Chancellor announces major plan to get Britain building
Four-point plan to get Britain building will change the way vital infrastructure projects are planned, determined and funded.
First, planning rules on brownfield sites are being removed to free up land for development, the housing budget directed towards new ‘low cost homes for sale’ for first-time buyers and housing association tenants given the right-to-buy to increase home ownership and construction.
Second, the existing 89 Local Authority pension funds will be pooled into half a dozen British Wealth Funds, each with assets of over £25 billion. This step will save millions of pounds every year in costs and fees. The new funds will develop the expertise to invest in infrastructure.
Third, the government will bring forward sales of land, buildings and other assets the government bought or built, raising up to £5 billion over the course of this Parliament. The funds from these sales will be recycled to help fund new infrastructure projects.
Fourth, a new independent National Infrastructure Commission (NIC) is being created today (5 October 2015). It will be charged with offering unbiased analysis of the UK’s long-term infrastructure needs. The NIC will begin work immediately. Lord Andrew Adonis will lead the Commission as its first chairman.
Commenting on the National Infrastructure Commission the Chancellor said:
The Commission will calmly and dispassionately assess the future infrastructure needs of the country and it will hold any government’s feet to the fire if it fails to deliver.
I am delighted that the former Cabinet Minister and Transport Secretary Andrew Adonis has agreed to be the Commission’s first Chair and help us create Britain’s plan for the future.
Lord Adonis said:
Without big improvements to its transport and energy systems, Britain will grind to a halt. I look forward to establishing the National Infrastructure Commission as an independent body able to advise government and Parliament on priorities. Major infrastructure projects like Crossrail and major new power stations span governments and parliaments. I hope it will be possible to forge a wide measure of agreement, across society and politics, on key infrastructure requirements for the next 20 to 30 years and the assessments which have underpinned them.
I will sit on the crossbenches in the House of Lords while chairing the NIC, to underpin its independent status.
BACKGROUND
Housing
To make use of unused land the Chancellor has called for an ‘urban planning revolution’ on brownfield sites. Unnecessary planning obstacles can act as a deterrent to building - a survey of small builders in 2014 continued to cite planning as the biggest ‘business challenge’.
Following the 2015 Productivity Plan the government will legislate to provide automatic planning permission in principle on all brownfield sites on the “brownfield register”.
The Right to Buy scheme has proved popular with Local Authority tenants with a 319% increase in the number of sales between 2011-12 and 2013-14. Extending the scheme to Housing Association tenants will mean that up to 1.3 million tenants can buy their homes.
British Wealth Funds
The 89 local authority pension funds are to be pooled into half a dozen British Wealth Funds. This will reduce costs, saving the beneficiaries of the schemes millions of pounds every year.
It will also change the way pension savings are invested. The funds will follow international norms for investment, meaning larger sums being invested in infrastructure.
Currently, small local pension funds lack the expertise to invest in infrastructure. Overall, across £180 billion of assets, only 0.5% is invested in such projects. In countries with larger pooled public pension funds up to 8% of assets are infrastructure and 17% are housing and infrastructure.
Asset sales and investment
The government will commit to further infrastructure spending, bringing forward sales of land, buildings and other assets the government bought or built, raising up to £5 billion over the course of this Parliament. The revenues from these sales will be used to help fund new infrastructure projects.
National Infrastructure Commission
The NIC will be created immediately on an interim basis, and will later be put into statute. It will deliver a long-term plan and assessment of national infrastructure needs early in each parliament, setting out what a government is expected to do over the next five years. It will be overseen by a small board, appointed by the Chancellor, and able to commission research and call for evidence from public sector bodies and private sector experts.
The NIC will start work immediately with an initial focus on:
- plan to transform the connectivity of the Northern cities, including high speed rail (HS3)
- priorities for future large-scale investment in London’s public transport infrastructure
- how to ensure investment in energy infrastructure can meet future demand in the most efficient way
The Commission will publish advice to the government on these issues before next year’s Budget. It will also begin work on a national infrastructure assessment, looking ahead to requirements for the next 30 years.
Transform the connectivity of the Northern cities
The NIC will work with Transport for the North on their developing plan to improve radically the connectivity of the cities of Northern England, including through high speed lines, and publish advice by Budget 2016. It will engage with Network Rail, High Speed 2, Highways England, the Department for Transport, the Treasury and other stakeholders.
Best approach to future large-scale investment in London’s transport infrastructure
The NIC will advise the government, by Budget 2016, on the best approach to large-scale future investment in London’s transport infrastructure. It will consult closely with the Mayor for London, Transport for London, and the Greater London Assembly.
Delivering future proof energy infrastructure
The UK’s power sector has a growing problem in matching demand and supply, meaning that keeping the lights on requires a level of redundancy in the system – generation which is not always used. The NIC will look at how to optimise solutions to this problem, including through large scale power storage – where innovation is needed to bring down costs; demand management – how to incentivise flexibility in demand so we don’t need as many power stations; and interconnection – how we best link the UK to the markets in the rest of Europe.
5 year National Infrastructure Strategy
The NIC will provide an assessment of the UK’s infrastructure needs every 5 years, looking 30 years ahead and examining the evidence across all key sectors of economic infrastructure – including energy, roads, rail transport, ports and airports, water supply, waste, flood defences, digital and broadband. As part of this work it will consider how investment in these sectors can support housing development.
In doing so it will help to create a better understanding of the UK’s long-term needs for significant new infrastructure to foster sustainable economic growth across the UK. This will help promote forward planning and timely investment decisions, and provide greater certainty for investors.
The Commission’s remit will be to consider future infrastructure of national significance. It will not re-examine existing government infrastructure commitments, and it will not re-open regulatory price controls. Neither will it look at Heathrow and airports in the South East or re-examine the work of the Airports Commission.
The NIC will seek to promote knowledge of and debate on international best practice in the planning, financing and delivery of major infrastructure.
Operation of the interim NIC
The NIC will begin work immediately in an interim form, before being made permanent by legislation. It will operate within a remit set by the Chancellor, which will include setting limits to the potential costs of the Commission’s recommendations to taxpayers and consumers.
The NIC will provide a comprehensive report on the UK’s infrastructure needs. The government will be obliged to respond to its recommendations, either accepting them or setting out how the government will develop alternatives. It will report every five years, updating the reports on a rolling basis.
The NIC will consult widely on its recommendations, and where it looks at specific issues its work and evidence should, subject to legislation, feed directly into National Policy Statements, streamlining the planning process for major infrastructure projects. Parliament’s role in the approval of planning policy will be unchanged.
The Treasury will consult shortly on the terms of reference for the NIC and how it will advise government and go about its work.
The NIC will be made up of around 25-30 permanent staff, but will have statutory powers to allow it to draw on the expertise of the sectoral regulators, and key national delivery bodies such as Network Rail and Highways England.
The government will introduce early legislation to establish the NIC on a permanent, statutory basis.
Further information
-
Andrew Adonis is a former Transport Secretary (2009 – 10), Minister of State for Transport (2008 – 09), Minister for Schools (2005 – 08), and Head of the No10 Policy Unit (2001 – 05). He was a member of the independent Armitt Commission, which recommended an independent National Infrastructure Commission in 2013
-
Andrew Adonis will chair the National Infrastructure Commission until a permanent chair is appointed following the passage of legislation
-
he will work 4 days a week and will be paid at the starting-point of the permanent secretary salary scale, adjusted pro-rata for 4 days a week
-
a process will be immediately launched to recruit a Chief Executive for the National Infrastructure Commission who will assist the interim Chair in establishing the new organisation