The New Normal

A new body with wide-ranging powers and a remit to come up with a long-term infrastructure plan. It could be 2010 all over again, but how will the new Infrastructure Commission and the latest incarnation of IUK work together, asks Paul Jarvis

“I said the Infrastructure Commission was the beginning of the end of Infrastructure UK,” said one adviser in the immediate aftermath of the announcement that IUK was being merged with the Major Projects Authority to create the Infrastructure and Projects Authority (IPA). “I just didn’t think it would happen quite as quickly.”

The way in which the government went about reshaping the infrastructure sector this autumn caught most people by surprise. The pace of change has been somewhat relentless, as Chancellor George Osborne unveiled in early October the new commission and at the same time revealed the coup of having former Labour Transport Secretary Lord Adonis to head it up.

“The morning after the announcement, Lord Adonis was in an office in Treasury, ready to start work,” says one source.

“My instinctive reaction [to the creation of the commission] was that much of the detailed work would be done by IUK,” says KPMG’s global chairman of infrastructure, James Stewart. But a just over a month later, it was announced that IUK would merge, while the commission would have a group of about 30 full-time professional staff led by a chief executive, in a model that looks similar to that of IUK.

“It’s almost like Groundhog Day,” says Deloitte partner Nick Prior. “It’s like 2010 again: Partnerships UK into IUK and the creation of a long-term plan.”

“It is a massive change,” adds Stewart. “The job of producing the National Infrastructure Plan [NIP] has gone from IUK. When you ask people abroad what IUK does, that is the first thing they think of.

“Who will be the spokesman for infrastructure in the UK? Put alongside the termination of the Construction Adviser role and you wonder who people will talk to.”

Conversations in the weeks between the launch of the commission and the announcement of IUK’s demise suggested few had seen it coming. Treasury officials in particular had been in bullish mood.

“IUK has a very strong future,” said one. “I’m very excited about the commission and how we work together.”

“IUK staff were all very shocked at the announcement,” says a private sector source.

The speed of all these changes led some in the industry to speculate that a lot of details are still to be worked through. The timing of the initial launch of the commission – at the Conservative Party conference – has seen some cynics suggest it was more of a political announcement than one of greatly thought-through substance – with the subsequent changes coming like a domino effect in the wake of the initial announcement.

As most point out, the current Chancellor is regarded as one of the most politically calculating to hold the position for many years, and has his eyes firmly on the top job. “Osborne is talking to us as the future prime minister,” says Tim Care, partner at law firm Ward Hadaway.

Working together
Whatever the truth of the depth of thinking behind the decision might be, the new commission is now a reality – complete with its six commissioners under Lord Adonis’s chairmanship – and it will have to work together with the new IPA when that comes in to being in January.

“We really do not want duplication,” warns Catherine Creane, director of energy at consultancy Sweett Group. She points out that IUK was renowned for going into great detail on projects, but the commission is also likely to want to have plenty of sight on both the technical and business case issues surrounding schemes. “Can one pass information on to another, so projects don’t have to jump through the same hoops again and again?”

The danger here is that if the IPA comes in at a secondary stage, it may need to ask the same initial questions that were required by the commission, thus actively slowing down progress rather than speeding it up.

“There needs to be absolute clarity given to business on what the role is for each body,” says Creane.

She and others suggest that it may be that the commission takes a strategic role, looking at what the country needs, before handing over the detailed discussions on a business case and choosing the best financing route to the IPA. “But what will 30 permanent staff within the commission do if not look at the business case?” asks one adviser.

Another option for the IPA is for it to mop up smaller projects that have less of a national impact. That would certainly fit with outgoing IUK chief executive Geoffrey Spence’s recent talking up of the potential for new PF2 projects, as these would provide a rich seam of work for existing IUK staff as they transfer into the new body.

“Clearly, there are areas where things are within IUK’s remit; things that are in the commission’s remit; and a whole raft of things that could be in either or both,” admits one Treasury source. “That is still being worked out.”

At the moment, there appears to be a view that the different roles will slowly work themselves out over time. “My feeling is that as the personnel are established in the commission, that relationship will work itself through,” says Graham Mather, chairman of the Infrastructure Forum. “The Treasury is being helpful in looking around the areas focused on by the commission.”

Some have argued that the commission is the natural evolution of the government’s direction of travel on infrastructure. One Treasury source suggests that the last five years, since IUK has been sitting in Treasury, has helped to change the culture within the exchequer.

“It is first of all about doing things properly, and that is what setting up IUK was about. Then it’s doing things better, which is where we are now. The commission will take that on to doing something different. It takes a long time to change the processes in Treasury.”

Making it work
Time is not something that the commission has much of, at least not to begin with.

“The idea of the original Armitt Review [carried out for Labour ahead of the election and which first floated the concept of an infrastructure commission] was for there to be four years to the first report,” points out Stewart.

“The timetable is very much speeded up from the Armitt plans,” adds Mather. “It is a more nimble body than originally envisaged by Armitt.”

Osborne himself has referenced the Davies Commission on airport capacity, as well as the Office for Budget Responsibility as good examples of successful, independent bodies and there is an expectation that the National Infrastructure Commission will therefore operate in a similar way.

Staffing remains perhaps the most surprising issue for many in the industry, with few having expected the organisation itself to have any sort of administrative body or chief executive as part of its setup. Even so, experts predict that the body will still use input from outside.

“There will be areas in construction, investment and the like where it will need a broad range of advice coming into it,” says Mather.

But not everyone is convinced by the makeup of the commissioners at the top of the organisation, which includes the likes of Lord Heseltine and Sir John Armitt. “Something – or someone – around the funding piece is missing,” argues one financial adviser. “The commission does not have anyone who has had a funding or investor mindset to bring the investment piece to the table.”

Creane, however, disagrees. “You probably do not want a funding person there because the IPA is hopefully going to be looking at the figures. So you need people looking at the business perspective. Armitt is a good example of that: he is an engineer who has good business understanding.”

Being different
When it was unveiled, Osborne explained that the commission would focus on three key areas, with an initial report due in time for next year’s Budget. They are: improving connections between cities in the north; the future of London’s transport system; and energy. In early November, Lord Adonis issued the first ‘call for evidence’, seeking views on these three areas.

All are huge issues, and questions have been raised over why this new body might have any more success than IUK, which has already looked at them in some detail. So what will the commission bring that is different?

Perhaps the main thing that sets this organisation apart is the calibre of people involved. “The difference is it has got some big hitters,” says Care.

“Any body with Lord Adonis and Lord Heseltine in it is going to cut through the undergrowth and give ministers clear and sensible advice,” agrees Mather. “It is not going to be delivering bureaucratic reports. These are people in a hurry with a mission.”

Its second advantage is its independence. While the body is currently working in an office in Treasury – at least for the time being – it is unlikely that commissioners such as Heseltine, Armitt, and the others will pull any punches when writing a report on what needs to be done. And it will be difficult for government ministers to ignore such an independent analysis.

Maintaining its independence will be a vital element of its success. “A good test will be what happens if the commission recommends something that Osborne doesn’t like,” says Care. “Whether Osborne will be able to stand back will be the proof of the pudding.”

That independence is something that many feel had been missing at IUK over the years. Having previously been Partnerships UK, and standing outside Treasury as a partly private organisation, its evolution into IUK within government increasingly resulted in it becoming part of the Treasury machinery.

“IUK had increasingly become a creature of Treasury,” says Stewart. “IUK should have been neutral but it has been on a gradual path to becoming the policy arm of Treasury. The commission will bring independence and neutrality and that is a good thing.”

Lord Adonis will be crucial to ensuring the commission’s neutrality as the organisation gets up and running. However, some are concerned that if it has been hoped his position as a former Labour minister might help smooth relations with Labour-controlled councils (particularly in the north), they may be disappointed.

“I fully understand why Lord Adonis is well-qualified to be leading the commission,” says Prior. “However if an objective through this appointment was to create cross party support,  it may well backfire, as having an ex-Labour peer in charge who has jumped onto Osborne’s bandwagon, it is quite likely local authority Labour leaders will be less likely to cooperate than if it was someone without that history.”

However, one financial consultant argues that the commission will be working at a higher, more strategic level and so won’t need to deal with local authority leaders in most cases. “For example, the HS2 decision was taken at a central level and if it had been left up to the local authorities it would not have been done,” he says. “If they can get stakeholder buy-in at the central level, it reduces the ability for local politics to get in the way.”

Nonetheless, the commission will, by its very nature, have to play the political game to a certain degree. Its remit to look at northern connectivity is of course part of the government’s Northern Powerhouse agenda, and it is no accident that many of the first set-pieces involving the commission – including the unveiling of commissioners and the call for evidence – took place in the north.

And the biggest question of all will be whether the commission will add value. “How much is it going to cost and what value is it going to bring?” asks Creane. “We will only know in a year’s time – at least – if it can add value. It takes time for an organisation to develop and for people to work together, so we have to give them a chance to do that.”

After five years of IUK, perhaps that organisation offers some pointers for direction of travel here. Creane suggests it has added value over the years. “Without it I don’t think something like Hinkley Point C would be where it is now,” she argues. “It has given good focus to such projects.”

Not that it was the perfect organisation. As Creane points out, it needed to streamline its processes. Whether its merger with the MPA to create the IPA will be for the better is far from clear.

“The perception around government was that the Major Projects Authority has to date had limited impact,” adds Prior. “IUK being merged with it, albeit with a recently appointed chief executive, and the organisation being moved out of Treasury and into the Cabinet Office is not necessarily an encouraging sign.

“Will it have the impact that IUK had established for itself?”