National Infrastructure — Motion to Take Note

– in the House of Lords at 11:56 am on 22nd January 2015.

Alert me about debates like this

Moved by Lord Adonis

To move that this House takes note of the case for improving investment in and planning for the United Kingdom’s national infrastructure.

Photo of Lord Adonis Lord Adonis Shadow Spokesperson (Treasury) 12:01 pm, 22nd January 2015

My Lords, the case for improving investment in and planning for the country’s infrastructure is compelling and I hope that today’s debate will promote consensus in working towards this goal from all sides of the House. Although the value of investing in infrastructure is increasingly understood and supported by politicians and the public alike, we have got to make it happen, and my argument is that it will not happen on the scale required unless it is better planned, better led and better financed. I want to look to the future, but an understanding of past failures is essential to preparing for a better future, so I will highlight three areas of failure.

First, as a country, we have significantly underinvested in infrastructure, and there has been far too much stop-go in public investment, which is just as bad. This has been a problem during the entire post-war period, but the present coalition Government have provided a master class. Public sector net investment more than halved between 2010 and 2014, from £53 billion to £25 billion in constant prices—a decline from 3.3% of GDP to 1.5%. The OBR projects that public sector net investment, as a share of GDP, will fall further to just 1.2% by 2017 under the present Government’s forward spending plans, and it will stay at just 1.2% for the rest of the next Parliament. To put this in context, across the EU as a whole, public sector net investment has declined much less—from 3.6% to 2.9% since 2009. Yet even within this fast-shrinking total there has been damaging and expensive stop-go investment, particularly in the roads programme, which was slashed in 2010, only for a large number of schemes—including the A14, the A21 and the A27—to be reinstated last year.

On top of public investment in public infrastructure there is, of course, privately financed investment. In some of the privatised utilities—notably telecommunications and water—and in port and airports, there have been significant investment programmes, but here, too, there are serious deficiencies. Where is the superfast broadband in rural areas that has been promised for years? What has happened to the super-connected cities programme, only a fraction of which has been implemented? The electricity generation sector, although privately financed, is in a precarious position because of serious underinvestment in new generating capacity and long-standing political uncertainty about the most appropriate and cost-effective mix of new energy sources.

This brings me straight to the second long-standing problem. It has proved notoriously hard to forge long-term consensus on key infrastructure priorities and projects. This is not universally true, even of big, initially controversial projects. Crossrail, HS2, the Thames tideway tunnel, the Silvertown tunnel and the nuclear power programme are now progressing with broad consensus. But in all these cases they are progressing years—if not decades—later than they should have done. I hope it will be possible to reach consensus much more rapidly on HS3, linking the major cities of the north with much faster and higher-capacity trains, and we look forward to the Government’s plan, to be published in March.

However, in many vital areas, controversial projects have been stalled, for years if not decades. Airport expansion in the south-east of England, vitally needed bridges across the east Thames, many major new housing developments and new electricity-generating capacity have been stymied not just by understandable differences of opinion but by a protracted inability to resolve these differences at the political level. Heathrow, the Thames Gateway bridge, new nuclear power stations and onshore wind farms, eco-towns and swathes of undeveloped brownfield land in areas of high housing need are all bywords for years, if not decades, of indecision and inability to build consensus.

The third key failure of recent decades is the failure to regard homebuilding as an overriding national and local infrastructure priority, in the face of an escalating housing crisis. There is consensus that we need to be completing between 200,000 and 250,000 new homes a year to meet England’s population and household growth. When housing was a major national priority in the 1950s, 1960s and 1970s, this level of housebuilding was achieved in most years, reaching a peak of 437,000 new homes in 1968, which also happens to be the year after the state last designated a major new town—Milton Keynes. But it is now 25 years since 250,000 new home completions were achieved in any year. Under this Government the provision of new homes has barely exceeded 100,000 a year, which is not only a policy failure but a cause of acute anxiety and stress to families nationwide, particularly in London and the south-east, where population is booming.

How should we tackle these weaknesses? Partly it is a question of priorities and leadership. To govern is to choose; we need political leaders and government—national and local—choosing to give a higher priority to housing and infrastructure, prioritising funding, and being prepared to take controversial decisions where they cannot or should not be ducked. These will be key issues in the next Parliament. I am particularly glad to see my noble friend Lord Rogers of Riverside in his place. He has long been making the case for systematic planning for brownfield sites to tackle housing need, particularly in London. This requires planning not just of housing but the transport and other infrastructure required to unlock major sites. The result could be a new generation of city villages. But it simply will not happen without a strong lead and systematic support from central government developing its own landholdings, notably in defence and the NHS, mobilising local government too in a new national drive to transform housebuilding.

Institutions have a key role to play in promoting better decision-making in respect of infrastructure, and I want to set out two worthwhile institutional changes which, between them, could transform our national and regional infrastructure planning and delivery: first, devolution to city and county regions; and, secondly, an independent national infrastructure commission.

As a policymaker, I have long believed that R&D often stands for “rob and duplicate”. On devolution, hardly anyone would now dispute that the establishment of the Mayor of London and the Greater London Authority, with a particular brief to manage London transport and promote better transport infrastructure, has been a notable success. We now need similar institutions in England’s other city regions. As a former Transport Secretary, I can say with near certainty that without the Mayor of London there would be no Crossrail, no Overground, nowhere near as much upgrading of the Tube and bus infrastructure, and, although this is not the direct responsibility of the mayor, there would also have been less commercial development and even less new housing development in the capital. Indeed, a good part of the reason why we are stuck on airports is because the mayor and central government have been at loggerheads on the way forward.

It is also notable that the next most effectively led and cohesive of the city regions after Greater London, Greater Manchester, has been the next most effective in terms of transport infrastructure planning and investment. Witness the growth of the Manchester Metro and Manchester Airport, thanks to significant investment and effective regional planning. We need bold devolution for other city and county regions to enable them to promote infrastructure improvements in a similar fashion. The noble Lord, Lord Heseltine, said this in his excellent report, published two years ago. I urged it too in a report for my party last year. The challenge is to create fit-for-purpose institutions, which means more, and more powerful, combined authorities on the Greater Manchester model and devolving to them serious budgets, tax income and infrastructure planning powers. For London, there needs to be more devolution to the mayor and the boroughs, particularly in respect of housing.

I turn to national institutions. It is essential that we have better institutional machinery for assessing medium-term and long-term requirements for national infrastructure in a non-party fashion, not—I stress this—to replace government and Parliament as decision-takers but to support and strengthen them and to help build consensus. This is the purpose behind my party’s proposal for a national infrastructure commission, as recommended by an independent review led by Sir John Armitt, who, along with the noble Lord, Lord Deighton, played a key role in the planning and delivery of the Olympics. The commission would span a 25 to 30 year planning horizon, updating its assessments at least once a decade.

At the Report stage of the Infrastructure Bill in November last year, I moved an amendment to establish a national infrastructure commission. I hoped the Government would rob and duplicate the idea, particularly given the consensual way that the noble Lord, Lord Deighton, has gone about his job as infrastructure Minister. Unfortunately, this did not happen, perhaps because the noble Lord himself was not responding for the Government. I am more hopeful today because he is. In responding for the Government last November, the noble Lord, Lord Ahmad, did not address the key argument for a commission—to promote independent analysis of medium-term and long-term infrastructure requirements in energy, transport, telecoms, water, waste, flood defences and possibly also social infrastructure and major urban extensions, taking account of sustainability, both environmental and financial. In responding, the noble Lord, Lord Ahmad, simply retreated into an argument about the cost of a commission, although, of course, the Government already employ armies of civil servants and officials within Whitehall and their agencies to work on infrastructure planning. They are just not sufficiently co-ordinated, expert, long-term or independently led. The noble Lord, Lord Ahmad, also said that a commission,

“would distract from the business of providing the infrastructure that the country needs now and in the future”.—[ Hansard, 05/11/14; col. 1644.]

It could hardly distract from the future, since it is all about the future. It is stark, staring obvious that governments and the state need the capacity both to deliver in the present and to plan for the future. They are not either/or. Indeed, the Government accept this in principle, which is why they now publish an annual national infrastructure plan. The problem is that the plan is not really a plan. It is a catalogue of some projects already under way and many hundreds more in the ether with little overarching needs analysis, rationale or prioritisation. I know this from bitter experience. When I became Transport Minister in 2009, the nation’s forward plan for rail modernisation stopped in 2014, which is why we had no national plan for main-line rail electrification or high-speed rail, both of which take somewhat longer than five years to plan and deliver, and which relate to national needs over the next generation, not the next decade.

It is no surprise, then, that the World Economic Forum Global Competitiveness Report 2014-2015 ranks Britain 27th for overall quality of infrastructure—27th for a country with the fifth largest GDP in the world. It is no surprise either that the view of business leaders is that future growth and prosperity prospects are being undermined by weaknesses in planning and delivering major infrastructure. A CBI survey of 443 senior business leaders in November last year showed that 96% felt political uncertainty to be discouraging investment and 89% were supportive of an independent infrastructure commission.

Let me stress that an independent infrastructure commission is not a dangerous innovation. Australia has a successful one, Infrastructure Australia. It applies to infrastructure the principle of systematic, impartial advice and analysis which is taken for granted in other spheres. It is precisely the principle behind the present

Government’s decision to establish the Office for Budget Responsibility in 2010, to bring independent analysis and advice to bear on fiscal policy, although of course decisions on taxes and spending are a matter for government and Parliament. My party has endorsed the OBR, and it is here to stay. The last Labour Government also set up the National Institute for Health and Care ExcellenceNICE—to make recommendations on the funding of NHS medicines and treatments based on evidence of clinical and cost effectiveness. NICE, too, has been sustained and it is clearly here to stay. A national infrastructure commission would play an analogous role. Indeed, the Davies commission, set up by the present Government to recommend a strategy for extra airport runway capacity in south-east England, is precisely such a commission but with a single-issue remit. So I hope that we hear a more positive response from the Minister today.

Let me end on an optimistic note. London 2012, the greatest infrastructure project in Britain since the Victorians, was a model of national purpose, successful planning and effective delivery. If we can make an outstanding success of the Olympics, there is no good reason why we cannot do the same in modernising our transport systems, our utilities and our housing. 2012 was Britain at its best; let’s make it the model for the future. I beg to move.

Photo of Lord Sassoon Lord Sassoon Conservative 12:16 pm, 22nd January 2015

My Lords, as the former Commercial Secretary to the Treasury, I am very pleased that the noble Lord, Lord Adonis, has initiated this debate on infrastructure today. I should note that I am currently the chairman of the China-Britain Business Council.

This is the first infrastructure debate in which I have spoken from the Back Benches and I will start by congratulating my successor, my noble friend the Minister, on the expertise, the energy and the success with which he has driven forward the UK infrastructure agenda in the past two years.

No Government in recent UK history have better understood the case for improving investment in and planning for the United Kingdom’s national infrastructure. This Government have spent more and they have spent better than the last Government ever did.

Let us remember that note which was left by the last Government in the Treasury drawer in May 2012, saying:

“I’m afraid there is no money”.

That was the appalling background against which the easy thing to do would have been to cut infrastructure expenditure—but this Government did the difficult but correct thing of increasing capital spending, initially by up to £2.3 billion a year and then by switching a further £5 billion a year from revenue to capital spend.

Not only was it more expenditure, it was against a plan which the last Government never had: the first ever national infrastructure plan, to set out the challenge and to give transparency to infrastructure investors and contractors. That plan was and is at the heart of this Government’s pro-growth policies, and it is a plan against which the Government have regularly reported progress.

We also inherited a PFI programme which had been poorly executed by the last Government, with endless cases of inflated costs borne by taxpayers and excessive profits made by investors. This Government have attacked those excessive costs and, by the end of 2012, had exceeded their initial target of saving £1.5 billion.

This Government have not dodged the most difficult infrastructure challenges. As far back as 2003, the last Government published a White Paper on UK runway capacity, but for seven years they did not act on it. But this Government have set up the Davies commission to make a detailed study and recommendations on runways in the south-east. The last Government were frit. This Government have risen to the difficult challenges.

On the international front, the Government have put infrastructure at the heart of our commercial relationship with China—a relationship which had no such dimension under the previous Government. It has led to Chinese investment in our water and in our airport infrastructure, and that is to be welcomed. I would be interested to hear from my noble friend about the even more important prospects for Chinese investment in nuclear power and in high-speed rail.

Finally, the noble Lord, Lord Adonis, referred at some length to the proposal for a new infrastructure commission. The last thing we need is another quango, more paperwork and more layers of bureaucracy. I hope that my noble friend will assure the House that this is neither necessary nor something that the Government will entertain.

I have noted the recent work of the new UK Regulators Network. It seems an excellent example of how well this Government are taking forward the huge and difficult infrastructure challenge, and I commend my noble friend for that initiative.

Photo of Lord Bhattacharyya Lord Bhattacharyya Labour 12:20 pm, 22nd January 2015

My Lords, I thank my noble friend for securing this vital debate. I meet global business leaders regularly and they all agree that Britain must improve its infrastructure in order to attract inward investment. From China to Holland, they see what good infrastructure achieves.

British business also says that we need to improve. Some 60% believe our roads are poor. Five years ago, the cost of road congestion was £2 billion a year. Yet, after the last election, many road projects were mothballed in the spending review. Capital spending on roads fell by around a half. Now the Government boast of major new investment. I welcome these projects, but all it means is that projects such as the A21 are back on again. It demonstrates that we do not think long term. In fact, our basic weakness in this country—whether it is investment in industry or in infrastructure—is all associated with short-termism. This has consequences. As KPMG has said, foreign investors are frustrated because,

“there aren’t projects to invest in immediately”.

We know there is a better way because we put huge effort into creating long-term consensus on projects such as the Olympics or Crossrail. That needs to be systematised in our approach to all infrastructure planning and is why I strongly support my friend Sir John Armitt’s proposed national infrastructure commission. It is, to quote the

Spectator

, an idea,

“good enough for George Osborne to steal”.

My noble friend has set out how the commission would work. I will make one additional point. Giving an independent body authority to assess infrastructure needs would not reduce the power of elected Governments. Rather, it would give Ministers a power that they do not have already—the power to choose. One of the big problems of the other infrastructure bodies that noble Lords have mentioned is that they become quangos. That does not have to be the case. They become quangos only through the authority given to them by the Government.

Infrastructure assessments would create a better understanding of future needs and lead to stronger medium-term plans under departmental leadership. Ministers would have greater certainty about resources as their party would have been consulted on priorities from the beginning. Now Ministers only have a choice between the plans of their predecessors and further delay. With improved advance planning, Ministers could better set priorities and choose which projects should go ahead. They would get the power to deliver what they need and Parliament would be able to hold them accountable.

Some ideas make us regret that the other lot got there first. Once the National Audit Office, Bank of England independence and the Office for Budget Responsibility were established, they seemed common sense. A national infrastructure commission is the next such proposal. The Government still have time to steal it. I urge the Minister to take this opportunity.

Photo of Baroness Maddock Baroness Maddock Chair, Works of Art Committee (Lords) 12:29 pm, 22nd January 2015

My Lords, I declare my interests as recorded formally. I particularly draw attention to my vice-presidency of the Local Government Association, because in my remarks this morning I will be drawing on the interim findings of a report commissioned by the LGA into economic growth and the future of public services in non-metropolitan areas, under the chairmanship of Sir John Peace.

There will be no disagreement around the House that good infrastructure forms the backbone of a modern economy and is vital to our economic growth. In coalition, the Liberal Democrats have agreed to prioritise infrastructure as part of our economic strategy. Indeed, by making tough choices, the Government have been able both to reduce the deficit and to increase capital spending on infrastructure—I disagree with the noble Lord’s opening remarks. It is now higher as a percentage of gross domestic product than in the final term of the previous Government.

However, this morning, I want to concentrate my remarks on the challenges that face us now and in future to make sure that the whole of England can benefit from important infrastructure development. One of the main challenges that we face is a highly centralised system of government and financial decision-making. The coalition has taken steps to decentralise, but central government still controls 60% of local government spending in England. What is more, it prescribes how much of that can be spent and sets limits on how local government can spend much of the money that it raises locally.

Local authorities are often best placed to understand the needs of their local economies and the challenges and opportunities that they face, which cut across traditional administrative boundaries. Having control over the whole budget would enable local authorities to prioritise according to local needs. Outside London, the non-metropolitan areas—the shires, smaller towns and cities and rural and suburban areas—produce the majority of England’s growth. Although it is vital that cities should be empowered to grow their skills and productivity, it is important not to hold back areas other than the major cities. We need to ensure that transport investment provides infrastructure that better joins those non-metropolitan areas to their urban neighbours and to global trade routes.

No one wants a wholesale reorganisation of local government—I have seen at first hand how difficult and destructive that can be—but that does not mean that we cannot use our existing structures to better effect. At the end of the day, unless we can make cities and non-metropolitan areas more fiscally self-financing, we will continue to be a centralised economy.

As a resident of Berwick-upon-Tweed, I am only too aware of the effects of our centralised system of government and financial control in areas such as rural north Northumberland. The main artery, the A1 from London and Newcastle to Edinburgh, peters out to a single carriageway most of the way north of Morpeth. Morpeth is 50 miles south of Berwick and at present is the home of county hall. I am pleased to say that, after years of lobbying, my right honourable friend Danny Alexander has announced hundreds of millions of pounds to dual the road at least halfway to Berwick. Promises have been made in the past but then forgotten by both Labour and Conservative Ministers. I sincerely hope that, whatever the result of the next election, that will not happen again. We need that strategic road to be upgraded all the way to Berwick if we are to attract businesses and jobs there; it is dualled most of the way the other side to Edinburgh.

We also need good local transport that is affordable to our young people and students. We have one of the lowest take-ups of further and higher education in the country. We have one high school in Berwick; the next nearest is 30 miles away. I am very pleased that we pledge in our manifesto to give two-thirds off public transport fares to young people.

Broadband is very important in our area. The county council has worked with the Government to ensure its rollout. It is vital to every farm and small business in a rural or remote area. Again, the council had to bid for that money.

We want good infrastructure. We need more devolution, to balance the budget and to have a long-term plan for capital expenditure on infrastructure, including housing, so that we can continue to raise the amount of money available in both absolute terms and as a share of our gross domestic product.

Photo of Lord Freeman Lord Freeman Conservative

My Lords, in a spirit of consensus, I agree with a great deal of what the noble Lord, Lord Adonis, said and congratulate him on securing this very important debate. I also associate myself with a number of recommendations that my personal friend, John Armitt, made in his excellent report to the Opposition.

I welcome the policy statement on national networks but I have one problem with it, which is the timescale. Governments of all hues over the years have made the same mistake of not thinking long-term. It seems important that one should be looking at least 30 years ahead, whereas at present the policy statement tends to be looking at a much shorter period. It is over that length of time that policy involving all modes of transport can be properly taken into account.

I will make four simple points. The first is that all modes of transport should have been involved in the policy statement, although I very much welcome it and it is definitely a step forward. Air transport is not included, for example, and it is important that we avoid some of the mistakes made in the past in rail and road planning, forgetting the implications for proposals for national airports. Secondly, and here I agree with my noble friend Lord Heseltine, local authorities up and down the country should play an important role in the planning of infrastructure. The delegation of responsibility to local authorities in this matter, in terms of both policy and finance, is extremely important. Thirdly, the private sector has a role to play in the planning of national infrastructure. I give noble Lords one example: on the west coast main line the franchisee has much responsibility, financially and in planning, in contributing to the improvement of that line running from London to Scotland. I welcome the initiatives already being taken by the Department for Transport to think long-term about improving that line.

Lastly, I will take what some of your Lordships might think a step too far. I think that this House should emulate the other place, the House of Commons, which has an excellent Select Committee on Transport. I see no reason why your Lordships—or the Government, in discussion with the Opposition—should not consider setting up a Select Committee in this House specifically to deal with transport. A lot of your Lordships have a great deal of experience in this field. Bipartisanship and looking long-term, which are both important principles, would be encouraged and developed if we could have a select committee, built to be bipartisan between opposition and government on planning infrastructure, devoted to considering this matter over the long term.

Photo of Lord Rogers of Riverside Lord Rogers of Riverside Labour 12:33 pm, 22nd January 2015

My Lords, we live in an urban age. Ten per cent of the world’s population lived in cities 100 years ago; today it is 50%, and in the next 30 years we shall see it at 80%. People are drawn by jobs and the possibility of meeting other people. They are the hearts of our culture and the engines of our wealth.

As part of this we need to invest in the infrastructure of cities, particularly in housing—the infrastructure of the everyday. Some 15 years ago, I chaired the Urban

Task Force set up by my noble friend Lord Prescott. We said then that we needed 300,000 homes a year. That is more or less what we are saying again, but today we are for the first time building only one-third of this. We were building up to 400,000 after the war. In addition, we have some of the smallest—and in my view, the shoddiest—housing in the world. We need to rediscover our skills in creating cities that everyone wants to live in.

The only form of sustainable city is compact, mixed-use and well designed, using brownfield land, retrofitting and densification, supported by public transport, and has well designed public space—and a lot of it—for walking, cycling and leisure. For example, in the centre of Manhattan 60% of people walk to work—in a city that is known for cars. Such cities must have a mix of uses of living, working and leisure, for poor and rich, and we need to build affordable houses to make cities have a real social mix. We will meet our housing targets only if we make the most of our brownfield land, and England has among the most brownfield land of any country, first, because of a vast Industrial Revolution, which changed it completely; and secondly, because there are still remnants of the war.

That industrial change and its impact give us a tremendous opportunity to strengthen our existing cities. We have enough brownfield land for 1.5 million houses, at a medium density. That is according to government figures, and after the selection of certain areas of brownfield that are easily developable and which would link in with the cities we already have, so it is a low figure that misses out on a lot of things. That supply is constantly being replenished as industrial change continues, so 15 years ago we used lots of it but we still have the same amount. Left derelict, brownfield land is a tear in the urban fabric and a focus for crime and disorder. Intensification and retrofit add much more potential. Somewhere like Croydon, for example, has potential for new development within the urban fabric on the scale of a new town, and already has wonderful infrastructure systems. The centre of Croydon is nearly empty.

Therefore I believe—and I have studied this for many years—that building new towns is not sustainable, either regarding climate change or using already half-empty buildings which are left near those areas. The situation is made worse when the planning and building of new houses is led by volume house builders, whose primary concern is the bottom line—and I am sure they would agree. That would seem crazy anywhere else in western Europe.

I have good examples of urban regeneration, where the people and the local authority take responsibility.

Photo of Lord Rogers of Riverside Lord Rogers of Riverside Labour

We need to give elected local authorities the powers and resources to plan for new brownfield development, intensification and retrofit so that they can repair the tears in the urban fabric and build the houses that we need, building on brownfield land before green. With the right infrastructure investment, and the power taken back by local authorities, we will be able to build new towns in our cities, not outside them.

Photo of Earl Attlee Earl Attlee Conservative 12:39 pm, 22nd January 2015

My Lords, my first point concerns the cost arguments against HS2—and, for that matter, any other large infrastructure project. My recollection is that we are spending around £3 billion a year on Crossrail. About the time we stop spending large amounts on that, we will move on to the construction phases of HS2. Clearly we can afford these projects, as we are doing so now. Affordability is a red herring used by the opponents of HS2. To put this expenditure into perspective, we spend in the order of £100 billion each year on welfare. I say “spend”, because that is not investment: next year we will have to spend another £100 billion on welfare, if we want to remain a humane and compassionate society—which I suggest we do. The beauty of a railway infrastructure project is that we can enjoy a return for 100 years or more.

My second point concerns the scheduling and sequencing of these large infrastructure projects. The advantage of having an Infrastructure Minister within the Treasury is that there is a much better chance of ensuring that projects are properly sequenced, to avoid feast and famine, and perhaps of providing some predictability for the construction industry. For example, drilling down into the HS2 phase 1 project, I would imagine that in the construction phase all the bridges will be commenced at more or less the same time. Each construction site will require at least one large crane. If we were to build HS2 phases 1 and 2 concurrently rather than sequentially, we would massively increase the demand, and therefore the cost, of the construction equipment—but everyone would know that famine would follow. The same argument would apply to every other capability, including professionals, that we need for HS2 and other projects. It would be much better for my noble friend the Treasury Minister to do his best to ensure a steady flow of work and avoid the stop-go that the noble Lord, Lord Adonis, mentioned in his excellent introduction. We should therefore do phase 1 of HS2 followed by phase 2, and then I hope by HS3 in due course.

My last point is that we cannot undertake large infrastructure projects without very adversely affecting some of the population. Sadly, an infrastructure commission would not change that. Unhelpfully, those who are adversely affected often do not benefit directly once the project is in operation. There are many inside and outside your Lordships’ House who query the economics of HS2. I sympathise with those adversely affected, and respect the opposing views, but I firmly believe that such projects should be authorised at national level, in Parliament, at the earliest possible point. The paving Bill for HS2 has been approved by Parliament, and it would be very difficult to stop it now, because that would involve writing off hundreds of millions of pounds of public money in sunk costs.

My concern is about the use of judicial review to delay, derail or stop a project. Some of the recent cases involved the HS2 consultation procedure, and claims that the consultation was not done in precisely the right way. It was a case not of no consultation, but of exactly how consultation was done. I am pleased to say that most of those claims have been thrown out by the courts, although some minor technical points were upheld.

Photo of Lord McFall of Alcluith Lord McFall of Alcluith Labour 12:43 pm, 22nd January 2015

My Lords, I congratulate the noble Lord, Lord Adonis, on generating this debate. I shall focus on three areas: the mindset of the Government, the present strategy, and the consistency or inconsistency of approach. The Government’s mantra has been fiscal consolidation, which is nothing more than a euphemism for cuts in public spending. That view was shared by the IMF, but it changed its tune dramatically in October, in its World Economic Outlook, where it said that there was a need for a substantial increase in public infrastructure investment globally. It asserted that properly designed infrastructure investment would reduce, rather than increase, government debt burdens. In other words, it would pay for itself. There is therefore an overwhelming case for investment now, and on a substantial scale.

The second issue is strategy. The Government’s strategy needs to embrace the entire country. That is mentioned in their document on transport, Rebalancing Britain, but it has to mean what it says.

I note that the Prime Minister is in Scotland today. He has to emphasise that the tools to deliver such projects need to come from the decentralisation proposals which will be implemented in England and the devolution proposals which will be implemented in Scotland, Northern Ireland and Wales.

The Economic Affairs Committee is looking at HS2 at the moment. I had a revealing exchange recently with Sir David Higgins, who is in charge of that. Sir David is a man of great integrity and impeccable professional credentials. However, I questioned him about his statement that we need an east-west train line in the north of England. He had called for that to be built alongside HS2, at a cost of £15 billion. It was revealing that Sir David replied:

“I do not think we were even talking about east-west six months ago, and as I started spending time with northern politicians, a number of them said, ‘Why do you not at least consider the issues?’ … the more I thought about it the more I thought that this debate needs to be had”.

Under questioning from me on whether the six-month timescale added up to a national strategy, he replied:

“You are right, so it is not a national transport strategy”, so we are building HS2 without a national strategy. His advice to the committee was that,

“you need to say, ‘There needs to be a national transport strategy’”.

Two conclusions can be drawn from that: first, that we have a London-centric approach; and, secondly, that we have a lack of clear strategic planning. The Public Accounts Committee report published last week was very clear that the Department for Transport is making decisions about which programmes to prioritise for investment on unclear criteria. Indeed, it has still to publish proposals for how Scotland will benefit from HS2, including whether or not the route is extended into Scotland. What goes for transport goes for other areas such as energy, airports and housing, which have been mentioned.

The third issue is inconsistent government policies. To deliver projects there needs to be public-private collaboration. There was a great initiative a few years ago whereby pension funds were going to invest £25 billion in infrastructure projects. However, for them to do so, they needed to match their investment with long-term liabilities. The Chancellor radically redesigned the pensions landscape in the 2014 Budget. The result will be a net gain to the Treasury in the next four years of £3 billion, and £17 billion a year by 2030 at 2013-14 prices, but uncertainty for pension funds and long-term investment.

There is a case for greater certainty in long-term strategic policy. That can be delivered only by an independent national infrastructure commission, as has been said. Sadly, that task will be left to the next Government, who need to make it a primary responsibility.

Photo of Lord Marland Lord Marland Conservative 12:47 pm, 22nd January 2015

My Lords, I welcome the debate initiated by the much respected noble Lord, Lord Adonis. I completely concur with other noble Lords that it should be conducted in a bipartisan spirit because, as we all know, infrastructure is for the long term and crosses Governments and Parliaments.

From my experience in government, which ended a year ago, I know that government has a poor history of developing infrastructure. It is not a naturally commercial animal and should avoid carrying out projects at all times, as they often end in overspend and incompetent management. However, government is an enabler. I congratulate the current Government and my noble friends Lord Sassoon and Lord Deighton, who have set about the task of enabling in an extraordinarily energetic and vigorous fashion.

We have had a very poor landscape of infrastructure development. We have had economic failure and the failure of banks to lend, which is fundamental to development. That has led to lack of confidence. Through my noble friends’ initiatives, despite having their hands tied behind their back, we have been able to develop confidence. I have enjoyed working closely with them on projects such as Battersea, Sellafield, when I was a Minister for energy and climate change, the early stages of Hinkley Point and now the Tottenham redevelopment.

What they have established is joined-up government. It is fundamental that across departments we must all share and work for a common aim. They should be further congratulated on setting up a showcase of the infrastructure projects that are available. This is the first time a Government have ever done this.

The noble Lord, Lord Adonis, quite rightly refers to the regions. He has taken London as a shining example of infrastructure showing the fundamental prosperity of a region. I totally concur with him that if we are to get real infrastructure projects going in this country, we have to empower the regions; we have to let them make the decisions and therefore generate the opportunities.

If one wants to see how that works, as the noble Lord said, one needs look no further than at Boris Johnson’s mayoralty, which has shown London as having travelled so widely. It is now the centre of the world in terms of how people look to see a city prosper and develop. We now have an opportunity, surely, because the economic landscape is changing. We have cheap money. We have the availability and the thirst of many investment organisations to invest in long-term projects. We must grasp this opportunity, as noble Lords have said, to develop infrastructure projects for generations to come. Now is the moment when government should act and take those opportunities.

Photo of Lord Hollick Lord Hollick Chair, Economic Affairs Committee 12:51 pm, 22nd January 2015

I would like to thank my noble friend Lord Adonis for securing this debate. All major parties have enthusiastically committed to infrastructure investment, but there are some key differences that have emerged over the level of funding, the process for evaluating projects and whether responsibility should reside in Westminster or increasingly in the nations and regions of the UK.

The Conservatives are clear that they will seek to achieve an overall budget surplus by 2018-19, with investment spending maintained at the current 1.2% share of GDP. Labour has sensibly proposed to unbundle current and capital expenditure and committed to secure a current budget surplus as soon as possible, to reduce the national debt as a share of GDP, but—critically—to increase infrastructure spend as a percentage of GDP back to 1.5%. The difference between the Labour and Conservative plans for infrastructure spend has been independently assessed as being up to £20 billion by the end of the next Parliament. The case for increasing the level of infrastructure spend at a time of record low long-term borrowing rates and when it can sustain and improve the current momentum in the economy is indeed powerful.

Another key difference between the main parties is the process of evaluating and deciding which of the many competing projects to pursue. The coalition published a National Infrastructure Plan, which has been referenced, and has subsequently published updates. This approach is most important. It has focused on delivery, cost control and implementation—all of which are of absolute and vital importance. But we are invariably proceeding without a clearly articulated strategic plan. As my noble friend Lord McFall mentioned, the Economics Affairs Committee is currently reviewing the economic case for HS2. Many of our witnesses have criticised the absence of a comprehensive strategy for HS2. This, they say, has undermined public confidence and stands in the way of a thorough and transparent review of alternative solutions. Professor Overman said that the case for HS2 and the alternatives presented to Parliament was so poorly analysed that it left MPs in a quite hopeless position to make a decision.

This is the crux of the problem: without a clear strategy, how are the Government, let alone the public, to decide what are the most appropriate and cost-effective options, and to prioritise investment? The Treasury carries out rigorous, zero-based capital reviews to determine priorities. But it is HS2 and the Department of Transport which are responsible for providing all of the data and analysis to support this evaluation. There is no independent review and the detailed analysis is not made public. This stifles informed debate and independent analysis.

The establishment of the national infrastructure commission—described by my noble friend—by the next Labour Government, will allow future Governments the luxury of making their decisions on which infrastructure options to pursue in the light of an overall strategy, and only after rigorous independent, impartial assessment.

The huge regional disparity in infrastructure spend was a very hot topic when our HS2 enquiry took evidence in Manchester from five Midlands and northern city authorities. The cities want to combine into large metro groups and take responsibility for infrastructure planning and implementation. Spending per head on infrastructure in 2013 was £2,595 in London but a meagre £5 in the north-east and only £99 in the north-west. The cities were justified in claiming that they are being short-changed and resented their subservience to Westminster. My noble friend Lord Adonis has made a powerful case to give large metro regions the responsibility for regional infrastructure and devolved budgets to support their projects. The noble Lord, Lord Heseltine, holds similar views, as does the City Growth Commission—chaired by Jim O’Neill, who appeared before our committee—which has called for the power to approve projects and secure finance to be devolved to the regions.

It is interesting to speculate whether, if HS2’s £50 billion budget was available to promote growth and connectivity in the regions, the regional metro authorities would pursue what one economist described as the lowest common denominator solution, or a more focused series of transport initiatives. Only when the regions are freed from the grip of Westminster will we know the answer to that question.

Photo of Baroness O'Cathain Baroness O'Cathain Chair, EU Sub Committee B - Internal Market, Infrastructure and Employment 12:56 pm, 22nd January 2015

My Lords, this is a brilliant debate, given that we are looking at investment in and planning for the United Kingdom’s national infrastructure. As noble Lords can probably see, I have torn up my speech completely and have scribbled only a few things because almost everything that I had wanted to talk about has been mentioned.

The letter of May 2010 was a fact, although even then we were more infrastructure-minded when looking at plans for 2012. We are now looking at many greater plans for the next five years. It was slightly unfair of the noble Lord, Lord Adonis, to castigate the Government, because investment in infrastructure in the five years of this coalition Government was at a higher proportion of GDP than under the last five years of the Labour Government.

Investment is something that we do not have too many worries about. Sovereign wealth funds and individual corporate investors want to invest in this country. Why? They trust us, appreciate our rule of law and the relatively stable political climate, and approve of the established regime of independent regulators. They are all part of a climate that is attractive to investors. Investment is certainly part of our normal business proposition.

However, I am concerned about the future of infrastructure programmes in this country because of the skills shortage. The skills deficit is definitely a fact.

We have funds, brains, designers, brilliant architects and award-winning engineers. We have a history of excellent research and innovation. What we must do is make skills the most important short and medium-term focus of our education system. I wish that I was convinced that there would be more rapid upskilling than seems to be happening. We need more of the technical academies such as those set up by my noble friend Lord Baker, who I am glad to see is sitting in his place.

I ask my noble friend the Minister if he could use his undoubted influence to resolve the current visa problems of overseas students who graduate from UK research institutes and have to leave the country after graduating. This is crazy; it flies in the face of common sense and sends all the wrong messages to would-be investors. This country is home to four of the top 10 graduate colleges in the world league table for research and innovation—Cambridge, Imperial College, Oxford and UCL. I have deliberately listed them alphabetically. Why do we educate these people to such a high standard in the best colleges in the world and then say, as soon as they have completed their PhD, DPhil or whatever, “You cannot stay. You’ve got to go”?

In conclusion, I firmly believe that we are in a very good place, both to attract investment and to produce great new developments in infrastructure. However, there is a caveat. We cannot put this at risk by allowing political posturing to damage the course we should be taking. We definitely need a national consensus. The leader of the Opposition in the other place certainly did this when he announced that he would insist on a freeze in energy prices if he were leading the Government. The overseas reaction was immediately bad. Investors are not risk-averse but when political whims enter the equation trust is damaged and we all know how hard it is to roll back from that situation.

Photo of Lord Berkeley Lord Berkeley Labour 1:00 pm, 22nd January 2015

I very much support and congratulate my noble friend Lord Adonis on this debate. I would definitely support the national infrastructure commission proposed in the excellent report produced by Sir John Armitt. I follow HS2 with a certain amount of interest. When my noble friend was Minister of Transport, and subsequently Secretary of State, he put a vision into the railways and quite a lot of discipline as well. He started the idea of HS2. The noble Lord, Lord Marland, and my noble friend Lord McFall suggested that everything was too London-centric. I remember suggesting to my noble friend Lord Adonis at the time that it might have been better to start in the Manchester and Leeds areas and work south. It would be easier to get across the Chilterns when there was nothing else to do but join them together. Nevertheless, it went well while he was in charge. I am sad that, in the period from then until the present Secretary of State, Patrick McLoughlin, took office—he is taking a great interest in it and doing very well—I detected a slight rudderlessness in the way HS2 was taken forward at the political level.

Last night I was pleased to be in Brussels with my noble friend Lord Adonis to see him being awarded a very important prize by the European rail supply industry for the vision that he showed in this country when he was Secretary of State. He went round many high-speed lines that were being developed across Europe in Germany, Spain, France and Italy to see how they did it. It was quite clear that in all those places they manage to build these lines much more quickly than we do. When it comes to operating their trains they are nothing like as good as we are, but they do the building very well. I suspect that this is something to do with us being a mature democracy—I am not saying that they are not—and listening to people’s complaints a bit more. I remember when I was starting off the Channel Tunnel, my French colleagues used to say to me: “Why is it taking so long to get permission to build this thing? We got permission in six weeks”. In the UK, we took three years. I asked them how they did it and they said: “If you want to drain the swamp, you do not consult the frogs.” That is an interesting way of putting it but it is quite true. One thing they did was related to arguments about compensation for people who owned property or whose businesses might be affected. There is a system in France where it is normal to pay a good 10% over the assessed market value of the business or the house. I hope we take up some of these big projects and wonder whether we should look at that when we do so. I am sure that if people felt they had been given a little bit extra, in addition to their moving and relocation costs, it would help a lot.

We also need to discuss how to get these permissions. The Bill for HS2 is grinding through the Commons. I do not know whether it is going to take three, four or five years. In many ways, it is no more contentious than the Bill for High Speed 1 was, but is that the right process? If it is, what about having a Joint Committee of both Houses to do it? Do we really need to offer people the opportunity to petition on the same subject—and it can be in exactly the same format—to both Houses? I suggested this a few years ago for HS2 but it has not been taken up. Or should we abandon the hybrid Bill process completely and go for the new regime within the Planning Inspectorate? This, of course, is the way the Thames tideway tunnel is being done. I happen to object to that project, but the process is probably going quite well. We need to have this debate; we need to reflect that, being a mature democracy, we have to take a bit longer. We have a long way to go but I welcome my noble friend’s debate today and hope we can take it forward.

Photo of Viscount Ridley Viscount Ridley Conservative 1:04 pm, 22nd January 2015

My Lords, I congratulate the noble Lord, Lord Adonis, on securing this debate and on the prize we have just heard about from the noble Lord, Lord Berkeley. I have had huge respect for him ever since his recent very fine report about the north-east of England. I am very sympathetic to much of what he has to say about the future of infrastructure but I will focus my remarks on roads.

Since 1990, France has built 2,700 miles of new motorway. Between 2001 and 2009, under the previous Government, this country built just 46 miles. To use the words of the noble Lord, Lord Adonis, himself, this was a “master class” in underinvestment, although admittedly it was before he was Transport Secretary. The UK has half as much motorway per vehicle mile as other major EU countries. It is not as if the Labour Government did not know that they were underinvesting in this, because in 2006 they commissioned Sir Rod Eddington to look into the road network and make suggestions. He wanted to tackle a number of bottlenecks, build bypasses, widen roads, improve junctions and so on, and he made a number of recommendations which largely were not acted on.

The Institute for Economic Affairs calculates that, over the last decade or so, we have been cancelling road projects that would have an average benefit to cost ratio of 3.2 to 1 and deferring ones with a benefit to cost ratio of 6.8 to 1. Yet at the same time we have been funding public transport projects with much lower benefit to cost ratios averaging about 1.8 to 1. I ask the noble Lord, Lord Adonis, why so little was done to fix the roads when the fiscal sun was shining. Was it just because we were all frit of Swampy in those days? I welcome the fact that, as my noble friend Lord Sassoon said, this Government are planning, under much tougher fiscal conditions, to spend £24 billion on roads between 2010 and 2021 to resurface 80% of national roads, to add 221 lane-miles of motorways and start 52 major road projects. I echo what my noble friend Lady Maddock said about welcoming the dualling of the A1 through Northumberland.

The crucial point is that we need to rethink how we pay for roads. In 2011, the RAC Foundation said that we had fallen behind other nations in the way we fund road building because in both the United States and across Europe contracts to build roads are nearly always, or very frequently, privately financed, often regionally commissioned and invested in by pension funds because there is a capital return through tolls. For example, in the United States, 4,500 miles of new highway infrastructure have been built in this way, using tolls, since the early 1990s. In France, which is hardly a hotbed of free-market economics, they have privatised most of the strategic road network and drivers are now very used to using tolls, particularly because of electronic tolling. That is, of course, why the roads in France are so good and they have been able to build so much more. The RAC Foundation concluded:

“Across continental Europe, toll roads now account for a significant portion of the strategic road network in all of the countries we have reviewed.”

We need to be more radical, open and imaginative if we are to cut congestion, which is a huge drain on business in this country, and boost economic growth.

Photo of Lord Graham of Edmonton Lord Graham of Edmonton Labour 1:08 pm, 22nd January 2015

My Lords, I join many other noble Lords in congratulating the noble Lord, Lord Adonis, on securing this debate. It is impossible to do in four minutes what one wants to do in a debate of this kind but I congratulate the staff of the House of Lords Library who have produced an excellent note, full of facts and figures. I do not intend to knock previous programmes but to remind the House of what has happened to some of them, such as the sale of council housing.

In 1979, there were 6,568,000 council homes. By 2012, this figure had shrunk to 2,096,000, and there one may find some of the seeds of the present problems.

Of course it was a good policy to sell council houses—we backed it in this Chamber. But the problem was that the Government of the day, because of their political stance, did not allow councils to replace the houses that they had sold. As a consequence, we have the problems that we have today, and that is not very good.

On the disposal of national assets to allow private landlords to amass a portfolio, I should like to put on the record a recent piece from a national newspaper. When houses were allowed to be sold, one assumed that people would own them for the rest of their lives or that they would be inherited by their children. But what has happened? A number of private individuals have made it a business to buy council houses and to rent them. I know of a situation where a man is saying, “If you have more than two children; if you are on a zero hours contract; if granny moves in; or if you are on housing benefit, you will be evicted”. That is what that man is doing. The terrible problem is that nothing can be done about it. He is operating within the law. I should like to ask the Minister, if it is possible to do this in this very busy period, whether there is any move towards examining the manner in which previous assets have been distributed and are now working against us.

Housing is not the only issue. I look at the extent to which water, electricity and other public assets have been distributed. Noble Lords will know the slogan: “Tell Sid”. Everyone jumped on the bandwagon but the shares did not remain in the hands of the individuals. They were bought up by, among others, the Canadian Pension Plan, a consortium in Hong Kong, Australian and Canadian pension funds, Cheung asset management, the Norway central bank, and organisations in China, Malaysia and Singapore.

I am conscious of the time and I do not want the Whip, who is doing her job, to remind me. This has been said in the country and I have said sufficient to indicate that I am in favour of the plans ahead. However, we need to be very careful that the defence of this realm is not put in jeopardy by selling or allowing to be bought the assets that we have inherited from our predecessors. We should be very careful not to allow too much imbalance.

Photo of Lord Bradshaw Lord Bradshaw Liberal Democrat 1:13 pm, 22nd January 2015

My Lords, those of us who work in systems industries are well aware of the fact that when you are using 85% of capacity—whether it is roads, water, electricity or railways—you put yourself in a position where a slight aberration in performance starts the system to collapse. We have to get our priorities right and we have to invest early enough. The noble Lord, Lord Adonis, will remember that when he was Secretary of State, we persuaded him to order 200 new diesel trains but he was unpersuaded after the OECD notice and I do not know why.

The noble Lord, Lord Deighton, would do well to address the whole issue of the appraisal of schemes and the capturing of the economic effects. Last night’s Evening Standard announced that house prices would rise 54% in Whitechapel because of Crossrail. As far as I know, none of that money accrues to the public purse or is even credited to Crossrail. We create wealth but it is not created for the public purse.

Air quality and congestion are enormous problems. As at present constructed, business cases do not give enough emphasis to that. In the infrastructure plan, there is a very imaginative scheme for Bath city centre. The local council wants to improve the appalling traffic flow and the huge damage to buildings by relieving the whole pressure of traffic on Bath. However, it is difficult to get the scheme to conform to the appraisal system. While I am on appraisal systems, I do not think there is any economic justification for adding together huge numbers of very small time savings and justifying things on that basis. They have to be credible and realisable time savings to be worth being taken into account.

I am very pleased to say that the railway franchise bidding procedure is at last taking quality into account. That has long needed to be done but the Treasury has shied away from it because it cannot be proved in financial terms. It is very heartening to see that the Stagecoach bid for the east coast and the Abellio bid for the ScotRail franchise have taken these things into account. I ask the Minister to note that the railway franchise system overspecifies the service. Lots of small stops are put into routes. Lincoln to Nottingham could be a very fast service, end to end or stopping at Newark, but it is precluded from that by the passenger service obligation.

I am interested in the idea of an independent infrastructure commission, as advanced by the noble Lord, Lord Adonis. I am a victim, I suppose, of the Strategic Rail Authority. In the years in which I was involved with it, we had constant fights with government departments as to who was in charge of what. A decision has to be made about who will be in charge—Whitehall or the independent infrastructure commission. There have to be clear lines of demarcation.

I endorse what the noble Baroness, Lady O’Cathain, said about training. Training is essential. We need huge numbers of engineers and people to support them. I am very pleased that this Government have at last delivered a great increase in the number of apprentices.

Photo of Lord Liddle Lord Liddle Labour 1:17 pm, 22nd January 2015

My Lords, I declare an interest as a member of Cumbria County Council. My purpose in speaking in this debate is to bring a cold wind of Cumbrian reality to all this chatter about infrastructure. When it comes to infrastructure, London gets most of what it wants—as, probably, as a global city, it should—but the rest of England has to be content with crumbs. These crumbs are from Chancellor Osborne’s table, which his spin doctors try to confect into some imaginary tray of appetising cream cakes. They look tempting and delicious when they are offered but, in the modern world on public health grounds, you are not allowed to get near them.

In Cumbria, we were greatly heartened by the Chancellor’s talk of a northern powerhouse and by the idea of High Speed 3 connecting our great northern cities. But what is the reality? A couple of weeks ago, the Transport Secretary, Patrick McLoughlin, who is a good man, came to Carlisle. It was one of those visits to marginal constituencies that Ministers have to make at this time in the political cycle. Doubtless, he had asked his department to identify what suitable goodies he could announce or perhaps reannounce for Cumbria. However, the cupboard proved very bare. There would be no road improvements to link the centre of Britain’s nuclear industry on the west coast to the M6. Nor would there be improvements in rail connectivity or an improvement in the east-west line from Carlisle to Newcastle. That is a journey of 60 miles, which in the modern world takes 100 minutes but should take 45 minutes. Instead the Transport Secretary came up with the announcement of a single additional early morning train service to take workers from Carlisle to the nuclear site at Sellafield. In my youth, the railway would have described that as a workmen’s special.

This beneficial improvement came out of the recent refranchising of the Northern and TransPennine rail services. What Mr McLoughlin failed to highlight in this announcement was that, as a result of this refranchising, Barrow-in-Furness has lost its direct rail service to Manchester Airport, which used to run every two hours. That service was a crucial lifeline for this isolated town. Why is Barrow losing this service? It is because the TransPeninne units have to be transferred south to tackle overcrowding on the Chiltern line. In other words, there is not so much a northern powerhouse as a southern smash and grab. As a consequence of this shortage of modern rolling stock, in order to provide services in Cumbria, diesels from the freight operator DRS will have to be used to haul old-fashioned coaches that have been retained for steam train excursions.

That is an extraordinary failure and it shows a deeper failure. We in Cumbria were supposed to get the third nuclear power station to be built, but there is no planning for that power station. It is in the national infrastructure plan, but there is no planning whatever. Planning is lacking. That is why I fervently hope that a new Government will implement the proposals made by Sir John Armitt in his excellent paper.

Photo of Lord Flight Lord Flight Conservative 1:22 pm, 22nd January 2015

My Lords, I add my congratulations to the noble Lord, Lord Adonis, both on his speech and on his prize. He is clearly speaking very much to the converted. However, I have some reservations—and need to be convinced—about his argument for a commission. Over the past four years we have not done so badly given the difficult economic climate. Crossrail has gone well and projects have advanced, and the 2014 NIP plan is a big improvement on the 2001 plan.

I will point to some specific issues that other noble Lords have raised. A key problem for major infrastructure projects remains the excessive regulatory, environmental and consultation requirements. These cause delays and costs and eventually lead to indecision, as was pointed out by the noble Lord, Lord Adonis. There is too much centralisation, and the regions need to be empowered.

I agree with my noble friend Lord Ridley that the biggest inadequacy is in our road network. While I am aware of inadequacies to the north, this applies particularly to southern England. For a long time we have desperately needed a motorway from Dover to Bournemouth, going through the middle of my former parliamentary constituency. There are still ridiculous traffic queues every day at Worthing and Arundel.

It is slightly wrong to think of infrastructure investment as part of the public sector. The major investor and manager of projects is the private sector, which accounts for something like 70%. Like my noble friend Lord Marland, I have rather greater confidence in the private sector’s ability to manage projects than in that of the public sector, which is not a natural for the purpose. I will add that there is no problem with financing proper projects, and I trust that my noble friend Lord Deighton would support this. If anything, we do not have enough projects lined up for the pension funds, the sovereign wealth funds and economies such as China to finance.

In 2010 I went to hear the shadow Chief Secretary present the infrastructure plan of the time. It consisted of roughly £200 billion of energy investment and £200 billion of communication, transport and digital investment, but with no particular timeframe. Indeed, I asked him when these projects were likely to take effect, and he could not answer. What has actually happened over the last four difficult years has been surprisingly good, in a way. We have averaged £47 billion per annum of investment, making a total approaching £250 billion over the last five years. This is also some 15% more than infrastructure investment in the previous Parliament.

The 2014 NIP is extremely good. There is an organised pipeline of £554 billion of investment, of which £303 billion is in energy and £176 billion in transport. Again, the financing of this is 64% private, 23% public and 13% mixed.

Before I sit down, I refer to the specific point of co-operation with China on infrastructure, which was raised by my noble friend Lord Sassoon. I understand that China has some concerns that the Hinkley joint venture project, which is 49% Chinese and 51% French, is in a state of stalemate. This is partly because the French do not have the funds, and partly because of political problems here about whether the National Security Council views China as a security risk for investment in nuclear energy. I hope that my noble friend Lord Deighton can sort this out, because I believe that it is causing some evaporation of Chinese support.

G

You say : "If anything, we do not have enough projects lined up for the pension funds, the sovereign wealth funds and economies such as China to finance".
Really ? How about funding the state pension properly by removing Regulation 3 which denies qualified pensioners in some countries ( mostly Commonwealth ) their rightful uprating and also removing the same discriminative clause 20 from the Pensions Act ?
Cost ? A mere 580 million compared to your billions being mentioned here.
Stop discrimination and grant pension parity worldwide.
You know it makes sense and justice will prevail.

Submitted by George Morley

Photo of Lord Maxton Lord Maxton Labour 1:26 pm, 22nd January 2015

My Lords, I join in thanking my noble friend both for obtaining this debate and for the very eloquent way in which he introduced it. Rather like my noble friend Lord Liddle, I will take a slightly different course by saying that we live in a world that is changing very fast indeed. That must be taken into account when we look at the investment and planning of our infrastructure.

A friend from America told me recently, in an e-mail in which he gathered together a lot of information, that the computing power contained on my mobile phone at the present time would have cost me £3.5 million in 1991, only 24 years ago. That is the computing power that I now have on my mobile phone. That is only an example of the way in which the world has changed and is continuing to change. That is the important point. The world is not only changing, but is continuing to do so and is changing faster and faster.

After all, most of the infrastructure we are talking about deals with transport problems that would not have existed 250 years ago. Yet 250 years is a very short time in the history of mankind, let alone the history of the world. Railways and motor transport did not exist then, so there was no infrastructure as we talk about it at the present time. Having said that, I make the plea that the infrastructure for the internet be considered as part of the essential needs of the people of this country. At the moment, the internet is provided by a variety of individual capitalist companies which, quite rightly, desire to make a profit. However, there are three distinct groups of people who lose out in the present structure.

The first group is the elderly, which I have to say includes some of my noble friends around the House.

A noble Lord:

What about yourself?

Photo of Lord Maxton Lord Maxton Labour

I am elderly, but not in that category. Some people think that I am quite an expert on computers in this place, but I consider myself to be a one-eyed man in the kingdom of the blind. There is some element of truth in that.

The fact is that the elderly often lose out because they do not have computers, and if they do, they do not know how to use them. Even mobile phones can be a bit baffling. The second group is the poor: those who cannot afford to pay for a monthly internet service.

I was tempted to say that the third group is made up of those who live in rural areas, but it is not just them, it is those who do not have a fast internet connection in their home. I want this Government—or any Government, because two out of these three groups would benefit from having a Labour Government—to ensure that the telephone network is part of the infrastructure that we are looking at in terms of planning because it is the main way of providing access to the internet. If we do not do that, we will leave these groups behind. We have already seen in education that children who have access to computers and the internet are benefiting over those who do not. I therefore ask the Government to consider this.

Photo of Baroness Mobarik Baroness Mobarik Conservative 1:31 pm, 22nd January 2015

My Lords, I rise to make a few points in this debate on what is clearly an extensive subject and one which has a significant impact on our own and our children’s long-term future. I would like to say first that in this debate, whatever our political allegiance, we all essentially want the same outcome, which is an infrastructure that will strengthen our economy and ensure that we remain one of the leading economies of the world. To do that, though, we cannot rely on our Victorian heritage. We must have a long-term vision and the will to make it happen. As the Chancellor said last year:

“We must learn from the past, not be the past. Decide or decline. That is the choice”.

That means not only putting aside our political differences but doing things differently, for clearly, as it stands, the system of decision-making still leaves considerable room for improvement. I welcome Sir John Armitt’s proposals for an independent infrastructure commission because it has sparked a debate and, it is hoped, will lead to the outcome that we all want.

From a business perspective, there is clearly support for doing things differently. The noble Lord, Lord Adonis, quoted the views of the CBI on this. That is not to say that the direction of travel in recent years has not been positive. The publication late last year of the road investment strategy and the forthcoming publication of a digital strategy this year indicate that we are starting to think beyond the immediate future. The innovations in the Infrastructure Bill currently going through the Commons are helping to put in place the building blocks for this. These are less controversial, though, than some of the tough decisions that are still outstanding, and none is more pressing than the key question of the airport capacity that is required if the UK is to remain competitive, and if we are to rebalance our economy and secure longer-term sustainable growth.

The experience of the Airports Commission, currently led by Sir Howard Davies, offers interesting insights upon which we can draw, demonstrating the importance of taking an evidence-based approach. When analysed in the cold hard light of day, the case for new runway capacity in the south-east is clear. With this clarity, it is essential that we as politicians play our part and commit to implementing the proposals when they are published in June, so that we can finally increase our capacity and grow the links to emerging markets that our businesses so desperately need. In the past five years, while we have been reviewing one runway, China has gone from 175 to 230 airports.

Getting value for money is important, although I cannot help but ask the question: did the Victorians rigidly cost-benefit analyse every project they undertook or did they start with a vision of what they wanted to achieve as a country? Where do we want to be: among the top industrial nations of the world or lagging behind because we have made an industry of analysing the detail of the tools we require in order to get there? Indecision on new runway capacity is already impacting on business investment, so we must take action as soon as possible. Business needs clarity, and not just on aviation but on the long-term future of infrastructure across the board, from our energy supplies to our funding for upkeep of the road network. These are key aspects that will promote growth. In all these areas we need to have an adult conversation both with each other and with the public about what we need and when we need it.

For too long, major infrastructure projects have become a painful process which has been hijacked by bureaucracy, electoral cycles and interest groups, despite the fact that we have democratically elected representatives to take these important decisions. It is important that we have a national debate which involves both politicians and the public, but we must also keep the end goal in mind—job growth, prosperity and security for our citizens. Perhaps an independent body made up of experts is the best way to help politicians to achieve this.

Photo of Lord Hunt of Chesterton Lord Hunt of Chesterton Labour 1:35 pm, 22nd January 2015

My Lords, I welcome this debate, which was introduced by my noble friend Lord Adonis, and I am pleased to follow the noble Baroness, Lady Mobarik, who commented on the broader considerations of our infrastructure. Of course, when levels of pollution got too bad during the great stink, this Parliament had to abandon the area. Similarly, China has to stop activities when the pollution levels get too high. Sometimes they turn off all the factories in order to have clean days, which are called “APEC blue”.

This debate concerns what we do for everyone’s benefit in both the immediate and the long term by using the space below the ground, the shrinking space we have available at ground level, and the increasing value of the space above the ground—right up to the ionosphere, which is one of the most valuable parts of our infrastructure. The debate has embraced all aspects of our built environment, our engineering structures and our natural resources, which include the vital and invaluable element of radio communications. I found out the other day that “infrastructure” was not in my 1960 edition of the OED, although the French introduced it in 1875. The noble Viscount, Lord Ridley, pointed out that the French understand systems. Perhaps that explains the lack of UK investment in the broader infrastructure. In that area, the UK is now ranked 28th in the world, having fallen from 24th place. I declare my interest as an engineer and scientist and as a former head of the Met Office, a very successful government agency that is a world leader. Vis-à-vis the remarks of the noble Lord, Lord Sassoon, and others, it was criticised for generating excess profits.

The UK’s engineers, scientists, architects and landscape architects, of which my wife is a distinguished exemplar, have gained a worldwide reputation and have contributed to some of the world’s greatest infrastructure projects. Although there is some great infrastructure in this country, as my noble friend Lord Adonis said, there are many areas where we have failed. One of the points which other speakers have perhaps not emphasised is the need for an integrated approach. The suspicion of integrated systems mooted in this House by Lord Shackleton in 1976, when the idea of systems thinking in government began to be discussed, was exemplified by the noble Lord, Lord Sassoon. He suggested that any kind of integrated visionary commission would essentially hold things up. I believe that a proper UK system would not necessarily mean adopting a top-down bureaucratic approach, but rather a visionary commission that considers many factors: the environment, climate change, training and many other areas which have been mentioned in the debate. Of course, a visionary commission should also look to its rather unvisionary colleagues in the Treasury, whose job it is to find the money and make sure that it is properly spent. I believe that a commission as envisaged in the Armitt review would be very different from what happens in the Treasury.

The other important point about such a visionary commission is that it must devolve powers to the regions and the cities, to government agencies, and most importantly to industry. That will ensure interconnected planning, particularly for new forms of power, technology and transportation. The remarks of my noble friend Lord Liddle exemplify this point. Such a commission will also link the UK infrastructure system to the network systems in other countries. In Europe, we have an interconnected system for electricity and other interconnected systems for other aspects of our power and business, and that is an important role of the visionary commission.

I end by referring noble Lords to the remarkable concepts of Buckminster Fuller, the great visionary engineer, who talked about an electrified interconnection grid developing around the globe. We are now seeing this, for example, in Asia. That is the kind of visionary idea that the commission would be able to have, and I believe that that kind of openness is what we need.

Photo of Lord Cavendish of Furness Lord Cavendish of Furness Conservative 1:40 pm, 22nd January 2015

My Lords, I am pleased to join other noble Lords in thanking the noble Lord, Lord Adonis, for introducing this important debate. His considerable experience, knowledge and enduring interest in Britain's economic performance were all evident in his eloquent opening remarks. In contributing today I declare my interests, which are quite numerous and varied, so I refer noble Lords to the register.

I wish to make two points. Given that the funding for 64% of our infrastructure projects is met by the private sector, it is worth asking why our national performance has slipped relative to other developed countries. Part of the answer must lie with the fact that our planning system moves at a glacial pace and needs urgently to be more responsive. More importantly—and I am sorry to say it—there seems to be no doubt that confidence is still lacking among the business community. It is not as though the Government have done nothing; on the contrary, as noble Lords have heard, they have done a great deal and in difficult circumstances, and I congratulate them warmly. I have listened to the arguments put forward by the Government against the establishment of an independent infrastructure commission and so doggedly advocated by the noble Lord, Lord Adonis, over a long time. I do not feel qualified to challenge those arguments. The rather convincing worry is that 89% of business wants such a body so that well developed infrastructure strategies are less exposed to political cycles, and, in a raft of other areas, business still has misgivings about the future.

One problem is that neither this Government nor any other understand business properly. It is not that we lack clever and committed politicians and officials—there is no shortage of those—but, crucially, not a single Minister, civil servant or public sector officer woke up this morning or any other morning to the reality of risk-taking and being held accountable, and the subtle workings of capital are not understood at all. It is an interesting reflection that barely a handful of noble Lords participating this morning have current experience of constructing a capital budget, or worrying about how they will pay the wages tomorrow morning or how they will cope with the daily tsunami of regulations. Business wants to see the politics of infrastructure change fundamentally in order to improve the perception of the UK as a place to do business. It would help if the noble Lord, Lord Adonis, would perhaps persuade his colleagues to talk less about such things as nationalising the railways.

I will finish by speaking about my own area of south Cumbria. I am more optimistic than the noble Lord, Lord Liddle. As he would agree, in common with many other rural areas we have had a varied economic history, but today in the Furness peninsula we are preparing ourselves for the biggest investment in our history. It is estimated that over the next decade some £40 billion will be spent in industries that include civil nuclear, biopharmaceuticals and nuclear submarine building, To put that in perspective, in money terms it is equivalent to one and a half times the Olympics. While it is hard to exaggerate this good fortune, the infrastructure implications are huge. Quite simply, we lack that infrastructure by magnitudes, as the noble Lord, Lord Liddle, said. My major concern is to see that small and medium-sized businesses benefit from this investment and have access to the supply chain. I am out of time, but I simply ask my noble friend to visit and see for himself the scale of the opportunities and the challenges that face us.

Photo of Lord Morris of Handsworth Lord Morris of Handsworth Labour 1:44 pm, 22nd January 2015

My Lords, whatever view we take in this debate, one word concentrates all our minds: capacity. The House will no doubt remember the fire at Didcot power station last October, which resulted in its partial closure. This, added to the planned closure of two more power stations and the decommissioning of others, was a wake-up call.

Last November, the Royal Academy of Engineering published the findings of an investigation into the capacity margin of GB’s electricity system. The investigation was commissioned by the Prime Minister’s Council for Science and Technology. The report warned that, in the absence of intervention, the capacity margin,

“would present an increasing risk to security of supply”.

The nation’s transport capacity—road, rail and air—is rehearsed daily in our media. Indeed, we consider it regularly in this Chamber. It cannot be ignored much longer. Investment is not something you do tomorrow; its implementation has to be decided on today. The lack of investment throughout our infrastructure leads to misery for many, destitution for some, and a massive cost to both the local and the national economy.

Throughout my industrial and political career, save for the National Economic Development Council, I can recall no overarching body charged with the responsibility for planning or co-ordinating the national infrastructure needs of the nation. It is now, I believe, an idea whose time has come. Last autumn, an article by Dan Lewis, senior adviser on infrastructure policy at the Institute of Directors, summed up the malaise of the nation, saying that until now the UK had somehow “muddled through”. He predicted that this was about to change and that over the next 15 years Britain would face a rolling series of major infrastructure shocks. Coming from the IoD, it was indeed a wake-up call.

I am pleased to say that the wake-up call is being heard loud and clear in this Chamber and in this debate. The Armitt report, which has been discussed, was published last September. It called on the Government to hand over responsibility for identifying the UK’s long-term infrastructure needs to an independent panel, which would monitor, plan and report. We need that debate because we have to reach a consensus. At least we have to convince those from whom we seek investment.

The call that I hear today is no different from what the Armitt report said. It called for a cross-party political consensus to encourage investment in long-term transport, energy, telecommunications and flood defences. I have heard the call, and I hope that the Government are also listening.

Photo of Lord Horam Lord Horam Conservative 1:49 pm, 22nd January 2015

My Lords, as others have done, I congratulate the noble Lord, Lord Adonis, on introducing this debate. We all respect his great record in transport and education. Equally, I am glad that my noble friend Lord Deighton is answering for the Government because he is the great implementer, as the noble Lord, Lord Adonis, admitted in his remarks. Indeed, with the two of them together, the House of Lords leads once again over our colleagues in the House of Commons; I do not believe that it could field two such Ministers as we have today leading our debate.

Undoubtedly, infrastructure planning has been a problem for this country for many years, stretching over many different Governments. The noble Lord, Lord Adonis, said that we were now 27th in the league of international comparisons. I thought it was 24th but, whether it is 24th or 27th, it is far too far down for a country that is fifth overall in the economic league tables. Now we have the annual infrastructure plan, which is an excellent idea and has cleared up some of the chaos that we were left in by the previous Government due to their bad planning over PFI and their penury on the macroeconomic front. That has helped to bring an element of stability to the whole situation but it is not enough.

Urgent attention needs to be paid to two things that I want to stress to the Minister, which I hope he will pay attention to. The first is that we need to get going on fracking. There is an important decision being taken shortly—in the right direction, I hope—by Lancashire County Council. I speak as a Lancastrian who knows the area of Bowland extremely well; it is where I was born. That decision needs to go the right way. If it does not go the right way, I hope that the Government will intervene and overrule the council. We need to make progress on this matter, otherwise we will be left behind in this very important area of energy development.

Secondly, affordable housing was mentioned by the noble Lord, Lord Adonis, and in a very important speech by the noble Lord, Lord Rogers of Riverside. I agree with both of them: our housing record is appalling. We need between 200,000 and 250,000 houses a year. Even Harold Macmillan in the 1950s was able, from an almost standing start, to get up to 312,000 houses in two years. He was able to do that only by a careful and dynamic plan from the centre, organised by the Government. It will not be enough to rely on private housing providers. They will not build the houses in the right places for the country or for the people who need affordable housing. What is happening in London now is a disgrace in terms of the number of houses and flats that are being built and immediately sold off-plan to foreign buyers and are not available to people who live in London. That must not happen any longer if we can possibly avoid it.

I therefore say to my noble friend: I want to see in the next Conservative manifesto something very concrete on fracking and something very concrete on affordable housing.

Photo of Lord Rooker Lord Rooker Labour 1:52 pm, 22nd January 2015

My Lords, I have agreed with almost every speech that I have heard today. I resented the petty, demeaning, partisan comments made by the noble Lord, Lord Sassoon, but they were the exception.

I tore up my notes and will use as an aid the Chamber of Commerce note that we all had because I agree with all the points it raises. When I visited an infrastructure project recently—the oldest railway tunnel in the world in daily use, a couple of miles down the road—I thought: what would Brunel think about us today, with our lethargy on infrastructure?

The message I took from the speech of the noble Earl, Lord Attlee, was crucial: the need for sequential planning to ensure that you can smooth things out and do not have all the cranes at once and then nothing for months afterwards. I think that is really important.

Let’s face it: until this Government came along, the last person to order a nuclear power station in this country was the late Tony Benn. The previous Government missed the post—we know that—with the disastrous 2003 Energy White Paper. Between the start of HS2 under the previous Government and it being fully supported by this one, there was a hiatus for about a year when there was a bit of backsliding within my own party, which we had to correct in this House by making it clear that we were fully in support and wanted to buy into it.

That brings me to the point. I do not know too much about the plan for the commission and building it all together, but what is clearly needed is a grand coalition on infrastructure that goes across Parliaments. We cannot go on saying that no Parliament can bind itself; by definition, it has to bind itself on infrastructure planning, otherwise we waste a fortune in money, crash hopes, destroy industry and end up not doing anything. So it requires more than what probably is planned. We need to tie ourselves down. The consensus we have here today shows that that can be done.

On motorways, years ago I was amazed when the noble Lord, Lord Mawhinney, as Transport Secretary, published a paper showing how small a proportion of the population actually regularly used a motorway—in other words, those who use them should pay for them or pay a contribution. I agree with the noble Viscount, Lord Ridley, that it is not too late to do that. Energy storage was on the list as well. Our gas storage is woefully inadequate and I do not think we have done much about it in the past decade. We are heading for trouble.

The Government own enough land to build 1.5 million houses. Most of it is brownfield, as my noble friend Lord Rogers said. Why are we not using it as a master plan within the Government? I do not worship the green belt like everybody else—most of it is rubbish land. It is not areas of outstanding natural beauty and it is not the national parks—they are quite separate. It is the urban collar around the big cities where the infrastructure is already there to have houses added to.

That is the key point: we do not have to go for big greenfield new towns any more. It is not necessary. We can use the land we have. As I say, the Government own enough land to build 1.5 million houses on, and basically they ought to get on with it.

I agree that infrastructure should stick with the Treasury. Whatever I might have said about the Treasury in the past, the long-term nature of the Treasury is crucial. The DWP is subcontracted to the Treasury. Every decision that it makes on pensions and benefits has a 30-year to 40-year consequential change, and it is crucial that the Treasury is four-square with that. With infrastructure, it is exactly the same. The Treasury does not have to take the detailed decisions, but rest assured that it has a bigger bite on it than it used to have.

Photo of Lord Teverson Lord Teverson Chair, The Arctic Committee 1:56 pm, 22nd January 2015

My Lords, when I left university in the 1970s, I did not take a gap year; I got in a Morris 1100 with two of my friends and we did something slightly unusual for those days: we drove around eastern Europe. Of course, those were the days of the Soviet empire and central economies, and one thing that particularly struck me was that there was no lack of infrastructure; in fact, plenty of infrastructure got built. The problem was that, first, it was not maintained, and, secondly, when they had failed to maintain it, they failed to repair it. That is one of the issues that I would like to pursue in my few minutes today. There are similar problems in the developing world.

Fast-forward to the United Kingdom in 2015: we have a major area of infrastructure that, when we go home and walk around, we see most often—our homes, our housing stock. One area that we have a problem with is upgrading our housing stock. There are 22 million homes in the United Kingdom, of which 82% do not meet even an energy performance certificate standard of C. That standard is not fantastic, it is merely okay, but the other 82% fall well below that. The previous Government and this one have had a number of schemes—Warm Front, CERT, ECO and the Green Deal—that have tried to tackle this issue. They have been successful to a degree and have been better than a drop in the ocean, but they have far from solved the problem of energy efficiency, fuel poverty and the cost of fuel to the economy and to families trying to keep themselves warm.

I will refer to a report produced by Cambridge Econometrics, among others, called Building the Future: the Economic and Fiscal Impacts of Making Homes Energy Efficient. It has set what would be a very reasonable target for any Government—the next Government, I hope—to bring all poor households up to energy performance certificate standard C level and to provide free loans of 0%, as is done in fiscally conservative Germany, for other households that can afford to pay for those changes in order to bring them up to those standards as well. The report estimates the cost of that over the lifetime of a Parliament as something in the order of £13 billion, which is a lot of money. Compare that with what the overall infrastructure spend might be for those five years in the next Parliament, which is estimated to be hundreds of billions. So it is something like 10% of the total infrastructure cost over a five-year term Parliament.

What are the benefits that come out of that? The estimate, which I see as being reasonable and reasonably conservative, is some £8 billion of energy savings, and that is taking into account what is called, shall we say, “comfort take”—people who are already too cold increasing their energy consumption or bringing up their temperatures after that. It reduces carbon emissions, of course, and increases energy security. The other area, which people like myself who deal with energy and climate change do not always take into account, is the huge benefit that there would also be to the National Health Service. In this country we have some 30,000 excess winter deaths, of which 30% to 50% occur because of cold homes. That is something that we can solve, something that is really important to us.

The cost of all that would be something like £13 billion, but every year we pay £2 billion worth of winter fuel payments to everyone universally. Over the same parliamentary period, that would be £10 billion. I suggest to my noble friend the Minister that this is an area where we could move on from Soviet and developing-world models, invest in our housing infrastructure and be of real benefit and cost benefit for our country in the future.

Photo of Lord Whitty Lord Whitty Labour 2:01 pm, 22nd January 2015

My Lords, I think my noble friend Lord Adonis was right to put the proposal for a national infrastructure plan at the centre of his speech, and I think this debate has rather brought that out. We need a mechanism whereby we have an overall prioritisation; an overall allocation of resources; an effective form of scheduling, as the noble Earl, Lord Attlee, said; a consistency of project assessment, as my noble friend Lord Hollick implied; and something therefore that investors of all sorts can have confidence in, so that they can avoid the tendency to short-termism and to knee-jerk political or financial reaction.

The investors include the Treasury, but they also include the corporate headquarters of multinational companies, the banking system, the finance markets and institutions such as the pension funds. At the moment they can have virtually no confidence. For those who say that a national infrastructure commission would simply be a bureaucracy and produce all sorts of favours, I refer to all the papers emanating from several different government departments and agencies that we should have read if we were to be properly informed on this debate, as recommended by the Library. We need an overall plan. The glossy that the Government produced on the national infrastructure plan in the past month is very helpful but incomplete; it does not give its basis or, in most regards, its timescale.

I shall concentrate my remarks on areas that are not in there: energy efficiency, which is hardly there apart from a brief reference to smart meters, and housing, which is hardly there at all. Had I had longer, I would have liked to have talked about transport and flood defence, but not in four minutes. However, I say to the noble Lord, Lord Sassoon, if I may depart briefly from my bipartisan approach to this, that the areas that the Government cut when they came in were exactly those: housing, energy efficiency, roads and flood defence. That was a ridiculous short-term decision, but luckily the Government have recovered from it. I hope that therefore we have a basis for bipartisanship in future.

On energy efficiency, the noble Lord, Lord Teverson, has spelt out the need for investment in energy efficiency at the point of use, and I echo virtually all his remarks. There is also energy efficiency in the system itself. We lose the bulk of our energy before it gets to the point of use. We need to look at improving the transmission and distribution of energy, at decentralised energy, at CHP and at carbon capture and storage, which is mentioned there but only briefly. That should all be part of an investment and infrastructure plan, and should be assessed on the same basis as, if you like, the sexier parts of the agenda, which relate to big roads and big airports. At the moment the process of assessment of such projects is very differential and, if you like, politically and subjectively charged, depending on which area you are looking at.

The same applies to housing. In a sense, the noble Lord, Lord Horam, must be right that this is the biggest lack of infrastructure failure of successive Governments in the past 30 years. Housing for our people must be a central part of the infrastructure agenda. At the moment it is not in the December document, and it ought to be. I hope that we can rectify this as we go forward. I hope that we can do so on a consensual basis, but I think we also have to recognise that we need new structures in order to be able to do so. Sir John Armitt’s report is a very good basis for starting.

Photo of Lord Deighton Lord Deighton The Commercial Secretary to the Treasury 2:05 pm, 22nd January 2015

My Lords, I thank noble Lords for an excellent, instructive debate; it has been thought provoking for me, absolutely. I congratulate the noble Lord, Lord Adonis, and endorse the point that the noble Lord, Lord Berkeley, made about his contribution and his receiving the European Railway Award. I was delighted that HS1 and Eurostar could get the noble Lord back here safely and on time to kick off the debate in a most interesting way.

This debate has also been useful in reinforcing the fact that infrastructure really does need to be centre stage: it is at the heart of our economic strategy—I think there is absolutely bipartisan endorsement of that. We have talked about the great opportunity that infrastructure brings, and we all agree that it is a key driver of economic growth. Transport, communications and energy systems help people and businesses improve their productivity, and as a result improve the rate of growth of the country. The construction projects, where we build them, are great short-term spurs to growth and skilled jobs. Infrastructure is also the key to unlocking growth in our regions. It is also a critical way of unlocking the housing growth that has been a big part of many of the contributions made by noble Lords.

The challenge, of course, is that historically we have underinvested, for a variety of reasons. What do we need to fix to cure that historical underinvestment? It has something to do with the shorter-term horizons of the political environment which do not quite match the longer-term needs and gestation periods of investment in infrastructure. How do we tackle that more effectively? The noble Lord, Lord Adonis, referred to our ranking as 27th in the World Economic Forum. My noble friend Lord Horam was appropriately horrified by that. I should just point out that those rankings are a result of the home audience’s subjectively evaluating what it thinks of its own infrastructure, so it probably says more about the British psychology than about the objective state of our infrastructure. Noble Lords might listen more carefully to the IMF review.

Photo of Lord Hunt of Chesterton Lord Hunt of Chesterton Labour

According to the Institution of Civil Engineers, this ranking was developed for the World Economic Forum. It is rather topical.

Photo of Lord Deighton Lord Deighton The Commercial Secretary to the Treasury

It is topical, but it was still a subjective review of our own psychology. The IMF review in 2009 says that the UK has the fastest-improving infrastructure in the G7, which is clearly a good thing. We managed to get cross-party support for the Olympic Games. We started off with a Labour Government and a Labour mayor, and ended up with a coalition Government and a Conservative mayor, and there really was not a single slip when the baton was handed over because there was very effective cross-party support. I suspect that the nature of our immovable deadline—with Her Majesty the Queen’s parachuting into the Olympic Stadium on 27 July 2012—and our British fear of being embarrassed in public were probably helpful disciplines in getting us to that successful outcome.

There are three simple components to the Government’s plan to deliver our infrastructure more effectively: first, to have a plan; secondly, to have the money; and, thirdly, to focus on delivery so that we get it done very effectively in terms of the Government’s performance as a client and industry’s performance as the deliverer of that infrastructure. Everything that we have done as a Government has been about refining how we do those three things and making them better. I will therefore structure my comments and my responses to noble Lords’ questions around those three components of the plan.

We have a comprehensive, cross-sector plan; it is the national infrastructure plan—a number of noble Lords referred to it. It is a lot better now in 2015 than it was in 2010, simply because we have iterated it and built upon it, and we should do that every year. It was unfair of the noble Lord, Lord Adonis, to say that it is not really a plan. It is a plan and it does have timescales. At the beginning, it was a little more like a list of projects, but now it is a plan and is underpinned by a clear strategy. We have a road investment strategy: it is the road investment strategy which drove the list of projects which then enabled us to put a five-year funding plan in place.

I take on board the comments by my noble friend Lord Bradshaw that we need to invest early enough to get capacity right—the lead times on this are absolutely critical. My noble friend Lord Flight pointed out that the plan was improving. It is rather boring government: each year, each section gets a little bit better; each year, the strategy which we pull out of the departments responsible for those areas gets better. That refinement is going on. It is a plan that is backed and supported by industry; we work with industry to develop it; and it is a plan that has given industry and investors the certainty to plan against the pipeline which, because we have now been doing it for five years, they are just about beginning to believe in. We need to keep doing it over and again. Government’s work is done at the front end of that pipeline; that is, turning the concepts or solving the problems, and creating investable projects. As a noble Lord said, it is not the finance that is the constraint; it is shaping such projects into investable projects so that they can be carried out.

The claim I would make for this Government’s achievement is that we have got to grips with the short-term delivery challenges. We have put in place a plan to 2020-21. Many of the projects last through the 2020s. The next step is to develop a plan that addresses the UK’s infrastructure needs in the much longer term—which is where we should spend a moment addressing the case made by the noble Lord, Lord Adonis, for a national infrastructure commission, which was supported by many noble Lords here. I agree that the next stage of work is to look at our longer-term needs and to ensure that we develop strategies for them. Out of those strategies will come the work to develop the projects that will give us the outcomes that we are all looking for. I absolutely agree that that is the next stage of work.

I agree also that there is a significant role for independent expert advice. That was what we did in wrestling runway capacity in the south-east to the ground with the Davies commission. If one looks at the amount of work that has gone into solving one particular problem within one sector of the broader transport area, one sees that the kind of effort that we are talking about here is very broadly based. Defining the precise scope is an interesting question. The noble Lord, Lord Maxton, referred to the infrastructure of the internet. In the National Infrastructure Plan, there is a chapter on communications. The Government are producing a digital strategy just as they have produced a road investment strategy. So these things are all under way. I also accept the point made by the noble Lord, Lord Hunt, about integrated systems. We have very good plans for each sector, but we need to be much smarter in the longer term about understanding integration opportunities and interdependence. We have, too, to understand climate change; we have to understand the impact of technology. Those are all the things that we need to figure out.

The discussion that needs to take place on how we do this—my noble friend Lord Sassoon referred to it— is about how heavy we make the machinery to accomplish it. My experience in business and especially in government is that we need people who can get to outcomes, not people who can create layers of process. I am very nervous about signing up to quite heavily constructed process when my experience has been that what we need in government is the ability to get these things moving.

If that is where the plan fits in, let me spend a little time talking about the money. Our infrastructure is financed either publicly, from taxpayer money, or privately. Quite a lot of it is financed with a mix. Two-thirds of it is financed in the private sector. On the publicly financed component, we can effectively retain a good bipartisan approach, but I think that this Government have been very successful in stabilising our public finances, which is what has created the room for us to be able to spend more ambitiously on infrastructure. That is a big difference between the parties. The success in stabilising those public finances has been what through successive fiscal events has enabled us to invest more effectively in public infrastructure. On the public side, we are talking about the road network, the flood protection environment and Network Rail as the three key sectors. We have also made settlements that last right through the Parliament, which is the first time that we have ever done that. If I look at all the things that we have done in the past four years, turning a one-year financial settlement into one that lasts to 2021 has been the single most transformational thing, because those sectors can now plan, build and construct, and have much more effective delivery, by having that medium to long-term planning environment. It is absolutely transformational.

We need to work through the system to make sure that the agencies responsible, such as the Highways Agency, the Environment Agency and Broadband Delivery UK, have the skills to be able to work with industry to realise the full benefits of that longer commitment of public money. I am delighted that we have been able to finance some of the pet or favourite schemes of noble Lords; for example, the interest of my noble friend Lady Maddock in the A1 north of Newcastle and connectivity with Berwick. As my noble friend Lord Attlee pointed out, such a longer commitment is the key to avoiding the feast and famine of past years and getting the sequencing right. If you have a five to six-year settlement, you can sequence it intelligently through that period, rather than having to make sure that you have spent all the money in year 1 because you are never quite sure whether it is going to be there tomorrow.

I have talked about the fact that we in the UK are pioneers in private finance. We do private finance of infrastructure better than anybody in the world. We introduced privatisation; we introduced public/private partnerships—as my noble friend Lord Sassoon pointed out, unfortunately the PFIs were not always as well executed as they should be, but getting the balance right is hugely important. A number of things make the environment that we have got here right. We are a very attractive location for overseas investment. Of course, we cannot be complacent; we need to keep making it better. The noble Baroness, Lady O’Cathain, was very articulate about the stability of this marketplace, the clear property rights and our world-class regulation—which a number of noble Lords referred to, including my noble friend Lord Sassoon. Preserving the independence of that regulatory framework is critical. I am particularly pleased with the combined work that the regulators are doing through the new body that we set up, the UK Regulators Network, to focus on the key issues such as affordability, cross-sector infrastructure investment and how we engage with consumers to facilitate switching. The Government have also intervened in a variety of sectors to support financing, including the new electricity market reforms. The noble Lord, Lord Rooker, referred to nuclear and the way in which we are driving that forward. The noble Lord, Lord Liddle, talked about Cumbria. We are doing an enormous amount of work to get all three big nuclear projects off the ground—not only Hinkley Point, but also NuGen and Horizon. That will ultimately be for the benefit of the economy in Cumbria too. I agree with the noble Lord, Lord Whitty, that work is needed on the demand side of energy just as much as on the supply side. All these sectors are critical.

I support my noble friend Lord Horam in his call to accelerate fracking. We have put the planning environment and the tax incentives in place. It is now down to the developers to determine if the economics are there for them. My noble friend Lord Ridley said that there are alternative models—which other countries have embraced—for funding our roads. The noble Lord, Lord Rooker, backed this up.

The noble Lord, Lord McFall, talked about potential investment in infrastructure by the big insurance companies and the challenges they sometimes face. Of the £25 billion they said they would put up, £5 billion is already committed, so that is moving ahead pro rata. We have helped with making the Solvency II rules as benign as possible to support that development.

The third component of what we are trying to do is to get smarter on delivery, what we do in government and how we can help industry get better at it. We are much more focused on government intervention to unblock things in our top 40 projects. My noble friend Lord Marland referred to it as “energetic” and “enabling”—making sure that we have joined-up government. I ran an exercise in upgrading the commercial capability across the key departments. My noble friend Lord Cavendish correctly pointed out that it does not come that naturally to government. We have to ship in a lot of the commercial expertise; otherwise we are outgunned in big commercial negotiations. There is a lot of work going on there. We have put our top people in key leadership positions. Of all the things we have done in HS2, persuading David Higgins to be its chairman has probably been the single factor which will make most difference in the effectiveness of its delivery.

Many noble Lords made observations about the need to improve the planning system. That is part of the responsibility of government in enhancing delivery. We have done a series of things. My noble friend Lord Freeman referred to the national networks policy. The noble Lord, Lord Berkeley, referred to draining the swamps and trying not to listen too much to the frogs. At the next Budget, we will consult on CPOs, and ideas about how to financially motivate getting to the right point more quickly will be our underlying objective.

With industry, we have worked at ways to improve project initiation—how projects are set up and delivered. In the first three years we took £3 billion out of a big set of projects through working with industry and we are continuing that engagement to look at change in their own delivery. An important component is getting skills right. When I started this job, the construction companies came to see me to say, “We want work”. Now they say, “Slow down, because we do not have the capacity to deliver it all”. Skills are at the heart of this. My noble friend Lady O’Cathain was spot on when she said that the important short-term and medium-term challenges were to get that right. Apprenticeships are absolutely at the heart of that. I am delighted that we have the HS2 colleges set up in Birmingham and Doncaster. My right honourable friend Patrick McLoughlin, who is clearly doing a very good job as a successor to the noble Lord, Lord Adonis, was at Crossrail on Monday, celebrating its breaking through its 400-apprentice model.

I have not said much about rebalancing the economy, a subject which many noble Lords raised it. The noble Lord, Lord Adonis, talked about devolution. My noble friend Lady Maddock talked about local authorities. The noble Lord, Lord Liddle, spoke about cream cakes and Cumbria. The noble Lord, Lord Rogers, talked about cities and urban regeneration. I think we all accept that we have not invested sufficiently in infrastructure in the regions, and that needs to be corrected. We are trying to do it. Chapter 2 of the National Infrastructure Plan is all about getting that right. The underlying, driving theory of HS2 is to empower the northern cities so that they can have the same kind of economics of agglomeration that can drive growth. We have seen it similarly in London.

I agree that there is a link between infrastructure and housing. Battersea is a great example. We guarantee extending the Northern Line and suddenly Battersea creates 30,000 homes. That kind of relationship needs to be worked out right around the world.

In conclusion, we must relentlessly continue our work to deliver the pipeline that we have. It is necessary to work at everything I have talked about—the plan, the money, the delivery—to ensure that consumers and businesses reap the benefits. As I believe we have demonstrated in this Parliament, where there is a clear plan to build and finance the infrastructure that we need and a powerful programme to drive its delivery, then that infrastructure can and will meet its potential to be a real engine of our economic growth.

Photo of Lord Adonis Lord Adonis Shadow Spokesperson (Treasury) 2:26 pm, 22nd January 2015

My Lords, this has been an excellent debate and I congratulate the Minister on his highly constructive speech and on the great work that he is doing. It is striking how broad has been the support across the House for the establishment of an independent national infrastructure commission, including from Conservative Members and from the Minister himself. I think he came as close as he could to endorsing the idea provided, as he said, that it is practically focused. I entirely accept that proviso.

The only dissenting note was from the noble Lord, Lord Sassoon, who said that the commission would be a bureaucracy. Any gathering of public officials is a bureaucracy. Your Lordships’ House is a bureaucracy; it just happens to be a very good one. The case for an independent commission is that it would be a good bureaucracy because its job would be to prepare a major infrastructure pipeline which has been so sorely lacking in recent decades. However, I believe that the noble Lord, Lord Sassoon, secretly agrees with me; he was just obeying orders from Tory Central Office. I say that because it was the noble Lord himself who took through the House the excellent legislation setting up the independent Office for Budget Responsibility— another bureaucracy, but a valuable one to provide independent advice on fiscal policy. It is precisely analogous to what we seek to do in respect of infrastructure. When making the case for the OBR to your Lordships, the noble Lord said:

“The independence of the OBR’s judgments will ensure that policy is made on an unbiased view of future prospects”.—[Hansard, 8/11/10; col.12.]

An independent infrastructure commission would have exactly the same purpose—to ensure, or at least to help ensure, that policy is made on an unbiased view of future prospects in respect of infrastructure. As almost every noble Lord who has spoken in this debate has recognised, we urgently need such an unbiased view so that we move from 27th to at least the top 10 in international rankings for the quality of our infrastructure. Nothing is more important to our future prosperity.

Motion agreed.