Industry

09 MAR 2020

BUDGET MUST HIGHLIGHT IMPORTANCE OF INFRASTRUCTURE TO UK ECONOMY

This week’s budget will be scrutinised by the industry for real signs that the government understands the key role infrastructure investment can and should play in boosting the UK economy, says ACE chief executive Hannah Vickers.

While undoubtedly there will be focus on the immediate response to coronavirus in the budget, notably for the NHS which will be at the forefront of additional spending to support it over the next three to six months, we should see additional details of what can be done in parallel to help businesses large and small. 

There is no reason not to expect a Conservative government to explore rebates on sick pay, or temporary adjustments to VAT, to support cashflows along with sector specific measures such as delays to ending the fuel duty exemption on red diesel. However, beyond this initial period the discussion will quickly turn to what we can use to catalyse the economy and help it recover from any lasting economic impacts the virus might have and we shall be looking for signals that the government understands the key role infrastructure investment can and should play in this.

A National Infrastructure Strategy has, unsurprisingly, been delayed which will ensure Wednesday’s announcement from the chancellor becomes almost like an emergency budget. However, we should still be looking for a continued commitment to understanding infrastructure’s role as a driver of economic growth. Furthermore, in light of the court decision on Heathrow, we would like to see more detail on how projects can be properly assessed through the net zero process. Finally, we’d love to see more details on investment in science, R&D and technology. Our letter from 28 industry leaders to business minister Nadhim Zahawi made the case for the Consultancy Sector Futures Institute, so I hope to see some positive news there.

Other areas which have been previewed in the mainstream media, include possible changes to the Green Book (HM Treasury’s guidance on how to appraise and evaluate policies, projects and programmes) and more on the extremely topical flood risk management. 

On the Green Book I feel it’s a bit of a misnomer. I am sad enough to have read the whole thing cover to cover (as part of my work training overseas governments to introduce similar concepts), but to my mind and unlike what is regularly discussed by politicians and in the media, the rules do not need to change. The rules allow for a strategic case for investment to be made – based for example economic or job growth in deprived areas.  It is just under-used and often doesn’t stand up to the quantitative cost/benefit ratio. 

Where others would blame the rule book, I would say the real changes need to be in how we evidence business cases and culturally how we ensure the assurance process works to support decision makers with clear evidence. As a consultancy industry there is plenty more we can ask for this, notably in using technology to support the development of robust business cases – allowing vast quantities of data on customer behaviour and asset performance to be modelled and solutions refined optimised against multiple client outcomes. It will ensure we better understand sensitivity analysis and immerse clients and users in the business case and “optioneering” process.  

At the risk of sounding like a broken record, the problem is we have analogue business cases in a digital world. They don’t flex and evolve as project options do - we need to move away from static reports into digital models which we assess at each gateway. To fix this will require changes on both sides. That would include a minister appreciating the impact of changing the project’s benefits to suit a differing political agenda or for a project team to know when to stop – transparent benefits it will become obvious when those are eroded.  

Given the impact of the recent Storms Ciara and Dennis on parts of the UK, flood risk management announcements in this space are extremely topical. The headline funding figure of £5.2bn here looks positive and, as we advocated in our manifesto, in line with the recommendations of the National Infrastructure Commission. However, further detail will be critical, including an increase in the national standard of protection offered by flood defences. This stops money being exclusively funnelled into areas which have been recently affected and ensures people will be better protected beyond the current political interest in the topic. The national standard is also crucial for a renewed focus on how the insurance industry provides ongoing support to those homes and businesses most at risk.

Hannah Vickers is the chief executive of the Association for Consultancy and Engineering.

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