Report highlights UK government’s ‘weak’ infrastructure decision-making

By on 29/06/2017
Hinkley Point C Jetty construction, one of the major controversial infrastructure projects the report criticises (Image courtesey: EDF Energy).

The UK government “struggles” to make decisions on big infrastructure projects, wasting civil servants’ time and taxpayers’ money, a specialist UK think tank has warned.

A report by the Institute for Government (IfG) published today says that “weak” decision-making processes on infrastructure investment in the UK put the government at risk of pursuing projects that fail to deliver the expected economic benefits.

Citing past projects such as the costly Millennium Dome, which lay empty for several years, the IfG argues that government is not always “adept” at picking the best investments.

“This is a serious problem,” the report says, highlighting a £245bn (US$318bn) pipeline of planned infrastructure projects in the UK. “Picking the wrong infrastructure projects can lead to white elephants – projects that deliver scant economic dividends compared to better alternatives, wasting public money in the process.”

The report looks at six major and controversial infrastructure projects in the UK: the third runway at Heathrow airport; the HS1 and 2 high-speed rail links; Hinkley Point C nuclear power station; the Jubilee Line underground extension; and the Thames Tideway Tunnel.

Think tank staff identified a number of shortcomings across these projects, which they believe make it more difficult for the government to draw “sound, timely” infrastructure decisions.

One is that the lack of a national strategy for infrastructure investment obfuscates the process of choosing projects based on a clear need. The report says this is evident in the case of HS2, the purpose of which has shifted over time.

“Without a clear understanding of what goals government wants to achieve, it is almost impossible to test [proposals] against meaningful alternative options. In the absence of a strategy, the choices and sequencing of UK infrastructure have not been clearly explained, contributing to investor uncertainty and higher costs of capital,” the report says.

Another issue identified by the report is the use of “questionable” models to forecast the economic impact of projects. The IfG believes this has been a problem with both Heathrow and Hinkley Point C, which were green-lighted on the basis of allegedly “uncertain” long-term forecasts.

“Criticisms of individual projects are often driven by concerns about the robustness of their business cases. Despite these concerns, successive governments have failed to communicate the inherent difficulties of modelling large projects with long-term payoffs, and continue to put more weight on these estimates than may be justified,” the report says.

The IfG also argues that government is often poor at learning from past errors because of “insufficient” evaluation of projects after completion. This means opportunities for improving pre-project modelling are being missed, despite evidence suggesting that when evaluation is carried out, forecasting and thus value for money both improve.

The report notes that the government has made some “worthwhile” reforms in recent years to its infrastructure decision-making capabilities, such as the formation of a National Infrastructure Commission and an Infrastructure and Projects Authority in 2015. “However, urgent action is required to address remaining and persistent issues,” the report adds.

The IfG said it would be carrying out a two-year programme to support government in getting infrastructure planning “right”, focusing on modelling, finance, politics and institutions.

Nick Davies, IfG research manager and co-author of the report, said: “Britain desperately needs upgrades to its infrastructure. But too often projects are given the green light based on questionable assumptions, a lack of strategy and without learning from past mistakes. Government decision making must improve significantly if we want to reap the benefits of smart infrastructure investment.”

A spokesman for the Treasury, which shares responsibility for infrastructure with the Cabinet Office, said in a statement on the report: ““We are increasing government investment in infrastructure by over 50% over the next four years, ensuring Britain is match-fit for the opportunities ahead.

“Since 2010, around 3,000 projects have been completed, over a quarter of a trillion pounds invested and the largest engineering project in Europe [Crossrail] will soon be completed.

“We have also improved the way that decisions are taken over our transport, digital and energy projects, by setting up the National Infrastructure Commission to provide impartial, expert advice on our future needs and priorities.”

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See also:

Infrastructure investment gap could cost U.S. economy $4tr and 2.5m jobs, study warns

Germany announces $299bn infrastructure investment

Britain to get new Infrastructure Commission

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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