My Lords, I am not an economist and therefore have no intention whatever of venturing into the debate on the deficit, its causes and how it might be tackled. However, I want to reflect on the fact that in this House and beyond there would be consensus that growth, when it comes, will to a large extent be dependent on infrastructure investment, particularly on transport. That point was very well made by the Association of British Chambers of Commerce in its briefing for this debate.
It is often said that transport plays a fundamental role in the economic, social and environmental well-being of our country. Everybody says that, and to an extent they understand it, yet this sector is bedevilled by lack of coherence. Interaction between levels and tiers of government and with industry and finance is haphazard and leads to poor and often random outcomes. A key constraint is the uncertainty of delivery of large publicly funded infrastructure schemes. Current mechanisms often work in total isolation from the development planning process and from financing.
As an honorary fellow of the Chartered Institution of Highways & Transportation, whose members are drawn widely from across the sector, I can commend to the Government the work that it has done to see how this situation can be improved. Its work has shown that there is potential for generating private sector capital through planning gain and the uplift in land values through investment in transport. This is the ethos that underpins the Government's community infrastructure levy, but much more needs to be done to ensure that government at all levels enter into true partnership with the private sector which needs encouragement to look at profit sharing and collaborative arrangements regarding land acquisition.
The majority of road schemes are and will remain local. With the localism agenda firmly in place, the mechanisms we use to deliver local infrastructure are urgently in need of review. The newly created local enterprise partnerships could take the lead in creating local infrastructure funds, a hybrid public and private sector vehicle for delivering local schemes and giving modest capital returns on private investment. Perhaps the Government could look at how such schemes could work and could pilot some because that would enable local businesses and local citizens to work with local government to invest in their own area. These municipal bonds could include provision for investment from local authorities' own pension funds. If the Government were prepared to prime them by providing some forward funding, it would enable these projects to get off the ground. Their investment would be repaid afterwards by capturing the economic benefit of such schemes. It is often the case that cash flow prevents the private sector funding such infrastructure, but there will be provision to make profit later, so this would be a low risk and relatively low cost mechanism by which the Government could stimulate delivery, particularly of road infrastructure.
Other schemes are worth while but are not quite viable without some level of public support. Here the Government should provide grants to fill the gap and should prioritise those areas that deliver growth. Both gap funding and forward funding will bring forward additional private sector investment in several forms: infrastructure, development and business and employment investment. It is estimated that infrastructure investment can result in a multiplying effect on the economy of between three and six times the initial investment. The challenge is not so much funding it as bringing together planning, funding and delivery. If local government in particular could engage with businesses at an earlier stage, it would increase the chances of coming up with schemes that meet the objectives of both sides, giving each the incentive to make progress. It would also focus the minds of local authorities on schemes that are deliverable rather than on the lists of aspirations that lurk in local transport plans for years with no realistic chance of being delivered.
To bring back market confidence and to encourage parties to engage and investment to flow, we need new mechanisms that would reduce the initial costs of scheme development because at the moment this presents a considerable risk and a large, potentially abortive, cost to investors. This needs all parties to rethink their approach to planning and delivery and their respective roles in them. If the Government are serious about private sector investment in transport, they need to recognise that decision-making and funding decisions have to be streamlined and a more certain environment has to be created. This applies whether you are talking about local or national schemes.
The Government should also consider creating a national hybrid public/private investment funding scheme for large transport schemes. In such a scheme, private investors could pool the risk across a portfolio of transport investments. Decoupling investment from the success or failure of any individual scheme is a standard risk elsewhere and could be attractive in the transport sector.
The Government are looking at new models of managing our highway network, in which roads would become owned and managed by the private sector, regulated by central and local government. Funding would come through the existing system of allocating money or-whisper it quietly-could evolve into road-user charging for funding improvements and new schemes. There is considerable consensus throughout the transport industry that road-user charging could revolutionise the way we use transport by enabling tariffs to reflect the location of the road and the time when it is used. It remains as politically unacceptable today as it was a decade ago, when the Commission for Integrated Transport put its weight behind it. Unless there is an outbreak of political consensus to match the professional one, we will make no moves in the direction of road-user charging.
In the mean time, I suggest that the Government take a look at the work of the chartered institute and some of the models that I have suggested this evening. If they do not, they will simply fail to get private sector investment in transport and to deliver the role that new transport plays in developing growth.