Infrastructure UK, which advises the UK government on infrastructure planning, and the Treasury have detailed how they plan to cut infrastructure costs by between £2 billion (€2.3 billion; $3.2 billion) and £3 billion per year in a report published last week.
One of the main conclusions of the report, titled the Infrastructure Cost Review, is that savings can only be implemented if the government puts an end to stop-start infrastructure investment and offers investors greater long-term certainty and pipeline visibility.
“There is strong evidence that the stop-start investment over the last few decades is increasing costs and stifling investment in innovation and growth,” the report states. To counter that, government will “create better visibility and certainty of the infrastructure investment pipeline” and will start publishing quarterly, from autumn 2011, “a rolling two-year forward programme of public infrastructure and construction projects where funding has been agreed”.
Autumn 2011 will also see the government launch its £200 billion National Infrastructure Plan, which will detail the UK’s long-term infrastructure spending priorities over the next few years.
Prior to that, this month will see the unveiling of “a binding set of principles of economic regulation to provide greater certainty for long-term investors in UK infrastructure”. The report suggests price control periods will be extended in several sectors to support longer-term planning. It gives as an example energy regulator Ofgem’s recent announcement that it plans to extend price controls from five to eight years.
While light on details, the report also says that Infrastructure UK and the Cabinet Office Efficiency and Reform Group are working on new procurement processes which they plan to unveil in December 2011.
The cost-cutting plan is focused on the economic infrastructure sector, the report stresses, “in which some 70 percent of the investment is from the private sector, including through regulated utilities”.