The Infrastructure Commission for Scotland has produced its Blueprint for Scotland and is preparing its Infrastructure Investment Plan. Chris Horsley, Burness Paull LLP, considers the cycle of infrastructure planning and delivery, Scotland’s position in the UK framework and the latest key topics and trends driving the focus of the market.
The Politics of Change in Infrastructure
Once again, we find ourselves in the initial stages of a new cycle, both north and south of the border.
The development of public infrastructure at a national level tends to run in cycles. There are key stages in this cycle, including:
- Strategies and priorities are identified;
- Models of contracts and delivery frameworks are developed;
- A delivery phase of specific projects in line with the strategy, model and framework is deployed.
The development of each initial stage is often linked to cycle of government, drawing upon the impetus provided by addressing the topic of infrastructure in upcoming elections, or demonstrating the promise and priorities of a rejuvenated executive team.
The early phases of a cycle may take a few years to put in place and the project pipeline which utilises the fruits of those phases may last for a decade or more. As a result, we tend to find new ideas overlapping with a series of models and frameworks from earlier launches which are now in the delivery phase.
Novel or Refresh
‘New’ cycles may also be kicked off for other reasons which arise over time – whether due to troubled project issues arising during an earlier delivery phase, value for money debates or refreshed guidance on crucial points such as balance sheet classification. Such factors can herald that a ‘new’ way of doing things is needed.
Politically, a strong message of improvement is extremely valuable to the government in power. In reality, the new contractual arrangements generated by a new cycle tend to be an enhanced ‘re-badge’ of established risk positions and market-standard drafting with adjusted wording to address a few material differences on the relevant topics.
A Blueprint for Scotland
Scotland is focused on the first stages of a new cycle. In February 2019, the Independent Infrastructure Commission for Scotland (ICS) was appointed to support the Scottish Government’s delivery of its National Infrastructure Mission.
The ICS launched its Key Findings Report in January 2020. This sets out Scotland’s guiding principles in delivering infrastructure to meet the country’s future economic growth and societal needs across sectors. This report looks at the ‘what’ and ‘why’ of Scottish infrastructure requirements.
Following publication, the ICS are now looking at the ‘how’. It is anticipated that a six-month period will be required to consider advice and recommendations to ministers on the delivery of infrastructure in Scotland, with an implementation report due in June. It may be reasonable to assume that the COVID-19 outbreak and the consequential effects upon both the construction sector and on the public purse may cause a further review of the recommendations to take place in advance of publication. This may mean that a delay to publication is inevitable.
A Broader Meaning
In contrast to a more limited UK approach, the Scottish Government has adopted a very wide definition of infrastructure, encompassing sub-sectors such as transport, heat, utilities, digital, housing; public infrastructure such as education, health, justice and cultural facilities; safety enhancement such as waste management or flood prevention; and public services such as emergency services and resilience.
The inclusion of ‘natural infrastructure’ such as waterways and forests brings in another dynamic not previously seen. This means that the Scottish Government are acknowledging that they are instrumental in tying all of these aspects together and identifying ways to improve and fund improvements in each case.
UK Budget and National Infrastructure Plan
Whilst the Budget contained some significant big-ticket spending figures for infrastructure, the long-awaited National Infrastructure Strategy which will contain the detail has been further delayed, and not released alongside the Budget as expected. The strategy is the government’s formal response to the now two-year-old National Infrastructure Assessment, which was a product of the David Cameron premiership.
Before the emergence of Covid-19, publication of the National Infrastructure Strategy was expected before the summer. The current review was anticipated to be to allow the new chancellor to refocus the strategy, to reflect potentially larger resources available, and to incorporate the challenge of achieving “net zero” carbon emissions over the 30-year timescale covered by the Strategy. The impact of the coronavirus may significantly alter this refocussing exercise, at least in terms of the use of resources and priorities of the next few years.
The strategy documents issued by each Government and the supporting discussions from recent conferences identify some central areas of focus influencing the latest iterations of the respective infrastructure plans:
- Net Carbon Zero is essential: The recent High Court ruling over Heathrow, found the expansion plans had failed to adequately account for the latest policies on climate change. Existing planned spending on roads, for example, may be subject to challenge if not adequately re-assessed in light of the latest guidance. Aviation is a notoriously polluting sector, but the debate about cars is less clear-cut, particularly given technical innovation in the shape of electric and hydrogen cars. Experts suggest that Heathrow will at least embolden objectors, and the government will face further legal challenges if it goes ahead with road spending without having clearly and properly considered the implications for net zero climate emissions;
- Existing Infrastructure attention: It is agreed that the vast majority of infrastructure which will be in use in 30 years’ time will be infrastructure that exists today. The political capital of signing off something new as compared to cutting the ribbon on an upgrade is considerably diminished. This provides a clear insight into why the country has issues with potholes and hospital maintenance backlogs etc. Attention is clearly needed, and publicising measures aligned with net zero goals may provide the political momentum to achieve real improvements;
- Foreseeable shifts in key costs: Numerous cost topics weigh heavily on the minds of those involved in future infrastructure planning. In terms of heat, gas boilers must be replaced rapidly in order to arrive at net carbon zero on time, and yet there is a very high cost to replace these on the necessary scale, with limited options. In transport, it is acknowledged that a suitable charging mechanism will be needed to replace fuel duty so that the Treasury has an income stream in the age of electric vehicles. In relation to digital infrastructure, the benefits of speeding up the 5G rollout cannot be underestimated, but neither can the cost of establishing this infrastructure, particularly outside of the major cities where internet blackspots remain widespread.
The coming months will see the National Infrastructure Plan and the Scottish Infrastructure Investment Plan seek to answer these points, alongside many other crucial questions for 21st century Britain.