Call for new right to ‘basic infrastructure’ to be written into new UK industrial strategy

November 10, 2017

Every person in the UK should have a right to access “basic infrastructure”, such as transport links, utilities, schools and broadband, an independent body set up to make recommendations on the shape of a new industrial strategy in the UK has said. 03 Nov 2017

The Industrial Strategy Commission, a partnership launched earlier this year by units within the University of Manchester and the University of Sheffield, said a new “universal basic infrastructure commitment” was “essential”.

“We believe access to sufficiently high quality (soft and hard) infrastructure should be considered as universal service obligations, the minimum the state should offer all its citizens in all places, and more important than monetary incomes in terms of delivering the capabilities for economic development to all people and places,” the Commission said in a new report (106-page / 2.66MB PDF).

“A new industrial strategy should commit to this provision which would we believe have a significant impact on the lives of most people and contribute positively to improving the UK’s overall productivity,” it said.

Pinsent Masons is hosting a BBC Question Time-style event, ‘Examining the Budget – what next for UK infrastructure’, shortly after the Autumn Budget on Tuesday 28 November at Pinsent Masons’ Crown Place office in London. The event is being organised in partnership with the Royal Institution of Chartered Surveyors, IPFA and Turner & Townsend. To confirm your place, simply register.

In its report, the Commission said that the UK’s new industrial strategy should not be confined to just “a few ‘sector deals’”. In outlining a new industrial strategy for the UK earlier this year, the government announced that it would consider industry suggestions on steps that could be taken to help improve productivity in their sector, such as deregulation, tax breaks, targeted funding or moves to tackle market access barriers with other countries.

The Commission called on the UK to “commit to a higher level of infrastructure spending”, and for some powers within central government such as those related to infrastructure, skills, business finance, planning and procurement, and some tax powers, to be devolved to cities and regions.

In addition, a new “public infrastructure bank” should be established to “crowd in private investment” for infrastructure, the report said. The government should provide a guarantee for this investment and “provide significant support for long-term investment through reinvesting all its profits”, it said.

Infrastructure expert Graham Robinson of Pinsent Masons, the law firm behind Out-Law.com, said that “innovative funding models” for improving UK infrastructure are needed.

“The independent Industrial Strategy Commission report has provided government with far reaching views on the future of Britain’s infrastructure,” Robinson said. “It is clear that Britain’s infrastructure must overcome major challenges if it is to meet the needs of future generations. Further delay in improving infrastructure in Britain will perpetuate the low levels of productivity which is already a symptom of our economy.”

“Funding Britain’s infrastructure is one of the most urgent challenges for the government to address in its industrial strategy. The upcoming Autumn Budget will determine whether more public funding will be made available by the chancellor. Philip Hammond probably has some room for manoeuvre, but fiscal challenges are a key concern with Britain facing a lower growth future as a result of Brexit uncertainty,” he said.

Robinson said that establishing a UK infrastructure bank “will be a necessity” well before Britain leaves the EU so as to replace existing funding provided by the European Investment Bank.

“Crowd funding to finance the infrastructure Britain needs via a public infrastructure bank backed by government guarantees is an interesting proposal and might be an answer to financing some of Britain’s infrastructure needs, but we have long argued that sources of financing to pay for infrastructure is not the issue,” Robinson said. “How Britain will fund the infrastructure it needs in the long term is the real issue – credible sources of funding are the key to financing infrastructure. Innovative funding models are needed to solve Britain’s infrastructure challenge.”

The Commission also said finance could be raised by applying the regulated asset base (RAB) model to some utilities. “This model represents a more efficient use of capital than PFI or public-private partnership (PPP) schemes,” it said.

Infrastructure expert Jon Hart of Pinsent Masons said the Commission’s suggestion to make use of the RAB model “deserves further detailed consideration”.

“The Commissions’ assertion that RAB represents a better way of funding infrastructure than project finance (through PPP or PFI) is not made out,” Hart said. “It also overlooks the difficulties that have been associated with the RAB model itself in relation to funding major capital schemes such as Tideway and in relation to transport infrastructure: notably how one makes the end user pay.”

The way competition in the utilities markets is regulated should also be reformed, the Commission said.

“Consideration should be given to replacing the sector regulators for the network industries with a single body, sitting within the Competition and Markets Authority (CMA), with a remit to include investment incentives in its criteria for regulation,” the Commission said. “Sectors need to be regulated more consistently.”

The Commission also outlined proposals which it said would enable the UK to move to decarbonise its energy supply. Among those recommendations, it called for “investment in new energy storage technologies and better demand management”, including carbon capture and storage (CCS) technologies.

“The government should commit to invest in the necessary infrastructures for CCS technologies to be fully utilised and provide financial incentives to make them viable,” it said.

To ensure government policies are “consistent with the industrial strategy”, a new “powerful industrial strategy division” should also be established within the Treasury, the Commission said.

“Officials from several departments, including BEIS, the Cabinet Office and 10 Downing Street, along with local, regional and devolved authorities would be directly involved in the day-to-day work of the new division,” it said.

Pinsent Masons is hosting a BBC Question Time-style event, ‘Examining the Budget – what next for UK infrastructure’, shortly after the Autumn Budget on Tuesday 28 November at Pinsent Masons’ Crown Place office in London. The event is being organised in partnership with the Royal Institution of Chartered Surveyors, IPFA and Turner & Townsend. To confirm your place, simply register.

 

This article was originally published by Pinsent Masons on its legal news service Out-Law.com, https://www.out-law.com/en/articles/2017/november/call-for-new-right-to-basic-infrastructure-to-be-written-into-new-uk-industrial-strategy/.

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