Infrastructure watchdog should audit business cases for big projects, think tank says
Call to open appraisals process to the National Infrastructure Commission ahead of possible Budget boost
Departments should be forced to open up decisions on approving and implementing major infrastructure projects to more scrutiny, including an independent examination by the National Infrastructure Commission, a think tank has said.
In a report looking at the UK’s record of delivering major projects, published ahead of next week’s Budget, the Resolution Foundation said the government needed to focus on delivery as well as funding to close the estimated 10% infrastructure efficiency gap between the UK and the most efficient advanced economies.
The gap is calculated by comparing the monetary value of the UK’s stock of public capital with physical indicators of infrastructure coverage, quality and cost. This analysis, the think tank said, suggests that the UK loses around 10% of the potential value on its public investments relative to the most efficient advanced economy. Although this means it is performing better than most advanced economies in the analysis – which had an an average "efficiency gap" of around 13% – the report said closing the gap to match the most efficient countries could have a benefit equivalent to investing an additional £5.4bn more per year by 2024-25.
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This gap can only be closed by changing how the government plans and allocates infrastructure spending, according to the researchers, through greater transparency, increased independent oversight and greater decentralisation.
In particular, they said government departments should be required to publish business cases and cost-benefit analyses before major investment projects are approved. The National Infrastructure Commission should be given a duty to certify the analysis underpinning the business cases for all projects above a certain size that fall within its remit, they added.
The Treasury should specify basic requirements for business cases more clearly, including indicative minimum thresholds for the benefit-cost ratio of major projects under consideration, and at the project selection stage, project appraisal methodologies need to more comprehensively account for the costs and benefits of climate change investments.
There should also be more devolved investment through greater decentralisation of investment funds, including to metro mayors throughout England. To improve delivery, the report recommended giving project managers “realistic, fixed, global budgets covering the whole life of the project and full flexibility to move resources between years”.
Cara Pacitti, a researcher at the Resolution Foundation, said plans to increase investment spending by up to £100bn over the next five years, likely to be confirmed in next week’s Budget, were “very welcome”. There are significant gaps in the UK’s public assets, from poor transport links outside London and the south east, to long waits for diagnostic tests in the NHS and too little new social housing, she said.
“But while an ‘infrastructure revolution’ is desperately needed, it’s equally important the government get its priorities right and ramps up the focus on delivery as much as it ramps up investment spending, otherwise it risks wasting billions of pounds,” she said.
“To do this we need a corresponding ‘delivery revolution’, with policymakers demonstrating projects’ economic benefits and value-for-money before they are approved, creating more independent oversight of these projects, and ensuring that more projects are designed by – and delivered for – people outside the capital.”
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