IMF wants streamlined infrastructure consenting

Angus Walker picture-13This entry reports on what this week's IMF assessment of the UK economy means for infrastructure.

On Wednesday, the International Monetary Fund (IMF, proprietor: Christine Lagarde) published a report on the UK economy as part of its role of surveying national economies (why does surveillance sound more sinister than surveying?). It does this about once a year. The latest report can be found here (it's fairly short) and a list of the previous ones can be found here for comparison.

The report naturally focuses on financial arrangements, but of interest to infrastructure planning wonks such as you and me is the second bullet point under paragraph 20:

"Investment in infrastructure, notably in transport and energy, could be supported by streamlining the planning application process and removing regulatory uncertainty. To accelerate the implementation of infrastructure projects, more authority over planning decisions should be devolved to local authorities, with financial incentives provided through greater revenue sharing."

Let's examine the four strands of this recommendation to see if Christine is on to a good thing.

First, the IMF suggests streamlining the planning application process. Nice idea, but hasn't it noticed the Localism Act 2011 or the Growth and Infrastructure Act 2013? If it has, then it would be helpful to know what more it thinks the government should do on the streamlining front; if it hasn't, then it's rather out of date.

The only streamlining that I and others have been urging that hasn't been carried out yet is the creation of a true one stop shop that gives project promoters freedom to combine all the construction-related consents that they might need. The government has only gone some of the way towards this, trying to coordinate some significant environmental consents while keeping them separate. I doubt the IMF has got to that level of detail, though.

Secondly, the IMF recommends 'removing regulatory uncertainty'. Given the context of transport and energy projects, this is likely to be a veiled reference to 'electricity market reform', where the government has yet to publish the 'strike price' it will offer for certain types of project, or individual projects. This is a fixed price for electricity to be offered by the government to give confidence to generating companies.

Thirdly, the IMF recommends the devolution of planning decisions on infrastructure projects to local authorities to accelerate their implementation. I'm not sure that their recommendation will achieve such acceleration and in any event the UK has been moving in the other direction and is unlikely to change that.

By their very nature, infrastructure projects tend to benefit a wide area, if not the whole country, and adversely impact a small area. The net effect for those in the immediate vicinity is therefore likely to be negative, whereas the net effect for those a long way away is likely to be slightly positive. Ergo, giving those in the immediate vicinity the power to consent projects is unlikely to speed them up, unless they are to take a particularly martyrly line.

Finally, the IMF suggests addressing that last point by introducing financial incentives through revenue sharing. This is presumably the suggestion that providing people in the vicinity of an infrastructure project with a financial benefit from its operation will make them more likely to support it. That is undoubtedly true, and indeed the Localism Act allowed financial benefits to be a legitimate factor in deciding planning applications, albeit restricted to government money and the Community Infrastructure Levy.

Although the IMF links them, the last two points are not necessarily related. 'Revenue sharing' could be introduced whether or not decision-making is moved to local level; in either case it is likely to make projects more palatable locally.

So I'm going to give the IMF a taste of their own medicine and survey them. They need to tighten up their awareness and analysis based on the first and third points above. On the other hand, the second and fourth points are probably well-made. The second can be acted upon simply by the government screwing up its courage (rather than anything else) and publishing the relevant strike prices. The fourth needs a bit more thought but an expectation of local financial benefit would certainly make infrastructure projects more palatable, if less financially viable.