxpayers, the level and type of financing that is required and its availability in the market, the capacity of supply chains to design, build, maintain and operate the infrastructure, environmental impacts such as the level of carbon emissions expected relative to targets to reduce emissions, and the level of resilience that is required from infrastructure. Infrastructure UK will also assist Departments in analysing similar constraints within sectors.
4. Infrastructure UK will work with Departments to advise relevant Ministers on the action that is required where constraints are likely to be faced, such as more effective management of demand to reduce the need for new infrastructure (e.g. through new technology and innovations), deferring investment decisions to allow funding, financing and supply chain conditions to improve before reassessing the decision to defer, and seeking alternative funding sources (e.g. moving from public to private funding).
This will be an iterative process, with regular dialogue, to allow trade-offs to be made within and between sectors. Throughout this process, Infrastructure UK will collate, challenge, support and review departmental analysis and work with private sector stakeholders ensuring cross-sectoral interdependencies regarding investment levels and priorities are taken into account.
Overall affordability
Currently, assessments of affordability are broadly carried out on a sector by sector basis with no single body considering the overall impact of the total cost of economic infrastructure on consumers and tax payers across the sectors. Within sectors, economic regulators tend to consider affordability of a particular investment or suite of investments by assessing the impact on consumer bills.
A greater understanding of affordability implications across economic infrastructure will enable more informed decision making whilst improving understanding of other secondary impacts such as whether charging or funding mechanisms are fair or place an excessive burden on specific groups of users. For example, ensuring access to services is maintained and fair treatment of those in lower income groups. The Government will establish a framework for assessing overall affordability and apply it as part of the planning and prioritisation process.
Enhancing analysis of economic infrastructure decisions
The Green Book is supported by supplementary guidance on specific themes to support analysts in using the methodology. To enhance analysis of infrastructure priorities, the Treasury will publish high level supplementary Green Book guidance on assessing the costs and benefits of policy and spending interventions related to economic infrastructure in early 2011, building on the Treasury’s Five Case Model for business cases and existing Green Book guidance. This will set out:
- how to assess investment need, funding models and financing of economic infrastructure at a strategic level (i.e. as programmes rather than specific projects);
- how to identify and evaluate constraints on the ability to deliver projected investment programmes (including exchequer and distributional impacts, affordability, access to finance, supply chain capacity, environmental impact and resilience);
- how to assess the most appropriate responses to address these constraints to ensure the right investment is prioritised at the right time using Green Book methodology;
- how to assess and value significant downside risks associated with infrastructure decisions, e.g. security of supply issues created by delaying or deferring investment; and
- how to deal with the uncertainty in quantifying long-term costs and benefits of major infrastructure programmes, especially where impacts are transformational.
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