黑洞社区

Gossip and small talk in the bars and tearooms of Westminster right now is almost entirely focused on the European Union referendum. This chatter inevitably leads to speculation over whether London mayor Boris Johnson has played a blinder in backing Brexit.

The gamble could see him garner enough support among Eurosceptic colleagues to get in to the top two of nominations from Conservative MPs when the leadership contest is held to replace David Cameron, who steps down as prime minister in 2020. The top two then go into the final ballot, which is decided by the party鈥檚 wider membership.

The other leading contender, chancellor George Osborne, is looking nervously at this situation, given that the populist Johnson reaches parts of the Conservative rank-and-file that he and other MPs simply cannot.

This is all very entertaining but it disguises the fact that these rivals both have hugely important political set pieces coming up later this month. Osborne is about to unveil his eighth Budget (see box, overleaf), while Johnson will be looking closely at what money there will be for Crossrail 2, the proposed 拢28bn line from south-west to north-east London.

The Budget itself is likely to be one of Osborne鈥檚 less dramatic affairs, coming soon after a particularly painful Comprehensive Spending Review (CSR) and Autumn Statement in November. This saw departmental budgets squeezed by an average of 19% and, according to analysis by the Public & Commercial Services union, will lead to around 490,000 public sector job cuts over the next five years.

We were quite chuffed with our settlement; it was not as bad as we were expecting. It was circa 15% of cuts when the talk was of 30%

Defra source

This suggests the construction industry should not be looking to Osborne for much on infrastructure spending. For example, a source close to the Department for Environment, Food, and Rural Affairs (Defra) points out that Osborne made his commitment to improve flood defence spending at the CSR and so does not expect any major announcements this time around.

The source says: 鈥淲e鈥檙e not in bad form ahead of the Budget. One of the achievements that [secretary of state] Liz Truss managed to get for Defra has been money for flooding 鈥� she did pretty well at the CSR. We were quite chuffed with our settlement; it was not as bad as we were expecting. It was circa 15% of cuts when the talk was of 30%.鈥�

What is likely to be of greater interest are three reports from the new National Infrastructure Commission, chaired by former Labour transport secretary Lord Andrew Adonis, published alongside and ahead of the Budget.

These focus on northern transport connectivity, large-scale investment in London鈥檚 transport infrastructure, and energy, the last of which has just been released.

These will be the first major steps taken by the commission, which Osborne has charged with overseeing 拢100bn of infrastructure spending by 2020. Having presided over around 5.4% of infrastructure cuts since entering Number 11 in 2010, Mr Osborne said the Commission shows 鈥淏ritain has rediscovered its ambition and we are thinking big again鈥�.

Here, 黑洞社区 delves into just how 鈥渂ig鈥� the commission is thinking in those three reports.

London

The commission has already been clear that Crossrail 2 will be the focus of this report, timely given its east-to-west London prequel, renamed the Elizabeth Line after the Queen, is only two years from completion following the most painless construction programme of any major infrastructure in recent memory.

The Treasury is currently deciding whether or not to finally hand the Transport for London team behind Crossrail 2 the 拢250m it needs to work up detailed routes and get it to the planning application stage in 2018. Osborne was expected to hand over the money at last year鈥檚 post-election Budget, but held back at the last minute. The commission鈥檚 recommendation for it to go ahead will be vital to seeing this cash handed over.

The signs are not great, given Greg Hands, the chief secretary to the Treasury, has said that it is 鈥渜uite an expensive project鈥� and that it would be 鈥渧ery, very good news鈥� if costs were cut. But a senior Whitehall adviser points out there is 鈥渁 groundswell鈥� of industry support that has not gone unnoticed by ministers.

In a joint submission to the commission with Network Rail, mayor Johnson points out the regeneration benefits that will accompany the project: 鈥淥ur analysis shows that we cannot delay proper investment in the project any longer. From now on, every six months鈥� delay by the government to Crossrail 2 will result in up to 拢4bn in lost benefit. If we make the right investment decisions this spring, we can transform the South-east鈥檚 transport network, tackle the housing shortage and lay the foundations for a prosperous future.鈥�

A leading infrastructure source says the commission has been swayed by these type of arguments 鈥� which could be detrimental to its work on northern transport links. He says: 鈥淚 suspect it is more likely that the majority of any Treasury money that is available as a result of these reports will be given to Crossrail 2, because Transport for the North is not as advanced. Now, how that plays politically we will have to wait and see.鈥�

The North

The politics is interesting because Osborne has made great play out of his plans to create a 鈥渘orthern powerhouse鈥� that would wean the economy off its dependence on financial services in London and the South-east.

Politicians of every hue would like to make sure that it is possible to get between three of the great cities 鈥� Manchester, Leeds, and Sheffield 鈥� within 30 minutes, which they think would create a strong regional economy. Focusing on London again would be a political risk and add to accusations that the northern powerhouse is an undeveloped idea, particularly given the organisation created to push the idea,

Transport for the North, has not been around for even 18 months yet.

Energy efficiency should be counted as infrastructure. It鈥檚 so short-sighted: insulation pays for itself so many times over

Caroline Lucas, MP

There has been lots of talk about how a High Speed 3 or the 拢1bn electrification of the TransPennine line would help to whizz executives between northern cities but the Institution of Civil Engineers (ICE) has warned that the powerhouse can only work if more mundane, everyday improvements are made.

Andrew Wescott, the ICE鈥檚 head of policy, says: 鈥淚n our submission to the commission, we emphasised that there needs to be a mixture of projects in the North 鈥� not just big transformational pieces, but also smaller investments, such as improving the flow of local roads, maintaining them so they operate at optimum levels.鈥� 

Richard Threlfall, chair of the ICE Northern Powerhouse panel, and head of infrastructure at KPMG, has also been calling for 鈥渞elatively quick and low-cost improvements鈥�, such as an integrated ticketing system for the North. He is likely to get at least part of his wish later this year when the Buses Bill is launched 鈥� 黑洞社区 understands it will include demands that transport franchises introduce systems based on London鈥檚 Oyster cards.

In its submission, contractor Balfour Beatty also argues: 鈥淚nvestment in local transport such as light rail, tram and metro systems to complement major rail hubs and enable workers to access main city employment locations from across a wide area will be vital if the North is to compete properly with the South.鈥�

A senior minister involved in the northern powerhouse indicates that ideas for smaller-scale schemes of all different types in the North are being encouraged across Whitehall. 鈥淚t鈥檚 not just transport,鈥� says the source. 鈥淲e also want departments such as health or culture media and sport to approach us with bids, such as [pitches] for building museums.鈥�

Energy

The commission has published this review, believing the UK could experience a 鈥渟mart energy revolution鈥� that could save billpayers 拢8bn a year by 2030.

As expected, Lord Adonis proved to be particularly keen on developing infrastructure that stores electricity like, as an industry source puts it, 鈥渁 giant battery鈥�. Large reservoirs of energy can also be stored through water, developments that could help make sure that electricity is available at times of peak demand.

The report says: 鈥淣etwork owners should be incentivised by Ofgem to use storage (and other sources of flexibility) as a means of improving the capacity and resilience of their networks as part of a more actively managed system.鈥�

But others want either the Budget to go further and acknowledge that some simpler energy efficiency schemes should be counted as infrastructure, so that it is funded out of taxation rather than fuel bills that many households are struggling to afford.

Caroline Lucas, the Green Party MP for Brighton Pavilion, says: 鈥淓nergy efficiency should be counted as infrastructure. It鈥檚 so short-sighted: insulation pays for itself so many times over, particularly when you include the creation of jobs. This should be on taxpayers鈥� bills not on fuel bills, which is regressive and puts people into fuel poverty.鈥�

Balfour Beatty also warned in its submission to the commission that there needs to be greater consistency in policy, a point other have made given energy secretary Amber Rudd鈥檚 reversal of a number of solar subsidies advocated by her Liberal Democrat predecessor, Ed Davey. The contractor says : 鈥淲ithout a clear 5 - 10 year road map with cross party support, the risks involved in investing in major energy projects may be difficult to justify. This will drive up expected returns from such an investment and add cost to the consumer. Frequent changes of direction or lack of commitment to the 鈥済reening鈥� of our energy mix will lead to stagnation in development.鈥�