Outdated infrastructure stifling city growth and costing UK £billions

Investment in connectivity between northern cities should be prioritised – a ‘tube system for the north’ Government should review insufficient competition in the high-speed broadband market and insufficient fibre connectivity Metro leaders should replace departmental Permanent Secretaries on IUK Advisory Council.

The UK has chronically underinvested in its infrastructure, trailing that of other leading global economies - experiencing 5 percent lower growth each year between 2000 and 2010 as a result, according to the latest report from the RSA City Growth Commission.

The Commission’s third report Connected Cities: The Link to Growth, concluded that the UK loses billions of pounds every year as a result of poor, overly-centralised decision-making that fails to encourage greater connectivity between metros, and causes problems across a range of issues including housing, transport and broadband.

View the Connected Cities: The Link to Growth report

Offering a bold, alternative vision, the Commission recommended that metros be given a voice at the heart of national policy making, bringing about a shift away from siloed departmental thinking, towards an infrastructure strategy that recognises its interdependence with other economic, social and environmental policy areas.

The report concluded that the current Infrastructure UK (IUK) model, including the introduction by the coalition of the ‘Top 40’ infrastructure projects, compounds issues associated with our overtly centralised system and the inherently political nature of such large-scale public expenditure. A balance is needed between achieving political buy-in and moving beyond electoral timetables, the report said.

The findings from the wide-ranging report will inform the Commission’s final conclusions - set to be published in October 2014. The report’s comprehensive set of recommendations include: drastic changes to the UK’s system of planning; the introduction of a more flexible funding system; and better means of measuring the costs and benefits of infrastructure investment.

 “We recommend the government considers making two bold decisions regarding its infrastructure policy. The first is to provide metros with a strong, powerful voice that can influence and guide decision making at a national level. For too long, our cities have not had a seat at the table, and this has been to the detriment of northern metros in particular, as well as the economic growth of the UK economy as a whole. The second is to place connectivity between metros at the heart of any infrastructure investment, in particular via multiple transport links between cities and better broadband technology. Whilst the UK is starting to move in the right direction – with the creation of Infrastructure UK and the Chancellor’s recent proposal for a connected ‘Northern Powerhouse’ – there is still some way to go.”

The Commission identified transport, housing and broadband as key to holistic, place-based city growth that should be central to the development of city-regional devolution, arguing that without concerted focus on fast, efficient connectivity between and within metros, we risk undermining investment and hindering long-term, sustainable economic growth.

Transport

Without effective, integrated transport connectivity, cities limit the size of their labour markets, risk the competitiveness of their businesses in connecting to trading partners, and undermine the ability of people to access public services and build social capital.

There needs to be better appraisal of transport investment – with priority given to schemes that maximise growth and job creation, the report said. Planning over long-term investment periods would also enable lower cost delivery of new homes, retail and commercial sites based around existing transport capacity.

Better connections between places need not necessitate high speed rail, as the debate can sometimes suggest, the Commission concluded. Instead focus needs to be on integrating multiple modes of transport for speed and ease of travel, for example, by building a ‘tube of the north’.

The Commission noted the importance of HS2 Phase 2 for northern cities, but stressed the greater economic case for connectivity between northern cities. So far, attempts to improve East/West connectivity (or even a ‘Phase 3’) are planned for delivery far in the future (or not at all), risking potential gains in productivity, jobs and growth.

Housing

The Commission warned that England is currently only set to meet half of its projected annual housing requirements and so several cities face huge undersupply of housing. In other cities, the quality and type of housing is a constraint on job creation and a move to higher value economic activity.

Several UK cities face a huge undersupply of housing, yet without appropriate housing people cannot be connected to where they are able to work most productively. The short supply of housing in London may also begin to price out its young talent, the Commission warned. Government intervention is needed to instigate long-term supply side structural changes to generate more house building. For example, granting Combined Authorities planning authority powers would help to improve the speed and quality of strategic planning decisions.

Broadband

The current private provision of broadband infrastructure does not match urban demand requirements for high speed, superfast connectivity. It seems private firms do not have incentives to invest in infrastructure, especially in meeting the demands of small start-ups that require lower cost, flexible packages of super-fast broadband. There are few incentives to invest in upgrading the last mile of infrastructure to ensure super-fast broadband is available to all businesses and households.

Metros are further constrained by European state-aid rules that mean public investment in infrastructure cannot take place where private sector investment already exists. The definition of ‘existing’ infrastructure limits the freedom of metros to help enhance the quality of supply. The Commission argues that Government should review the market for, and existing infrastructure network of, urban high-speed broadband.

Recommendations

1. Develop a stronger, metro focused Infrastructure UK that recognises the importance of metros in economic growth and infrastructure decisions for the UK. Metros need to set the high-level strategic objectives that can ensure greater connectivity between and within them. The Commission recommends:

• Metros should be allowed to plan, develop and deliver their infrastructure strategies within their boundaries

• Metros should collaborate at regional level

• There should be metro-level representation on IUK - this could involve, for example, metro leaders replacing departmental Permanent

• Secretaries on the IUK Advisory Council

2. Introduce a fairer and more flexible funding system that learns from international examples to: allow for greater flexibility and long-term certainty of funding at the metro level; to enable cities to establish innovative finance arrangements; and develop pipelines of investment. The Commission argues that metros should be responsible for approving and securing finance to develop schemes within their boundaries, drawing on private expertise and finance to secure investment and expertise.

3. Introduce a flexible and innovative planning system. The Commission recommends that drastic changes should be made to the planning system. Metros should take on planning authority powers, with the ability to convene relevant agencies and planning decisions across all modes of transport; from traffic orders on local roads, to building a new railway, or closing a pathway to enable major developments to get ahead. In addition they should be free to:

• Designate housing zones

• Make greater use of CPO powers

• Create an open register of public sector land at the metro level; and 

• Reclassify poor quality Green Belt and promoting Green Belt swaps

In addition, the Commission recommends the Government review the insufficiency of fibre connectivity in key parts of cities (especially final connections to business and households), in light of what seems to be insufficient competition in the high-speed broadband market. The Government’s review would consider why this is the case and how it might be resolved.

4. Follow a measurement system that accurately reflects the costs and benefits of infrastructure investment. The Commission calls for:

• Appraisal methodology to take account of the importance of place;

• Emerging techniques of appraisal to be taken into account to capture additional impacts of investment on economic growth;

• Appraisal methodology to take account of the interdependencies of infrastructure;

• Continual improvements  in appraisal methodology across the board;

• Generation of better regional, local and metro-level data from ONS and other data-rich bodies

5. Enable metros to rise to the challenge. The UK’s highly centralised system of government has contributed to an erosion of local government capacity. While some leading metros are breaking away from this trend with the emergence of Combined Authorities and a greater focus on developing internal capability, metros as a whole need to demonstrate greater capability to deliver robust appraisals, strategic plans and long-term collaborations with other cities, agencies and the private sector. To support these moves the Commission recommends: private and public sector swaps; greater collaboration between cities; and metro-level skills planning.

View the Connected Cities: The Link to Growth report

Notes to editors

1. For more information contact RSA Head of Media Luke Robinson on 020 7451 6893 or 07799 737 970 or [email protected]

2. The World Economic Forum ranked the UK as 28th for overall quality of infrastructure, behind France, Japan, the United States, Canada and our Scandinavian rivals.

3. 98 percent of firms consider infrastructure to constitute a significant consideration when making investment choices yet many businesses are concerned about the viability of UK infrastructure and its resilience on the ground over the next 5 years.

4. To meet projected household growth, England needs to build 240-245,000 new houses per year from 2011 to 2031, yet the best estimated net additions to housing stock in England are 124,720 in 2012-13 - barely half the projected annual housing requirements for the next twenty years.