The government has today published its new 10-year Infrastructure Strategy. Alongside last week’s Spending Review, this is an important moment that sets the trajectory for a decade of expanded infrastructure investment. This is vital to improve the UK’s growth prospects. Supported by bold planning reforms, the government is rightly seeking to transform the UK into a higher investment economy, through greater public and private funding. The government deserves credit for reforming its fiscal rules to enable significantly higher public investment, but just as significant is the role that private capital will play in delivering what amounts to a £725 billion programme over the next decade.
The government has rightly placed social infrastructure, such as housing and healthcare facilities, on a par with economic infrastructure. This is welcome recognition that social infrastructure plays just as significant a role in supporting the economy, and that infrastructure should be developed holistically.
It is also welcome that the government has recognised the importance not just of building new social infrastructure, but also renewing and properly maintaining existing facilities. It has carved out a dedicated estates maintenance programme for the NHS, schools and colleges, and prisons and courts. This is important to ensure facilities’ continued productiveness and to get best value for money for taxpayers by ensuring they operate to their full expected lifespan.
However, although this investment may help to slow the degradation of the public estate, it may not be sufficient — even over the decade of the strategy — to turn the tide. The existing backlog across hospitals, schools, prisons and courts exceeds £25 billion and is ever-expanding. The NHS commitment restates the settlement announced at the Spending Review last week, in which overall NHS capital investment was flat.
In our report “Rebuilding the Nation 03: Infrastructure Investment Partnerships” published in September, we argued that the government should develop a new approach to public-private partnerships (PPPs) to help address these challenges.
We are delighted to see that our recommendation has been taken up. With PPPs abandoned by Chancellor Phillip Hammond in 2018, the new 10-year Infrastructure Strategy rightly recognises this approach can deliver high quality, value-for-money infrastructure and its arbitrary exclusion from the Westminster government’s toolkit was counterproductive and risked inhibiting the ability to meet public policy goals. The commitment today to explore the use of PPPs in primary and community healthcare, for instance, could be transformational in delivering the government’s shift from hospitals into the community as part of its overall health mission.
It was encouraging to see the new Infrastructure Strategy refer to the Welsh government’s Mutual Investment Model (MIM) for schools, roads, and hospital projects, which was one of the examples we drew on when developing our own Infrastructure Investment Partnership model. We also called in our report for the development of a public infrastructure project pipeline to provide better visibility to investor and supply chain companies of potential opportunities, and are delighted to see this recommendation taken up.
The government rightly emphasises the importance of value for money as the driving force for deciding which funding model to use for different infrastructure projects. Yet while this is emphasised in relation to the use of private finance for infrastructure, scrutiny of publicly financed projects remains weak. To be able to make meaningful comparisons of value for money between financing approaches we also need long-term data on the cost of operating and maintaining publicly financed infrastructure.
All projects – whether publicly or privately financed – create long-term funding obligations for taxpayers and/or billpayers, not just in terms of building but also in ongoing operational and maintenance costs. Private finance allows for significant visibility over these costs decades ahead. Anyone can access the Treasury’s database on historical Private Finance Initiative (PFI) projects and see estimates of projected annual costs out to 2050. There is no equivalent cost projection for publicly financed projects. Not only does the government not publish this data, it does not collect it.
As it moves to delivering its Infrastructure Strategy, the government should commit to producing assessments of the long-term costs of publicly financed projects and publishing this data as part of its welcome move to publish business cases for larger projects. Only then will we be able to make proper comparisons between different financing approaches and their long-term costs to the taxpayer. The current asymmetry in available data skews the public debate and prevents proper scrutiny of the value for money of all projects. Being able to make informed decisions about which funding model to use when will be critical to seeing today’s commitment to make “careful, targeted use of PPPs” translate into more and better public infrastructure in the future.
