Infrastructure UK, an advisory unit within the Treasury, was established in 2010 with a remit to specify what economic infrastructure is needed in the UK, to identify the key barriers to achieving that investment and to mobilise systems and resources, both public and private to make it happen. The first National Infrastructure Plan was published in 2010. The latest update of the plan, published in December 2012, comprised over 500 prospective programmes and projects for new economic infrastructure expected to cost £310 billion. Some 64% of this amount is expected to be spent on infrastructure that will be wholly owned and financed by the private sector. Consumers will bear most of the cost of this new infrastructure through bills for utilities and other services.
Investment in economic infrastructure is needed to replace ageing assets, improve public services and stimulate economic growth. Many of the investment proposals impact on energy supply and are therefore particularly time critical. We believe that this will lead to higher costs which will be borne by consumers. We are particularly concerned at the impact of higher energy bills on those with low incomes. However, we are not convinced that the current proposals represent a rigorous plan with clear priorities for action or with a clear programme for delivery.
The Treasury has identified 40 key projects and programmes. However, many of the programmes are broad categories and in total they include more than 200 individual projects. This does not suggest a properly targeted and prioritised infrastructure plan. The Treasury will need to work more forcefully with departments, regulators, contractors and investors to agree the priorities for the projects that will be undertaken and the ways in which the costs both for consumers, through bills, and taxpayers, through various forms of support, will be identified and contained. This needs to be addressed urgently.
The Government also needs to ensure that the legislative and regulatory framework provides sufficient certainty to secure the necessary private sector investment in a climate where the competition for capital is internationally competitive. In this regard the statutory framework provided by the Energy Bill is coming rather late in the day when the energy crunch is fast approaching. It is likely that the UK will buy ever more energy from overseas and at a higher price due to the failure to secure investment.
Most of the economic infrastructure investment required will be in the private sector using investment supported by government with households bearing the costs through higher bills or fares. In these circumstances greater transparency is needed over investors' costs, risks and rewards and more information is required on the long term costs falling on consumers in a form that will allow them to judge how they might respond.
On the basis of a report by the Comptroller and Auditor General, we took evidence on Planning for Economic Infrastructure from participants in the infrastructure sector, the Treasury, the Department for Transport and the Department for Energy and Climate Change.