James Heath, Chief Executive of the National Infrastructure Commission, addressed the Infrastructure Forum Annual Policy Summit yesterday (29 September 2020). His speech explored the importance of a long term strategy for infrastructure planning, the tests which the Commission will apply to the government’s forthcoming National Infrastructure Strategy, and the key policies the Commission recommends is included in that strategy.
James’ speech can be found below.
“Good afternoon everybody.
I joined the National Infrastructure Commission back in May. Before that, I was at DCMS advising Ministers on broadband strategy, mobile connectivity and telecoms security. So, I know quite a lot about digital infrastructure but am still on a steep learning curve on the other parts of Commission’s brief.
I joined the Commission because its remit – to provide expert advice on the country’s biggest infrastructure challenges – really matters. The next few years are going to be critical if we want to solve era-defining, strategic questions – about how to decarbonise the economy, how to address the UK’s productivity gap, and how to change the UK’s economic geography. And I believe that infrastructure policy has a critical role to play in solving all these questions.
The title of today’s session is: ‘A national infrastructure strategy and investment for the long-term’. I’ll focus on three things:
- Why long-term, strategic infrastructure planning matters,
- The tests that we think the Government’s National Infrastructure Strategy needs to meet,
- And the Commission’s view of some of the policy priorities that should be reflected in the National Infrastructure Strategy, if it is to support the economic recovery and meet the Government’s ambitions on net zero and levelling-up.
Why is infrastructure planning important but hard?
On the first question, there are three particular characteristics of economic infrastructure that make strategic planning very important but also very hard to do well.
First, most infrastructure challenges are long-term. It takes a long time to plan and build major infrastructure projects, even if we can – and we should – work out how to speed up the timescales. This means that we usually build infrastructure ahead of demand, so it doesn’t become a constraint on future growth. And the costs and disruption of infrastructure are real and accrue today, whereas the payback and benefits of infrastructure accrue tomorrow.
Linked to this challenge, is the question of how we plan infrastructure under uncertainty. There are certain drivers of infrastructure demand that we can plan for even if it is hard to do so – so we know that by 2050, the UK’s population and economy will have grown significantly and that this will place substantial pressures on infrastructure. We also know that the challenge of climate change will require a transformation in energy, waste and transport by 2050. But we clearly don’t know what the long-term effects of an event like Covid-19 will be on behaviour change, the distribution of work, and the demand for infrastructure such as transport, logistics and broadband. The Commission has work underway to consider the plausible future scenarios and what they may mean for infrastructure policy choices.
The third characteristic of infrastructure is its interdependence – infrastructure should be viewed as a network or a system rather than as a set of independent schemes. The obvious example of this is the need for urban infrastructure planning to be integrated with housing. But interdependence applies to the electricity system needing to be prepared for an increase in electric vehicle ownership or digital connectivity on roads being necessary for the future availability of connected and autonomous vehicles.
These characteristics of infrastructure – its long-term nature, uncertainty, and interdependence – make strategic planning essential. But they also make it very hard to do well.
And this, I think, is why we’ve seen in many countries infrastructure policy hampered by problems of short-termism, siloed decision-making in infrastructure sectors and fragile political consensus that has often led to prevarication and paralysis on major decisions.
The National Infrastructure Commission was set up by government as a new institution to try and correct for these problems by:
- Taking a long term, 20 to 30 year view of the country’s infrastructure needs and how investment should be prioritised to meet them,
- By taking a cross-sectoral approach to infrastructure planning,
- And by basing our policy advice on in-depth, expert analysis and wide consultation to try and build a consensus on major decisions.
We’ve had some success in improving infrastructure planning but there is a lot further to go. Our National Infrastructure Assessment set out – for the first time in the UK – a long-term vision for economic infrastructure and, critically, a detailed and fully costed plan to deliver it.
The Government has responded to many of our recommendations. The main outstanding areas are mainly in energy policy, devolution and the need for a new independent infrastructure financing institution.
We hope to see the Government’s response on these and other areas in its National Infrastructure Strategy, when it’s published in the autumn.
What does a good National Infrastructure Strategy look like?
This brings me to the second area I want to talk about – the tests that we believe the National Infrastructure Strategy should meet to have a real impact.
First, the strategy should have a long-term perspective – it should look beyond the immediate spending review period and set out the Government’s expectations for infrastructure over the decades to come.
Second, the strategy should have clear goals linked to economic recovery, re-balancing growth across the UK and delivering net zero – with concrete plans to achieve the goals across the different infrastructure sectors.
Third, the strategy should have a clear funding commitment.
And finally, the strategy should demonstrate a genuine commitment to change and seek solutions that will stand the test of time. To manage uncertainty I talked about, the strategy needs a balanced portfolio of ‘no regrets’ moves on proven technologies and delivery mechanisms, alongside ‘future strategic bets’ that could yield big returns.
What should be the policy priorities in the National Infrastructure Strategy?
If these are the tests that we think the National Infrastructure Strategy should meet, then the final area I want to cover is some of the key policy priorities that the strategy should address.
There should be a focus on measures that can both stimulate demand in the short term, while also charting a course to transform the economy over the longer-term. This means accelerating the deployment of domestic energy efficiency measures, electric vehicles and gigabit-capable broadband.
There should also be a focus on long-term commitments to infrastructure projects that support the supply chain and on measures that instil confidence – so private investors and firms in water, energy and digital can invest at scale and create new jobs.
In terms of securing the Government’s goal of more balanced growth across the regions, we would like to see a commitment to fund transformative urban transport projects in our fastest growing, most congested cities, with multiyear devolved budgets.
We’d also like to see an integrated rail plan for the North and Midlands that improves trade and connectivity between the Manchester, Leeds and Birmingham city regions. We are currently working on our advice to Government on this and on the right menu of investment options.
And, finally, we’d like to see faster progress on developing the spatial plan for the Cambridge-Milton Keynes-Oxford arc and on delivering the supporting infrastructure.
In all these places, transport improvements are necessary to support local economic growth – but rarely are they sufficient. Infrastructure policy must form part of a much wider strategy to make our cities and towns attractive places to live, work and invest in, alongside critical factors such as skills and the devolution of money and powers to city leaders so they can deliver local solutions.
Getting infrastructure planning right is also critical if we want to reach net zero carbon by 2050. Around 70% of greenhouse gas emissions come from infrastructure sectors. Significant capital investment will be needed to decarbonise transport and power generation – and make buildings energy efficient.
In many policy areas we have a clear direction of travel, even if there are big execution and acceleration challenges to overcome such as on renewable energy.
But there are other, important areas where we don’t yet have a clear policy position or a roadmap. I’d pick out three particularly pressing infrastructure challenges that the National Infrastructure Strategy needs to address.
First is Heat. More than a third of UK carbon emissions are created by heat production. Decarbonising heating requires us to come up with a scalable, long-term solution, be that hydrogen, electrification or, more likely, a combination of both.
The second area is Hydrogen, and carbon capture and storage. There is a good case for the UK placing a strategic bet on hydrogen and really testing whether it can work at scale across heating, transport, industrial processes and electricity generation.
And the third area is the switchover to Electric Vehicles. Our view is that by 2030 all new cars and vans should be electric, or use a low carbon alternatives.
2030 is a stretching but achievable target if the right conditions are put in place. Consumers won’t buy electric vehicles on mass if they are not confident that the charging infrastructure will be available. And the investment case for the infrastructure is, in turn, dependent on growing demand for electric vehicles. We can help resolve this ‘chicken and egg’ problem by bringing forward the date for ending the sale of petrol and diesel vehicles to 2030 and taking steps to address barriers to the take-up of electric vehicles. You’d expect the market to be able to largely fund the roll-out of the necessary charging points. And we’d support Ofgem putting in place a framework that supports anticipatory investment in the necessary upgrades to the electricity distribution grids.
In these exceptional times, the most precious commodity is confidence. The Government has a golden opportunity with the National Infrastructure Strategy to set out an ambitious but deliverable plan for the nation’s economic infrastructure. A plan that can instil confidence among investors and industry; a plan that can support the economic recovery; and a plan that details how the transport, energy and technology of the future can help transform the UK’s economy.
At the National Infrastructure Commission, we will continue to work with the Government to realise this golden opportunity.