Despite suggestions that High Speed 2 might be at risk, the Conservative manifesto puts those rumours to bed. Like Labour and the Liberal Democrats, the party has firmly committed to completing the project. Similarly, the proposed Swansea tidal lagoon, despite the questionable investment case for tidal lagoons, receives support in all three manifestos (though the Conservative manifesto chooses not to namecheck it, referring instead to harnessing “Welsh natural resources for the generation of power”).
Even on Heathrow expansion – the longest running saga amongst these ‘megaprojects’ – there is some clarity. While Labour dodges the question (perhaps due to the Shadow Chancellor John McDonnell’s West London constituency), the Conservatives give firm support. Whatever your view on the merits of these projects, certainty is welcome.
The creation of the National Infrastructure Commission has been a positive step and the ‘National Infrastructure Assessment’ – due to be published in 2018 – could bring some much-needed coherence to UK infrastructure decision making.
It is therefore disappointing that, unlike Labour and the Liberal Democrats, the Conservative manifesto makes no reference to the commission at all.
The Conservatives commit to an independent review into the cost of energy which will consider how to keep bills low while ensuring a reliable supply and meeting the 2050 carbon reduction objective. Framing the issue in terms of the ‘energy trilemma’ is encouraging but the review must ensure energy is not considered in a silo, separately from the rest of the National Infrastructure Assessment.
Regulation, regulation, regulation
Changing the regulated sectors – particularly energy and water – was another prominent feature in the manifestos. Labour has promised to regain control of energy networks and replace the water system with regional publicly-owned companies. The Conservatives also commit to examine how utilities regulation can deliver a better deal for customers and better incentives for investment efficiency.
As we have argued before, regulatory intervention – or even just the possibility of intervention – can lead investors to decrease or delay investment, or ‘price in’ intervention by seeking a higher return. The implications of these proposals for the cost of infrastructure are therefore concerning.
Whoever enters office on 9 June will have to specify precisely what problems private finance (and ownership) brings in infrastructure, and how they plan to address them.
Reinventing private finance
More UK infrastructure is privately financed than virtually anywhere else in the world, with most of the finance coming from abroad. The Conservative manifesto pledges to form Future Britain funds, effectively UK sovereign wealth funds, that could also invest in British infrastructure. Created out of the revenues from dormant assets (previously earmarked for charities), shale gas and sale of public assets, pension funds would also be encouraged to join.
This could be a positive development or could be an example of reinventing something that already exists. The Pension Infrastructure Platform, established with Coalition Government support in 2012, already supports pooling of UK pension funds for the purpose of investing in infrastructure – alongside the local authority pension pooling reforms announced in 2015. It is unclear whether this new proposal is meant as a replacement or will simply provide competition to these existing pooling mechanisms.
What shale we do?
The Conservative Party has pledged significant investment in shale gas, even though public opposition has meant not a single unit of gas has been produced in the UK to date. To resolve this, the manifesto seemingly suggests limiting the opportunities for communities to formally oppose fracking at the local level, and increasing the financial incentives for local communities to accept sites close by.
However, financial considerations are often secondary to psychological, communicational and value-based factors, such as environmental concerns, in determining hostility to projects. Indeed, financial incentives may even decrease citizens' willingness to permit the development of hazardous sites. As we have previously argued, well-structured public involvement in infrastructure decision making may be a more effective way to build consensus for projects.