In this fortnightly blog, ICE's Director of Policy Chris Richards looks at developing policy landscape for infrastructure, what decisions mean, and their implications, so that infrastructure professionals can play their part in shaping the discussion.
1. Infrastructure Australia prioritises regional schemes in an annual list
The infrastructure commission in Australia has published its annual update to Australia’s ‘Infrastructure Priority List'with a heavy focus on projects that would benefit regional communities in the wake of the Covid-19 pandemic.
Forty-four new proposals have been added, the largest ever, with 10 projects moved off the list into construction. Projects on the list have a full business case already developed and remain on the Priority List until delivery or construction begins. In publishing the list, Infrastructure Australia drew on their 2019 needs assessment and recent research that showed the changing use of the Australian infrastructure system as a result of Covid-19:
“We have seen changing work patterns, a pause on Net Overseas Migration, and a 200% increase in people moving from capital areas to regional areas. These changes present a range of new challenges and the Priority List looks to identify infrastructure investments that will meet the diverse needs of our communities in this new environment.”
Strategic infrastructure planning in Australia is something we looked at in deriving theEnabling Better Infrastructure principles. The process provides a transparent and prioritised list for state and federal governments to focus their decisions on funding and financing. The process is a useful lesson for other federal countries on prioritising across different government tiers. The approach for the 2021 list also considers Covid-19 implications similar to ICE’s study last year.
2. ASCE 2021 report scores US infrastructure a C-minus
The American Society for Civil Engineers (ASCE) has published its 2021 report card scoring America's infrastructure system a C-minus, up from D-plus in 2017, ‘the first time outside the D range’.
However, 11 of the 17 categories received scores in the D range, with ASCE noting the financial gap between forecast spend and what is needed stands at 2.59 trillion US dollars. State report cards have also been published.
Alongside the challenges requiring urgent attention, the report highlights innovations in delivery across different states, providing ample case studies for use worldwide.
Examples include a collaborative approach to water and broadband installation in rural Illinois, which has reduced fibre broadband deployment cost by two-thirds and enabled the installation of smart meters to provide live data on the water network.
Unlike countries such as Australia, the USA doesn't have a government-sanctioned infrastructure needs assessment for federal and state levels. Instead, organisations like the ASCE or the Regional Plan Association at the State level provide these as a sound evidence base for action. This approach is similar to the State of the Nation reports ICE used to undertake before the National Infrastructure Commission came into existence.
3. Further detail announced on UK government Levelling-Up Fund
At Spending Review 2020, the UK government announced the creation of a levelling-up fund, which local authorities would bid into to finance infrastructure and other priorities. Spring Budget 2021 provided guidance on how local areas can submit bids outlining the initial themes for proposals and the process for bidding.
Local authorities were also placed in one of three priority categories – however, these categories' criteria are oddly missing.
The guidance cover transport themes, town centre regeneration, and cultural investment as part of the first round of applications to the nearly £5 billion fund. Members of Parliament will also be involved in selecting a bid for their area that they see as the priority.
A lot has been written about the fund and how spending will be allocated, with accusations of the fund being a vehicle to promote Conservative MPs' profiles in parliamentary seats recently gained from the Labour Party. However, the government would retort they were elected with a mandate to do things differently, and the fund is one example of that.
We are still progressing down the ‘levelling-up’ path without a clear sense of direction.There is a weak definition or clarity on outcomes, and a lot of money could be wasted on nice but ineffective interventions. Getting an answer to the question ‘how will we know we’ve levelled up?’ is a subject ICE is currently exploring, including a recent Presidential roundtable on the topic.
4. South African government looks to increase domestic pension fund investment in infrastructure
Countries are looking to infrastructure investment to provide a post-pandemic stimulus, and South Africa is no different.
In the recent South African Budget statement, the government announced changes to pension fund investments' rules to enable more money to flow to infrastructure in the country. The existing rules are designed to minimise investment risk to retirement funds by limiting how much of each type of investment a pension fund can hold.
For some countries, attracting private finance or raising debt to support the level of post-Covid stimulus required will not be easy, particularly where debt levels are already significant or have increased due to the finance necessary to manage the economic effects of Covid-19.
South Africa is in this category of countries, as the country's finance minister put it in his speech, “we owe a lot of people a lot of money”.
The government is therefore looking to other sources to boost the investment needed in infrastructure. The pension rule changes would define infrastructure for the first time to support transparency. The changes also separate previously grouped asset classes (hedge funds, private equity and other assets) and raises the investment limit for private equity – which the government claims has a positive impact on infrastructure projects over and above the financial impact – from 10% to 15%.
Investment by pension funds in infrastructure construction and operation is well documented, most notably the Ontario Teachers’ Pension Fund, which owns many infrastructure assets in the UK. Other countries may look at South Africa’s rule changes as just one way to unlock domestic sources of finance in the months and years ahead.
In case you missed it...
- Is there a need for a bridge between Northern Ireland and Great Britain? We look at what the public think
- What did the UK Spring Budget 2021 have to say about infrastructure? We look at the new UK Infrastructure Bank and the Chair of the APPG on Infrastructure gives his thoughts. A short digest of all the relevant announcements is also available here
- The Public Accounts Committee has accused the UK government of having no plan to achieve the net-zero carbon target - our analysis of its report is here