State of the Nation 2018: Infrastructure Investment

Today, ICE launches a new report exploring options for the financing and funding of the UK’s economic infrastructure.  

  • Updated: 18 October, 2018
  • Author: Paul Sheffield, Steering Group Chair, State of the Nation 2018: Infrastructure Investment

State of the Nation 2018: Infrastructure Investment explores opportunities to improve the flow of investment and examines funding mechanisms to ensure that affordable infrastructure is viable long into the future.  

Building on the Institutions’ National Needs Assessment in 2016, this report recognises that the demands on infrastructure services are changing and increasing, with pressures from population growth, ageing demographics, increasing urbanisation, and resilience issues due to climate change. It further seeks to define how we can pay for resilient new and existing infrastructure the UK will need to 2050 and beyond.  

Policies for a funded future  

State of the Nation 2018 makes eight recommendations for government to consider. The full list, along with a link to the report, is below.

Four of the report’s recommendations focus on sector-specific ideas to help ensure clear and sustainable lines of finance in the future. One of those looks specifically at how we can better fund the UK’s roads. 

The UK has 24,000 miles of local roads in need of essential maintenance, which will cost at least £5bn over 10 years to repair. Alongside the move to a zero-carbon vehicle fleet, which will reduce the viability of fuel duty, it's more important than ever that we talk about how the next generation of road transport levies will be raised.  

ICE recommends government consider a ‘pay as you go’ road charging scheme to replace Fuel Duty and Vehicle Excise Duty. 

Importantly, this recommendation has the support of nearly half of adults (47%), with less than a quarter (23%) opposing it. Some 30% are either undecided or don't have an opinion either way.   

The revenue raised through the charges could be used to improve and maintain local roads. Further, such a scheme could have additional benefits, utilising GPS and telemetric technology to create more efficient journeys, or make better use of capacity by recommending alternative routes.  

Funding options

The other four recommendations relate to overarching government policy, which has the ability to influence and change future funding and finance.  

The report recognises that some lines of credit may be lost when Britain leaves the European Union. To ensure that financing options remain open for development of our infrastructure network, ICE recommends that government consider contingencies.  

If a renegotiated relationship with the European Investment Bank isn't possible post-Brexit, the government should continue to examine how we make better use of the under-utilised UK guarantee scheme in combination with some form of a UK investment bank.  

The UK must also ensure long-term planning is in place. The investments we make today will pay dividends for generations to come, which is why ICE recommends the National Infrastructure Commission (NIC) be placed on a statutory footing in the long-term.

It takes years to plan and build infrastructure that lasts for decades, if not centuries. This goes far beyond the political cycle of any one parliament and it’s important to ensure that there's a consistency of approach.  

Giving the NIC a role set out in legislative terms and answerable to parliament would ensure both its permanence and reassure both the industry, and investors, that our commitment to long-term thinking is here to stay and that their voices are listened to.  

Continuing the conversation  

As an industry, we want to work with government to ensure a viable and sustainable future for UK infrastructure. The government’s responses to date have been encouraging, with the creation of the Infrastructure and Projects Authority and the NIC. ICE will listen with interest to the budget and the government's response to the National Infrastructure Assessment.  

We also want to hear from our members, as well as individuals and companies working within the sector.

It's important that we all contribute to the discussion, provide evidence to inform decision making and help deliver the bridges, roads, rail track, pipes and cables which will drive Britain in the decades to come and ensure infrastructure fit for an innovative and productive, global trading nation.  

Recommendations  

Sector-specific interventions to enhance infrastructure investment

  • The government should give serious consideration to replacing the existing generation of road taxes with a ‘pay as you go’ model for the busiest roads in England. 

  • Energy storage and other emerging technologies should receive enhanced government support through appropriate mechanisms drawing on the successful impact of Contracts for Difference on the renewable energy market. 

  • Water Asset Management Periods should be flexible enough to enable the planning and delivery of long-term programmes, which meet future demand caused by demographic and climate changes and enable more effective financial planning. 

  • Market-led proposals in rail should be reformed in a way which simplifies applications and respects the sharing of intellectual property from all bidders. 

Overarching policy recommendations for government 

  • The feasibility of establishing a UK investment bank should be explored as a contingency against a loss of access to low-cost anchor finance from the European Investment Bank and to maintain domestic expertise in infrastructure investment. 

  • Active steps should be taken to facilitate the use of alternative funding and financing mechanisms, including asset recycling, land value capture and crowdfunding. 

  • The National Infrastructure Commission should be placed on a statutory footing in the long term to ensure its permanence and enhance its ability to give independent expert advice. 

  • The National Infrastructure and Construction Pipeline should support the investor community through providing increased detail of the risk and viability of individual projects. 

Download this report

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