Fitting COVID-19 into the infrastructure puzzle
After years of stop-start work on a national infrastructure plan, the Treasury made capital investment a key element of the government’s ‘levelling up’ agenda. Then COVID-19 struck, raising big questions over Britain’s future infrastructure needs. Ben Willis hears national, regional and local infrastructure specialists map out a way forwards – and urge Whitehall not to press the pause button
Even before COVID-19 struck, Britain’s Conservative government was eyeing up a big infrastructure spree as one of the key pillars of its plans to ‘level up’ the UK’s persistently unbalanced economic geography.
Building on a manifesto pledge in last year’s general election, UK chancellor Rishi Sunak pledged in his Budget speech just before lockdown to spend 3% of the UK’s GDP on infrastructure by 2025. Simultaneously, he ordered a review of the ‘Green Book’ used by the Treasury to prioritise infrastructure spending – whose ‘value for money’ calculations have long been criticised for favouring wealthy regions such as London and South-East England.
With Britain facing its worst recession in living memory – perhaps ever – the need for this investment has taken on a new urgency. Last month, prime minister Boris Johnson promised to “build, build, build” the UK out of its dire economic straits. And a few days later, in his set-piece summer statement, Sunak once again reaffirmed the government’s position – promising “historic investment in infrastructure” to aid Britain’s recovery.
But, enticing as it sounds, the prospect of an infrastructure investment binge raises big and complex questions. How should infrastructure projects be selected, funded and managed? Will the Green Book review lead to meaningful change, prioritising wider economic and social goals – such as boosting productivity and reducing poverty – alongside financial assessments of the additional growth created? Above all, has COVID-19 blown out of the water all our assumptions about what infrastructure we need?
Building the post-COVID world
This latter question is particularly troubling, given that the UK government is supposedly nearing the completion of a National Infrastructure Strategy ordered by former PM David Cameron. Expected to inform infrastructure spending priorities through to 2050, the strategy was delayed at the start of this year – reportedly due to the government’s desire to refocus it on supporting a low-carbon agenda. Now, with COVID-19 creating huge uncertainty over the shape of Britain’s future economy, is there a case for going back to the drawing board?
Speaking in a recent Global Government Forum webinar on the role of infrastructure in levelling up the UK economy, Greg McClymont – assistant director for transport and place at the National Infrastructure Commission (NIC) – cautioned against a knee-jerk response to the pandemic. The NIC undertook the scoping work for the strategy, publishing a National Infrastructure Assessment in July 2018 to which the strategy itself was expected to be the government’s official response.
If the shift to remote working demanded by the pandemic proves persistent after the immediate threat has receded, we’re likely to see – for example – much lower demand for commuter transport, and an increased need for digital infrastructure. But in McClymont’s view, many of the key assumptions around the UK’s infrastructure needs are likely to remain valid.
“Obviously it’s difficult, because there’s bound to be some [behaviour change] as a result of COVID. We don’t know what it will be, and so there’s a temptation to say wait and see,” McClymont commented. “On the other hand, I think there are some things which we undoubtedly need… I would say almost 50% of your infrastructure strategy should be focused on tackling climate change and other environmental problems like flood defences, and there’s zero prospects of COVID having any effect on those.
On transport, he added, “obviously there is some risk that if you start work now you pick the wrong things.” But it takes years to get big infrastructure projects into delivery, he argued, and by then “we’ll know more about how we might want to adjust the plans. And it’s pretty unlikely that they’ll turn out to be totally unnecessary, even if you need to adapt them. So we would say to government: ‘Yes, you need to get on and do a national strategy. Make it sensitive to the fact that you might need to adjust as things go. But don’t sit around and wait’.”
Pleas for action
Tim Wood, Northern Powerhouse Rail director at Transport for the North, agreed that further delay is not an option. Northern Powerhouse Rail aims to boost productivity across northern England through improved rail capacity; and Wood argued that until this and other large transport schemes – including the extension of High Speed 2 (HS2) past Birmingham to the North – are implemented, the northern economy will continue to under-perform. “Within the North of England, we’re absolutely in a straitjacket; and there is no way without these transport interventions that we are going to start to have a blossoming economy,” Wood said. “If you go between Bradford and Leeds today, it’s eight miles but takes 26 minutes on the train. Can somebody please tell me if that’s right in the 21st century? I think not.”
Maria Machancoses, director of strategic transport advisory body Midlands Connect, said businesses and communities in her region also want to see action rather than more planning. The government has promised an ‘integrated rail plan’ setting out how planned rail infrastructure in the regions such as HS2, Northern Powerhouse Rail and Midlands Engine Rail will dovetail, she said. “We keep saying that the integrated rail plan has to be a plan – it cannot be yet another vision – and that the National Infrastructure Strategy has to [include] a plan of execution. We don’t want another 10 years of planning; if anything, we need to accelerate a programme of investment.”
Such investments will, in part, rest on Sunak’s review of the Green Book. Setting out how Treasury officials calculate the economic return on public infrastructure investments, this currently compares the financial cost of delivery to the value created by a project – including factors such as land released for development, jobs created and worker time saved. Because land and salaries are much more expensive in the South-East, investments here tend to look better value; even when spending the same money in the North would create more jobs, open up more land or lead to a bigger rise in local productivity. As northern business and political leaders said in an open letter to the chancellor shortly before the Budget, the Green Book will never lead to economic rebalancing because it favours areas where growth is already happening, rather than making growth happen in areas where it otherwise might not. The aim of levelling up, they added, needs to be “hardwired” into Whitehall spending decisions.
Recalibrate the calculations
Machancoses agreed that the Green Book and its benefit cost ratios (BCR) methodology is “just focused very much on numbers”, failing to “acknowledge the wider economic and social benefits” of a project. Investment decision-making, she argued, should factor in wider economic and social benefits, and it’s “very difficult to do that centrally. You need to understand what’s going on at a more ground level to make those informed decisions. So the Green Book does need revisiting, and it’s not going to be easy, but we’re going to have to bring in much wider factors including climate change.”
Angela Barnicle, chief officer for asset management and regeneration at Leeds City Council, pointed to a connection here with another aspect of the levelling up agenda: the goal of redistributing civil servants away from the South-East, which was explored in a previous webinar. Part of the government’s aim is to root policymaking more closely in local communities, and Barnicle argued that locating Treasury officials in the North would enable them to make more broad-based decisions on infrastructure spending.
“If the civil service is located in the places where we are writing these BCRs, you don’t then get lost in the nuances of equations etcetera,” she said. “It’s about [being] together on that journey and making sure the metrics we’re choosing to measure are delivering the outcomes we’re trying to achieve.”
Integrate vertically
Barnicle also argued for further commitment from government to “devolved integration” – creating stronger connections between national, regional and local officials. “If we are going to give funds out, let’s make sure that they are delivered at a local level,” Barnicle said. “In terms of that delivery, could the civil service embed themselves locally into a local team, rather than having a national team delivered out of Whitehall?”
McClymont echoed the need for spending priorities to be determined locally, given local authorities’ oversight of a broad range of policy areas such as housing, education and planning. “It’s not just transport – it is all of these other policies. And local authorities, unlike Whitehall, do actually manage all of these policies,” he pointed out, adding that this provides them with “a focus on one particular place and the ability to prioritise between policy areas.”
In certain parts of England, councils are joining forces to form ‘combined authorities’ (CAs) at the city-regional level, providing the ability to make strategic decisions across a conurbation. The West Midlands CA is “driving huge innovation” in areas such as transport and digital connectivity, said Machancoses. But she stressed the need for CAs to forge links with their wider hinterlands to ensure seamless infrastructure provision.
Connect horizontally
Midlands Connect is a “big footprint body”, she explained, reaching well beyond the West Midlands CA into “the Marches, Herefordshire, the shires – which are extremely important when it comes to economic activity in terms of agri-food, agri-tech, manufacturing, and so the needs are very diverse” across her patch. “This cannot be just about core cities and urban centres, as important as they are. We need to acknowledge that core relationship between us.”
Bodies such as hers, she added, should work with CAs on topics such as 5G and autonomous vehicles – extending innovative policies beyond the CAs’ footprints. “We want to roll it out at a wider scale,” she said. “People [do not] acknowledge boundaries, and they don’t want to go to one part of the Midlands and then the moment they go somewhere else, the standards [of infrastructure] fall dramatically.”
Concluding, Northern Powerhouse Rail’s Tim Wood said that the scale of the challenge presented by COVID-19 means it’s now imperative for decisions over critical infrastructure to be made swiftly and by a wider range of stakeholders. “We need to be front and centre in making the right kind of decisions first time. Where are the answers? Not necessarily all with the policy makers,” he said, adding that many lie “within the construction and design industries: they can bring innovations to the fore, but have actually been really suppressed over the years.”
“There is a massive ill wind coming in this country,” he added. “We can’t keep kicking the can down the road on these things, because there’s going to be millions of people affected. It’s important to get that key message across: that now’s the time to stand up and be counted.”
This webinar was the third session in a four-part online conference on ‘Levelling Up in the era of COVID-19’. The first session, featuring senior panellists including a former DEXEU permanent secretary, Treasury adviser and Northern Powerhouse chief, covered how the Levelling Up agenda should evolve in response to the pandemic, and examined the best ways for government to realise its goals. The second session explored the government’s goal of redistributing civil servants away from London and the South-East. And in the fourth session, panellists discussed how combined authorities can achieve far more than individual councils.
You can also watch this entire panel session:
About Ben Willis
Ben Willis is a journalist and editor with a varied background reporting on topics including public policy, the environment, renewable energy and international development. His work has appeared in a variety of national newspapers including the Guardian, Daily Telegraph and Times, as well as numerous specialist business, policy and consumer publications.
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UK needs to follow the example of NZ with its shovel-ready projects to kick start infrstructure spending, both in the cities and regions. Billions are earmarked to be spend on projects as small as rebuilding a decrepit and dangerous sports pavilion in a rural rugby ground on the east coast to building a facility for training trades graduates to help with the infrastructure rebuild in one of the smaller cities to ambitious rail corridors between major cities.