HM Treasury: Planning for economic infrastructure - Public Accounts Committee Contents

3  The impact on consumers

18.  Because the Government expects most new economic infrastructure to be wholly owned and financed by the private sector much of the cost of new infrastructure will fall on consumers rather than taxpayers.[34] There are difficulties in trying to estimate what the impact on consumers will be of future infrastructure investment. Policy decisions will affect infrastructure investment and the costs of certain types of infrastructure that will be built in the future are currently unknown. [35]An example is nuclear power generation where the unpredictability and constant escalation of costs makes cost estimation difficult.[36]

19.  Consumers have already been hit by rising energy bills owing to increases in world energy prices before taking account of the additional impact of the cost of infrastructure investment.[37] There has been no overall assessment by Government of the future impact of infrastructure spending on consumers. Affordability has been judged and addressed in individual sectors such as energy although these sector assessments have contained considerable uncertainty. Infrastructure UK initially planned to develop an overall framework for judging affordability but subsequently decided it was not feasible to establish such an overall framework.[38] The Treasury argues that there are a range of factors, not just infrastructure, that affect households' cost of living. These include council tax, import prices and the devaluation of sterling. The Treasury considers, therefore, that the cost of living has to be monitored through a broad affordability framework but has not ruled out a framework just focussing on the aggregate impact on consumers of infrastructure spending.[39]

20.  Those on low incomes are particularly at risk from the impact that infrastructure spending may have on consumer bills. The Treasury is concerned about the impact of costs on the poorest people. The Government already supports citizens on low incomes through initiatives such as the Warm Homes Initiative and Winter Fuel Payments for pensioners. If new infrastructure investment adds to future household bills then this will raise further issues about the distributional effect of the costs on consumers.[40]

21.  The Treasury also has to consider the macroeconomic effect of increased prices that may arise from infrastructure spending. The Treasury told us that some of the estimates as to why the economy is still 6% smaller than before the economic crisis is the rise in household bills and the impact this has had on living standards and consumer spending.[41]

34   C&AG's Report para 17 Back

35   Q161 Back

36   Q8 Back

3 37  7 C&AG's Report paras 3.2-3.3, Qq 97-98, 175


38   C&AG's Report para 17 Back

39   Q162 Back

40   Q102 Back

41   Q102 Back

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Prepared 29 April 2013