Infrastructure Bill [HL]

Written evidence submitted by Which? (IB 44)

About Which?

Which? exists to make individuals as powerful as the organisations they deal with in their daily lives. We are now the largest consumer body in the UK with more than 800,000 members: we understand consumers and what makes them tick. We operate as an independent, a-political, group social enterprise working for all consumers and funded solely by our commercial ventures. We receive no government money, public donations, or other fundraising income. We plough the money from our commercial ventures back into our campaigns and free advice for all.

Summary of response

Which? wants to see better scrutiny of infrastructure investment to ensure spending is kept in check and projects are affordable for consumers. We support new clauses 14 and 15 which would give the Government the power to task a new independent body with scrutinizing infrastructure spending.

According to Which? analysis of the 2014 National Infrastructure Plan, £327 bn expenditure is planned on updating the UK’s infrastructure programme by 2021. £214 bn of this (up from £151bn over the seven-year horizon in 2013 [1] ) will be funded privately, meaning that these costs will eventually be passed onto energy, water, tr ansport and telecoms consumers.

It is essential that we invest in our aging infrastructure. However, Which?, the National Audit Office and the Public Accounts Committee have all raised concerns that neither the Government nor regulators have a clear understanding of the impact of this investment on household bills, particularly for those on low incomes. This Bill presents an important opportunity to deliver the cost scrutiny that is needed to ensure infrastructure spending delivers value for money and is affordable for consumers.

New Clauses 14 and 15 - ‘Impact of infrastructure spending on costs for consumers’

Which? supports new clauses 14 and 15, which would allow the Chancellor of the Exchequer to require regulators provide data about infrastructure spending. The Treasury would then have th e duty to scrutinise this data, or delega te the scrutiny to another body, and publish an assessment of the impact that infrastructure spending has on the costs of bills and products and on affordability for different groups of consumers.

Which? is calling on the Government to create a new independent body, the Office fo r Regulatory Scrutiny (ORS), to carry out this analysis. It should:

· Estimate the impact of infrastructure spending on consumers’ bills

· Monitor whether infrastructure investment is being delivered efficiently and providing value for money

· Assess consumer outcomes in essential markets, and the impact that regulators are having

Which? thinks the ORS should operate along similar principles to the Office of Budget Responsibility and Low Pay Commission. It is needed in order to provide independent data that can be used to hold politicians, regulators an d industry to account, and which can be used by the Treasury to make an affordability assessment. T he ORS should have powers to request data and reports from regulators and the firms they monitor, and have a board representing regulators, businesses and consumers.

Why better scrutiny is needed

Simple arithmetic shows that the £214bn of private investment planned by 2021 equates to roughly £1,150 per year per household in the UK - a £400 increase from last year [2] . T his is not to say that this is how much consumer bills will rise in that time – higher prices will also fall to businesses, and companies making investment may spread the cost over a longer period of time. What is clear, however, is that all of these costs will at some time or another have to be paid for by user bills, and that any increased costs for businesses will eventually be passed on to consumers.

This comes at a time when essential goods and services have already seen price-rises significantly above-inflation throughout the last decade. Which? analysis of ONS data shows that the sum total of household expenditure on energy, water bills, communication, and travel fares combined had increased from £58.7 billion in 2003/04 to £73.5 billion in 2012 (adjusted into 2012 prices). Price increases in these essential services also tend to have the biggest impact on those on low incomes. We found that those in the lowest income quintile spent 12% of their spending in these areas, compared to 8% for the highest quintile. Without proper scrutiny, new infrastructure projects could result in unaffordable rises in bills for consumers, particularly those on low incomes .

At the 2010 Spending Review, the Treasury broke new ground by publishing a distributional breakdown of the impact of departmental spending changes. In a similar way, Which ? wants to see a proper analysis of the impact that the £ 214 billion of planned private infrastructure investment will have on different groups of consumers.

The UK Regulators Network (UKRN) are undertaking some good work to ensure that the regulators in different sectors are joining up better and learning from each other. It has been suggested that they could undertake this work, however, Which ? believes this would be inappropriate.

The UKRN sets its own work programme and relies on the agreement of the 10 Chief Executives from the regulators that make up the network. The UKRN are unable to conduct an independent and impartial assessment as results would, in part, reflect the effective functioning of regulators – and it would be inappropriate to ask regulators to judge their own performance. An independent body is needed to hold regulators and Government to account and ensure results are robust. In addition, the UKRN relies on good will of regulators to provide staff resource - which might be difficult to secure in the event of a critical assessment of one or more sectors.

January 2015

[1] 1. Which? analysis of 2014 National Infrastructure plan to 2021, compared to 2013 National Infrastructure Plan to 2020.

[2] 2. According to the 2013 National Infrastructure Plan, £151bn of private investment was planned by 2020 which equates to roughly £750 per year per household in the UK.

Prepared 15th January 2015