Infrastructure: Expenditure

Lord Deighton Excerpts

Monday 25th March 2013 Lords Chamber

[Lord Hollick]

To ask Her Majesty’s Government how much has been spent on infrastructure projects in the current financial year, and how that figure compares with that in the previous financial year.

[The Commercial Secretary to the Treasury (Lord Deighton)]

My Lords, we are spending more on infrastructure projects this year. Capital spending by the departments responsible for economic infrastructure—DfT, DECC and Defra—is increasing. The transport budget, for example, rises from £7.7 billion last year to £8 billion this year, then £8.7 billion next year and £8.9 billion in 2014-15, which is more than at any point under the last Government. This has been possible because the Government increased infrastructure spending by £10 billion over the past two Autumn Statements, increases which the Budget committed to making permanent, with a further £3 billion a year from 2015-16.

[Lord Hollick]

I thank the Minister for that Answer. However, the Office for Budget Responsibility reported a rather different situation last week, when it announced that public sector net investment would fall by 34%, from £38.7 billion in 2010-11 to an estimated £25.5 billion in the current year, 2012-13. The OBR also forecast that, taking into account all the measures so far announced, including those announced in the Budget last week, there would be zero growth in infrastructure spend between now and 2017-18. Will the Minister please explain why these measures have failed, and continue to fail, to boost overall infrastructure investment, and which additional measures he plans to introduce to improve the dire forecast for the next five years?

[Lord Deighton]

My Lords, first, it is necessary to clear up the numbers. There is a significant difference between public investment numbers and investment in infrastructure. Public investment includes huge investments in health and in defence, so there is a significant difference there. Also, if you look at the national infrastructure plan, you see that approximately 80% of the investment that we expect over the next 15 years in fact comes from the private markets and not from public capital expenditure.

[Lord Flight]

My Lords, the national infrastructure plan has identified some £200 billion of energy infrastructure investment and £200 billion of communication and transport infrastructure investment. What proportion of that total does the Minister estimate might be under way by the end of five years, and to what extent are any delays caused not by the absence of finance—where sovereign funds and others are willing to put up the money—but by planning and environmental legal constraints in this country?

[Lord Deighton]

I thank my noble friend for that question, which focuses us on the issues to do with accelerating the delivery of this very important programme. With respect to the proportion that will be under way within this Parliament, this Government have focused activity on the top 40 programmes and projects, which accounts for about £200 billion of the £400 billion my noble friend refers to. Approximately 20% of those projects are currently in construction, and we would expect that proportion, by 2015-16 and the end of this Parliament, to be approximately 50%. There is no question but that the gate that most constrains our ability to accelerate the stream of projects is to do with the variety of planning regulations that surround any major public infrastructure investment.

[Lord Soley]

Do I take it from the Minister’s enthusiasm for private sector investment in infrastructure, with which I wholly agree, that he supports the expansion of Heathrow Airport?

[Lord Deighton]

If I may say, my Lords, those are two quite separate questions. I am very enthusiastic about private sector investment. Infrastructure investments lend themselves to financing in the private markets because they generate a cash flow that can repay those investments. The question about Heathrow Airport is an entirely separate one, although I accept that airports are a particularly attractive investment proposition for the private markets.

[Lord Barnett]

My Lords, is not the difference between the figures that he quoted and those quoted by my noble friend Lord Hollick that the previous figures were allocated but not actually spent?

[Lord Deighton]

I bow to the noble Lord’s extensive experience in managing public expenditure. There is absolutely a distinction between what is allocated and what is spent. There is a small additional amount this year that is underspent, but it is in the region of £2 billion, which is consistent with previous years. I agree that that is part of the difference.

[Lord Adonis]

My Lords, the Budget document says that the Government will create an enhanced cadre of commercial specialists in Infrastructure UK to promote infrastructure delivery. How many such specialists are there now, how many will be in the enhanced cadre and when will these specialists be appointed?

[Lord Deighton]

I thank the noble Lord for drawing attention to an important part of our intervention to improve the public sector’s delivery of these crucial projects. On the question of the amount of resources required, we are not simply discussing the resources in Infrastructure UK here; we are discussing the resources right across government, particularly in the government departments that are charged with delivering infrastructure: the DfT and DECC being the two primary examples. Between now and June, we will work precisely to define their requirements, based on the project load that they are managing, and what they ought to be staffed with in order to make that happen. That gap is thus being defined, and we have to assess what is in the departments as well as what is in Infrastructure UK in order to determine how to fill in that difference.

[Lord Forsyth of Drumlean]

My Lords, will my noble friend confirm that had he continued with Alistair Darling’s plans for capital expenditure, capital expenditure would have been severely reduced?

[Lord Deighton]

My noble friend is precisely right that the restoration to capital expenditure which this Government have made through the 2010 spending round, the two Autumn Statements and the recent Budget, has restored capital expenditure levels to considerably above the previous Government’s plan.

[Lord Berkeley]

My Lords, can the Minister clarify how much of the amount he quoted in his original Answer is in respect of Network Rail and how much is capital expenditure, whether it is considered to be in the private or public sector, and whether or not it was financed by government guarantee?

[Lord Deighton]

The plan for Network Rail is included under the high-level output specification, which is a £9 billion plan from 2014 to 2019. Of that £9.4 billion, approximately £4.2 billion has been added during the tenure of this Government.

[Lord West of Spithead]

My Lords, the Minister mentioned defence infrastructure. Does he not agree that it would be better over the next eight years to spend money on building warships in our warship yards rather than spending money in those yards not to build warships, which is what the plan appears to be?

[Lord Deighton]

I congratulate the noble Lord on being able to take the Question into the sphere of defence expenditure, which is not my expertise or my brief. One thing that I am working on in all our infrastructure investments is to make sure that they are highly productive. Spending the money that we are allocating well is probably the most effective thing we can do over the next three years.