Infrastructure is never the sexiest of subjects, and yet its effects are all around us. This influence is felt not just in the quality of our buildings – the schools, waste plants, hospitals and houses – but also in our economy. Spending money on infrastructure creates thousands of jobs and pays for itself many times over through increased economic growth.
So when the pre-budget report is published on Wednesday, it will be worth peering through the likely torrent of commentary about tax rates and government borrowing to see what the Treasury has to say about its building plans.
One thing that the chancellor, Alistair Darling, is bound to announce when he stands up in Parliament is the creation of a body called Infrastructure UK. Background work on this idea has been going on since the summer, led by Lord Davies of Abersoch – better known as the City grandee and former Standard Chartered chairman Mervyn Davies.
Its remit, of which the outline is already clear, is nothing if not ambitious: to plan what buildings, transport and communications infrastructure, and energy generation Britain will need for the next 50 years.
The thinking behind Infrastructure UK is that even though British levels of investment in infrastructure have picked up hugely under Labour, that spending has not been coordinated. Large programmes – most delivered using public private partnerships (PPP) or the private finance initiative (PFI) – have been launched in all the key areas, but separately.
That leaves Britain at a disadvantage compared to its European neighbours and even countries such as Australia, which has recently launched a body to coordinate infrastructure investment (called, imaginatively enough, Infrastructure Australia).
"It's very, very important for the UK to have a centralised agency … that can prioritise projects across departments," says Yann Le Saux, the deputy director of French construction firm Bouygues, which for the last 10 years has been building schools and hospitals in the UK.
"The UK is still, despite 12 years of investment in infrastructure, behind the continent, behind countries like France."
Infrastructure UK will therefore try to coordinate the various capital spending programmes, so that, for example, new energy plants can be planned alongside rail extensions. It will also have to think about how private investment can be channelled into these projects.
The body is likely to have a strong PPP 'feel' to it: those helping Lord Davies in his preparations have included Sir Adrian Montague, a former head of the Treasury's PPP taskforce, and Cressida Hogg, the managing director of 3i, a major PFI investor.
A crowded field
How it will interact with other agencies remains an interesting question. It will enter an already crowded field that includes relatively low-profile (but often powerful) bodies such as Partnerships UK, Local Partnerships, Partnerships for Schools, and the Treasury's own infrastructure finance unit (Tifu), which lends public money to PFI schemes struggling to attract private finance.
Infrastructure UK could incorporate some or all of those bodies in an attempt to make life simpler; but if it does, the role of the Tifu becomes extremely interesting. It is, after all, a public infrastructure bank, albeit on a very limited scale.
In a report published earlier this year, the right-leaning Policy Exchange thinktank urged the government to establish an infrastructure bank similar to those operating overseas, notably in Germany.
Such a body, incorporating the Tifu and the Public Works Loan Board, which lends to local councils, could give real force to infrastructure policy, financing the construction phases of projects before they become operational and generate income.
"The prize is an institution," the report argued, "which facilitates the introduction of private sector capital without crowding it out, finances itself with a government guarantee … and whose liabilities do not score in the national accounts."
For the Policy Exchange, a body such as Infrastructure UK without any financing powers would be "significantly" less effective – just another advisory agency or centre of excellence.
The Liberal Democrats agree: their Treasury spokesman, Vince Cable, has already argued for a national infrastructure bank. "Government would provide guarantees but the national infrastructure bank would be professionally managed and make investment decisions on an objective, project by project basis. It would not be a nationalised industry," he said last month.
Not everyone is convinced, however. Contrary to the Policy Exchange's optimism, an infrastructure bank could very easily crowd out private finance, leading to no net increase in investment in buildings. Or it could become highly politicised, despite Cable's assurances.
Nor is it clear how Infrastructure UK, in whatever form it takes, will work with government departments. Will it be able to override their wishes, to dictate that certain projects will happen before others? Or will its decisions be subject to veto by departments, leaving it with no power to do anything other than give advice?
None of this will become clear until Darling has finished speaking on Wednesday. But the hope is that he will give infrastructure planning the prominence it has so long deserved, but not often received.
