Docstoc

East Midlands Development Agency Infrastructure Funding Report

Document Sample
East Midlands Development Agency Infrastructure Funding Report Powered By Docstoc
					East Midlands
Development Agency
Infrastructure Funding
Report
Executive Summary




Published August 2010
East Midlands Development Agency                                                                                                                   Executive Summary



Executive Summary                                                                       Government’s response to these reviews – the White Paper – Planning
                                                                                        for a Sustainable Future set out proposals to reform the regime for
1. Background and Context
                                                                                        development consent for nationally significant infrastructure and other
Forward planning of infrastructure delivery and its connection to growth
                                                                                        measures to change the Town & Country Planning system. The
areas is not new and was key to the successful industrialisation and
                                                                                        introduction of the Community Infrastructure Levy reflects the importance
growth of our cities. During the Victorian era many of the water supply
                                                                                        attached to the delivery of major infrastructure to underpin growth and
and sewerage systems still in use today were constructed, for example
                                                                                        stability.
the reservoirs in North Wales built to serve the growth of Birmingham.
                                                                                        The East Midlands region has acknowledged that significant investment
Prior to 1979 much of the country’s infrastructure was in public
                                                                                        is needed to achieve a step-change in the capacity and availability of
ownership. The 1980s saw the privatisation of many of these industries,
                                                                                        infrastructure to support growth and regeneration. During the recent RFA
for example water, telecommunications and data, power and gas
                                                                                        exercise, the region considered the potential merits of using its existing
supplies and public transport, with others including highways, education
                                                                                        funding allocations to create a dedicated Regional Infrastructure Fund
and health remaining in public ownership and delivery, although subject
                                                                                        (RIF) to provide up-front investment in infrastructure which would then be
to much more rigorous internal market control.
                                                                                        repaid through developer contributions, however the balance of opinion
The newly privatised infrastructure companies inherited forward                         within the region is that a compelling case remains to be made and it
investment strategies and growth directions that had been closely related               was clear that further investigation and consideration was required.
to the housing land availability forecasts and land allocations made by
                                                                                        The East Midlands Development Agency (emda) has taken this issue
local planning authorities through the development plan system. They
                                                                                        forward through this commission, with the aim of exploring how the
also inherited a substantial reserve of un-utilised or under utilised service
                                                                                        Agency can work mostly effectively in this system identifying appropriate
capacity. In general terms it is fair to observe that the ability to grow
                                                                                        levers that might be used to exert an appropriate level of influence, or to
infrastructure access through the utilisation of pre-privatisation
                                                                                        help improve any identified gaps or deficiencies in the current processes
programmed growth and greater use of service capacity reserve is now
                                                                                        and relationships. In this context, the provision of infrastructure needed
becoming limited. This programmed growth and service capacity reserve
                                                                                        to support key growth areas, including housing and employment areas, is
is a finite resource and, some commentators including the Royal Town
                                                                                        considered in relation to maintaining and enabling regional economic
Planning Institute believes that it is now close to exhaustion in a number
                                                                                        growth.
of locations. 1
Delivering the right infrastructure is critical to sustainable economic
development and housing. Recognition of the significant role
infrastructure plays in the delivery of economic growth and prosperity
was underlined in both the Barker2 and Eddington3 reviews. The

1
  RTPI (2008) Supporting Housing Growth. A Cross Cutting review by the Treasury. RTPI
response.
2
  Barker, K , (2006) Barker Review of Land Use Planning. Final Report, HM Treasury,
London
3
   Eddington, R, (2006) Transport's role in sustaining UK's Productivity and
Competitiveness: The Case for Action.

                                                                                                                                                      Ove Arup & Partners Ltd
                                                                                                                                               Published by emda August 2010
East Midlands Development Agency                                                                                                             Executive Summary



2. The Report                                                                      role for the Homes and Communities Agency and a Regional Utilities
The study was informed by both primary and secondary research and                  Group. Finally the report sets out a focused action plan for consideration
shaped by a workshop held with key members of staff within the Agency.             by the Agency, which contains ‘quick wins’ and longer term actions, the
This explored the importance of ensuring appropriate and timely                    planning for which needs to commence in the near future.
infrastructure delivery to the Agency and future success of the East               An ‘Ancillary Report’ has also been produced which seeks to map at a
Midlands region and expanded the scope of the study from that originally           regional level the relationships between infrastructure capacity and
envisaged to one which includes the outcomes described below.                      provision and planned or proposed levels of additional development and
The report examines the nature of the infrastructure ‘problem’, defining           growth. Due to the difficulty in compiling a comprehensive picture of
‘critical’, ‘strategic’ and ‘other’ types of infrastructure and the role of emda   investment plans, this mapping is indicative and intended to assist emda
in the infrastructure agenda. The current priorities for co-ordinated              and partners in understanding some of the potential challenges,
infrastructure delivery, the functional geography of infrastructure                constraints and opportunities facing different parts of the region.
provision, its relationship to future growth, the connections between
infrastructure and spatial planning are explored and consideration given
to how this may be affected by the requirements for higher sustainability
and environmental performance standards for new development.
The priorities of infrastructure providers, how they are funded, how they
manage their assets, their approach to connecting new development and
how they cover their costs and charge for services are considered,
alongside a brief over view of the structure, regulation and forward
planning processes of the key utility industries.
A number of key challenges relating to the co-ordination and delivery of
infrastructure are identified, and assessed alongside the key players and
organisations, regional capacity infrastructure funding decision making,
and processes for identifying and delivering new requirements. Three
different delivery models for infrastructure are explored in more detail.
The report considers a number of mechanisms for the financing of co-
ordinated infrastructure provision, including the development of
infrastructure funds, existing and potential sources of revenue and
examines the scope for action by the Agency. A series of intervention
areas and associated issues are identified and assessed, including State
Aid, the shadow price of carbon and compatibility with RDA resource
accounting and capital write down procedures. Emerging from this
assessment is a series of recommendations for the way forward focusing
on using planning powers, establishing dedicated delivery vehicles and a
dedicated infrastructure fund. The report describes a model approach
that could be applied and the stages in achieving this, together with a
                                                                                                                                                Ove Arup & Partners Ltd
                                                                                                                                         Published by emda August 2010
East Midlands Development Agency                                                                                                               Executive Summary



3. The Infrastructure Challenge                                                    Emda has sought to influence infrastructure provision through its
The infrastructure needs of the region can be represented as a series of           strategic leadership role; it has no direct or obvious role in the regulation
‘layers’ representing networks of roads, high voltage power lines,                 of infrastructure providers, but understanding the impacts and
sewers, gas pipelines and telecommunications networks.                             implications of how regulation works is of relevance to understanding
                                                                                   some of the challenges in the current system of infrastructure. Key points
Figure 1. A layered approach to infrastructure
                                                                                   regarding emda’s past and current role are as follows:
                                                                               • Emda is not a core funder of infrastructure – but has been actively
                                                                                  involved in capital schemes re: large coalfield sites (National Coalfields
                                                                                  Programme) which has involved full site remediation and servicing;
                                                                               •    Involvement has often focused on feasibility and technical assessments
                                                                                    – site specific or strategic, with examples including transport
                                                                                    infrastructure, and power (network related and renewable);
                                                                               •    Support for innovative projects – e.g. community wind farm project;
                                                                               •    Projects/programmes re: delivery – waterways; GI; with clear and direct
                                                                                    link to economic development and Regional Economic Strategy (RES)
                                                                                    objectives.




To be effective, infrastructure needs to be delivered in a coordinated way
to support productivity performance. It is clear from the findings that each
infrastructure ‘layer’ responds to development opportunities in different
ways, reflecting the providers own business models, strategies and rules
resulting in bottlenecks and barriers in the supply of services thereby
delaying investment. Through the intelligent co-ordination of capital
programmes and working with the network operators some of the
bottlenecks can be lessened enabling the right conditions to come
together. The strategic planning and management of infrastructure is not
undertaken systematically, reflecting the gap in regional priorities.
The term “critical” infrastructure is defined as the basic infrastructure
required to support development. The term “strategic” infrastructure is
often used to prioritise funding and delivery with reference to policy
objectives alongside scale. The term is used as a precursor to prioritising
RIF projects.
                                                                                                                                                  Ove Arup & Partners Ltd
                                                                                                                                           Published by emda August 2010
East Midlands Development Agency                                                                                                             Executive Summary



4. Infrastructure Provision                                                       infrastructure is internalised within a development. For example the use
The distribution of strategic employment locations and the spatial                of on site renewable generation technologies, and the recycling of water
direction of future housing growth (taken from the East Midlands Plan)            for secondary uses within sustainable urban drainage systems can
show a relative clustering of proposed development along the M1                   reduce the reliance on critical infrastructure networks. Whilst current
corridor towards the designated growth area in the south of the region.           technologies are unlikely to ever dispense entirely with the value of being
The East Midlands Regional Plan and RES are based on geography                    connected to wider networks, the design principles require greater
defined by administrative areas; sub regional partnerships and functional         integration between providers and developers early in the process.
units like Housing Market Areas or regeneration areas. These units are            Network operators will be particularly interested in testing the robustness
the focus for identifying development needs and for plan-making. These            of design assumptions concerning the use of “on site” delivered services
areas are a lot smaller than the infrastructure providers whose networks          in case non performance leads to eventual displacement of demand
typically span areas the size of a region as demonstrated by the regional         back onto the networks. This might be a problem in cases where “on
structures used for water and electricity respectively. These large               site” infrastructure lies in the hands of a myriad of owner occupiers
functional regions are not co-terminus with the administrative regions            (domestic and non domestic) without specific arrangements to maintain
hence the East Midlands is served by more than one utility operator e.g.          the infrastructure.
Anglian and Severn Trent Water.
                                                                                  Sustainable development initiatives must, therefore, be accompanied by
The geography used by network operators often reflects the legacy asset           new delivery models that remove risk of non performance. Sometimes
base and organisational form of what has gone before. Originally, these           this will be facilitated by the commercial arms of conventional utility
networks were established on some form of universal service obligation            companies who will design, build and operate the technology.
established at the time of being a nationalised industry. As regulated
private monopolies in the main, they have tended to retain their
obligation to consider all applications for connections but on an economic
basis. The growth policies of the region impact on network operators by
changing the relationship between demand for infrastructure services
and supply through the legacy network e.g. by changing demand for
infrastructure services via physical regeneration policies that switch land
use from employment to housing or by creating additional demand
through sustainable urban extensions and major inward investment sites.
Growth policies therefore have the potential to change the spatial
patterns of use across the network and future demand for connections.
These policies, if realised, will have an impact on investment needed to
maintain the networks.
Whilst it is clear that some infrastructure provision e.g. transport, is better
connected to the planning system than others, a key issue for all
providers and the Agency relates to the impact of increasing sustainable
development standards and requirements on delivery. This has the
capacity to change critical relationships as a greater proportion of
                                                                                                                                                Ove Arup & Partners Ltd
                                                                                                                                         Published by emda August 2010
East Midlands Development Agency                                                                                                         Executive Summary



5. Infrastructure Providers and the Planning System                           Assembly and the water supply companies in the region, and which is
Privatised network operators are commercial concerns driven by                working to put all aspects of water at the forefront of decision-making in
shareholder returns on investment. Economic development outcomes              planning processes.
have tended to be incidental to providers core business, unless there is a    Table 1 overleaf summarises the key relationships between the
clear “bottom line” benefit. Network investment decisions are usually         infrastructure providers, their business planning processes and the
made in support of the financial priorities of the delivery organisation      planning system.
within the framework set by the economic regulators. Regulated utility
providers are generally prevented from making ‘up-front’ or pre-emptive
investments to respond to development proposals or land allocations.
However, they can agree a cost with developers or land-owners to
improve an existing or provide a new connection to a particular site.
Otherwise, the majority of investment made by the providers is focused
on maintaining their networks and asset base, not explicitly to plan for or
enable additional future demand created by development.
Investment in network costs comes from the money people and
businesses pay to use the system and payments made by developers for
new connections, and is a significant source of revenue. In addition, the
apportionment of network costs to new connections has led to a whole
set of complex rules governing how much is payable to whom and when.
Neither emda, nor any other strategic body or local planning authority
has any significant leverage over charging levels.
The joint planning for infrastructure is complex, partly as a result of
different geographies operated by providers and regeneration agencies
and the commercial sensitivities attached to key data needed for
infrastructure planning. In addition, there is also a temporal discord
between the lead-in times for certain types of utility infrastructure
provision (e.g. water) involving five year business plans with costed
proposals, local needs and infrastructure renewal. Other infrastructure
provision, for example roads, is well connected to traditional land use
planning. A process of rolling engagement and dialogue is likely to be of
mutual benefit to both providers, Local Planning Authorities and
regeneration agencies such as emda.
There are examples of best practice engagement emerging, for example
the Regional Water Partnership in the East Of England, which involves
the East of England Development Agency, GO-East, Natural England,
CC Water, the Environment Agency, the East of England Regional
                                                                                                                                            Ove Arup & Partners Ltd
                                                                                                                                     Published by emda August 2010
      East Midlands Development Agency                                                                                                                Executive Summary




Table 1 Summary of key relationships

Infrastructure      ‘Regulator’          Business planning period                                 Issues and link to planning system


Water               Ofwat                5 years Business planning period.                        Sewage and Water Companies are Statutory Consultees for major
                                         All water companies have a duty to produce water         planning applications and development plans. Business planning
                                         resources plans covering the next 25 years. These        areas do not follow regional / local authority boundaries.
                                         cover how companies intend to provide sufficient water
                                         to meet their customers' needs.


                                         Flood and coastal risk management – 25 years             Statutory consultee for planning applications and development plans.
                    Environment
                                                                                                  Cachments do not reflect regional / local administrative boundaries.
                    Agency
Gas and             Ofgem                5 year price controls.                                   Not a requirement. Generation may be outside region, or even
electricity                              Long lead in time for new infrastructure capacity and    offshore windfarms.
                                         replacement infrastructure capacity. Asset value         Issues – fuel mix (eg % renewables), security of supply, planning
                                         measured in decades.                                     system seen as impediment to new infrastructure delivery.
                                                                                                  Statutory consultee role on development plans limited to person to
                                                                                                  whom a license has been granted under Section 7(2) of the Gas Act
                                                                                                  1986
Telecoms            Ofcom                Focus on competition vs monopolies                       No apparent link to planning system. Concern that 100% superfast
                                                                                                  broadband coverage will require public sector support particularly
                                                                                                  rural areas. Statutory consultee role on development plans - any
                                                                                                  person who owns or controls electronic communications apparatus
                                                                                                  situated in any part of the area of the council
Roads               DfT                  Various depending on nature and size of scheme and       RTS, LTPs, connect to spatial planning system. Links strengthened
                                         nature of funding source.                                through RFA process.
                    Highways                                                                      Statutory Consultee role on development plans and major planning
                    Agency               Well connected to planning system – strengthened for     applications
                                         major infrastructure through RFA process.
                    Local
                    Highways

                                                                                                                                                         Ove Arup & Partners Ltd
                                                                                                                                                  Published by emda August 2010
East Midlands Development Agency                                                                                                       Executive Summary
                     Authority
Rail                 DfT,          Network Rail – strategic business plan 5 years.       RTS forms key part of RSS. Route Utilisation Strategies –
                     ORR                                                                 stakeholder steering group includes regional planning representation.
                                   Some developments linked to planning system and RFA
                                   process has strengthened this.
                                   19 franchised train operators, various time limited
                                   contracts
Air                  DfT, CAA      Various time periods                                  Future of Airports White Paper.
                                   Airport masterplans to 2030                           Airport expansion proposals reflected in RSS and development plans
                                   Airline routes – shorter time




                                                                                                                                          Ove Arup & Partners Ltd
                                                                                                                                   Published by emda August 2010
East Midlands Development Agency                                                                                                         Executive Summary




6. Co-ordinating Infrastructure Provision                                      Planning Policy Statement 12 (PPS12, published 4 June 2008) now
Where an infrastructure provider is a private company, decisions made          encourages a much greater emphasis on what was formerly termed
belong in the commercial sphere and as such are governed by                    implementation planning to support development plan policies. New
commercially confidential decision making.                                     guidance clearly indicates that infrastructure delivery planning will be a key
                                                                               test of soundness for the Core Strategy and other local development
Although there are a number of organisations with a nominal regional
                                                                               documents in the future. Currently, PPS12 guidance does not provide any
focus in the conduct of their decision making, the boards of the regulated
                                                                               detail over the format of an infrastructure delivery plan which has led to a
monopolies and their parent corporate bodies make decisions based on
                                                                               variety of approaches from local planning authorities ranging from the
assessments of national need or international investment opportunities.
                                                                               passive testing of broad policy principles with some infrastructure
These decisions are in turn influenced by trends in the international money
                                                                               providers through to a more integrated approach aimed at establishing the
markets. The economic regulators (who are concerned with the amount of
                                                                               critical path across a range of infrastructure delivery bodies.
money available for investment) and institutions of the European Union
(who are concerned with Regulations relating to the quality of service/        With the passive model, the focus has tended to be on core public service
safety) are also making decisions without any particular regard for region’s   infrastructure providers often within the Local Authority’s control. The
economic development.                                                          output of this approach is typically a standalone document owned by the
                                                                               Planning Authority that lists infrastructure projects, ownership, costs and
Whilst an open system carries certain disadvantages, the funding of East
                                                                               timescales. The document may lack a consistent process and ideally
Midlands regional infrastructure needs is freed from a dependency on
                                                                               needs to be developed in partnership with adjoining Authorities that
internally generated revenue streams alone. This carries potential risks
                                                                               occupy the same functional footprints of the infrastructure networks they
and rewards dependent upon national priorities of the day and alternative
                                                                               are seeking to influence.
investment markets.
                                                                               Under the integrated approach, infrastructure delivery planning is driven by
The study highlights the context within which the Agency is working by
                                                                               a common overall vision for the development of an area as expressed in
illustrating that it is contending with funders that, in the example of the
                                                                               its Sustainable Community Strategy and Core Strategy. This vision can be
energy companies, have a global perspective where the East Midlands is
                                                                               unpacked into the performance required from individual services over the
one, small market place among many. For international utilities,
                                                                               term of the plan.
opportunities exist for higher returns in the expanding markets of Asia.
                                                                               As Local plans are replaced by Local development Frameworks (LDFs),
The approach to infrastructure planning does not follow any particular
                                                                               the LPAs will have a statutory duty to plan and cost new infrastructure
pattern of engagement with critical providers. The co-ordination problem
                                                                               required by the LDF. This will help inform negotiations with developers
has encouraged the development of a whole range of policies aimed at
                                                                               relating to planning obligations (Section 106), and/or decisions about how
promoting infrastructure delivery co-ordination and planning. The
                                                                               much of this cost should be funded by the Community Infrastructure Levy
government has chosen to concentrate on the land-use planning system
                                                                               (CIL) if implemented. The overall purpose of the CIL is to make a
as the means of achieving better co-ordination.
                                                                               significant contribution to infrastructure provision and to ensure that




                                                                                                                                            Ove Arup & Partners Ltd
                                                                                                                                     Published by emda August 2010
East Midlands Development Agency                                                                                    Executive Summary




development contributes fairly to the mitigation of the impacts it creates
and to ensure that development is delivered in a more sustainable way.
The challenge of securing sufficient value from lower value sites to support
infrastructure is an issue emda will be familiar with, and is likely to be a
key issue during the economic downturn.




Figure 4: Role of a Common Vision in Driving Infrastructure Planning           Figure 5: A Vision Led Process




                                                                                                                       Ove Arup & Partners Ltd
                                                                                                                Published by emda August 2010
East Midlands Development Agency                                                                                                       Executive Summary




7. Delivering Co-ordinated Infrastructure                                    8. Financing Co-ordinated Infrastructure Provision
Certain delivery models would appear to have a greater scope for filling     Forward funding mechanisms have emerged as a response to situations
gaps/ weaknesses than others. The development of a focus on these            where development has stalled due to an unwillingness of either the
vehicles does not devalue the other organisational forms, but seeks to       supplier of infrastructure services, or the inability of a developer with a
maximise future potential. Three key models are identified and explored in   service requirement, to fund new investment. The response has been the
more detail below, alongside a consideration of the role which emda and      development of a number of innovative solutions to deal with timing
its partner organisations could play in each.                                problems and inflexibilities in silo based capital infrastructure.
These delivery models are:                                                   Figure 6: Infrastructure Funds – Structural Relationships
•   Strategic co-ordination bodies (for example the City Development
    Company Concept);
•   Asset Backed Vehicles (including Local Asset Backed vehicles such as
    Blueprint in the East Midlands; Local Incentive Backed vehicles such
    as that used by Network Rail and Kier; Sectoral Asset Backed Vehicles
    – Local Improvement Finance Trusts (LIFT) for example Greater
    Nottingham and North Nottinghamshire LIFT)
•   Local Infrastructure Service Models (for example Energy Services
    Companies and Multi Utility Service companies such as the elephant
    and Castle MUSCO).




                                                                             Figure 6 shows the possible structural relationship between potential
                                                                             revenue streams for the raising capital to prime a fund for the financing of
                                                                             infrastructure.
                                                                             One solution has been to ‘de risk’ the provision of an asset by funding it’s
                                                                             investment requirement using third party funds and using predictable
                                                                             revenue streams to support the process. Infrastructure can be delivered to
                                                                             enable or unlock development from which agreed planning obligation




                                                                                                                                          Ove Arup & Partners Ltd
                                                                                                                                   Published by emda August 2010
East Midlands Development Agency                                                                                                              Executive Summary




contributions would reimburse or repay the fund. Once the Community                 Growth Points. The focus is on the degree to which a RIF investment adds
Infrastructure Levy (CIL) is in operation that could also be used to                value to the delivery of sustainable growth or by making development
reimburse any fund.                                                                 more sustainable by earlier delivery of key infrastructure.
The potential funding available from different revenue sources is                   The model shown in figure 6 is dependent upon the ability to identify an
dependent upon the degree to which government allows innovative                     appropriate source of revenue to finance borrowing costs and reimburse
sources of finance to enable these systems to function effectively. The             the fund to enable further investment to be made. In the UK these sources
infrastructure fund approach is emerging as a valuable tool for addressing          are relatively few and concerned largely with capturing value from the
failures in the provision of infrastructure needed to unlock development.           development process. Most of the revenue streams are also dependent
Models exist or are developing at a sub-regional level and regional level           upon capturing the positive spill over effects of infrastructure into property
around the country. There are clearly some benefits of the approach in              and land values. In the post credit crunch era it must also be recognised
overcoming the common barrier of an absence of up-front investment to               that there is an element of risk associated with assuming there will be
enable or unlock development. Therefore, this approach is something                 realisable gains. In an uncertain market, it can not be certain that new
which merits further consideration.                                                 productive investment will be realised off the back of infrastructure
                                                                                    investment however well designed and funded.
However, the effectiveness of the mechanism is dependent upon the flow
of repayments coming back into the fund from public and private sector              The study identifies a number of existing sources of revenue streams
sources. Under recessionary conditions, the danger is that funds become             which could be developed further, for example the Local Authority
locked up in a first tranche of projects. There is still a concern over the         Business Growth Incentive (LABGI), the proposed Nottingham Workplace
additionality created by such a fund against the scale of need unless there         Parking Levy, and Planning Obligations (section 106 Agreements). In
are significant funds channelled into it. The scale of funding required             addition the report considers a number of potential future work streams,
could act as a major barrier to emda playing an active role in establishing         although it should be recognised that primary legislation would be required
a fund, although other public sector partners such as the Homes and                 for their introduction. These include Tax Increment Financing, Accelerated
Communities Agency may provide an alternative source of funding to                  Development Zones and Supplementary Business Rates.
prime a Regional Investment Fund. The South West Regional Investment
Fund provides an indication of the likely scale of the funding required,
where the RDA allocated £50m from the ‘single pot’ and matched by £30m
top sliced from the RFA. The RIF has been in existence over twelve
months and four investments have been agreed totalling over £21m.
The RIF Business Plan is managed by an Investment Panel and
investment decisions taken within the context of existing regional
strategies, set against clear criteria to deliver regional priorities established
through the RES and RSS and supported by other initiatives such as New




                                                                                                                                                 Ove Arup & Partners Ltd
                                                                                                                                          Published by emda August 2010
East Midlands Development Agency                                                                                                           Executive Summary




9. Prioritising Interventions                                                   10. Recommendations for the Way Forward
There is a clear need to secure the co-ordinated provision of infrastructure    Interventions in relation to the strategic infrastructure challenge need to
in order to realise the development objectives of the region. There are a       focus on reducing the opportunity costs incurred by development projects
number of ways in which emda might respond to the issues identified. The        caused by bottlenecks between critical infrastructure providers to secure
determination of priorities however must represent a balance between the        spatial/ economic objectives and between critical and social/ community
internal capacities of emda and the external economic drivers likely to         infrastructure.
influence infrastructure service developments in the future.
                                                                                Bottlenecks can be overcome by improving the flow of information
The factors influencing how emda might intervene include:                       between providers (including the reduction of proprietary knowledge) or
                                                                                using funding mechanisms to change the critical path of infrastructure
    •    Government guidance concerning the interpretation of market
                                                                                provision.
         failure and the way RDAs are expected to scope and justify
         actions.                                                               A range of practical actions that the Agency is either already doing or
                                                                                could consider include:
    •    State Aid regulations have implications for the types of
         interventions which are considered appropriate, focusing largely on    •   Using current statutory planning role to achieve improved flow of
         the use of public investment to assist private sector organisations.       information (principally via input to assist LDF preparation);
    •    Operational decisions and judgements will also be required,            •   Establishing or partnering the development of dedicated delivery
         including the scale of funding and other resources which emda has          vehicles to improve the flow of information and fund projects essential
         available to support any decision to play a more active role in the        to maintaining the critical path of a project; and
         infrastructure agenda.
                                                                                •   Establishing dedicated funds primed for the purposes of changing the
                                                                                    critical path of productive investment.
                                                                                The Agency has an opportunity to use its strategic influencing role to
                                                                                promote a model approach to dealing with the infrastructure problem for
                                                                                local planning authorities but validated by the network planners managing
                                                                                critical infrastructure. The Agency, with its business focus, is well placed to
                                                                                act as an interface between a multitude of local planning authorities (either
                                                                                acting individually or within groups) and the “big” critical infrastructure
                                                                                companies.
                                                                                As a result of PPS12, spatial planning has become more involved with
                                                                                critical infrastructure but the experience is serendipitous. Once developed
                                                                                a model approach could be targeted at those authorities currently



                                                                                                                                              Ove Arup & Partners Ltd
                                                                                                                                       Published by emda August 2010
East Midlands Development Agency                                                                                                           Executive Summary




considered a priority for input from a strategic perspective to inform plan      Investment Board have prepared and agreed the RFA (as opposed to the
preparation and those where growth and infrastructure provision are likely       more inclusive approach adopted in the East Midlands which involved a
to emerge as particular issues.                                                  series of workshops and discussion papers to reach agreement).
Consideration could be given to how current and future delivery vehicles         The West Midlands has identified twenty Investment Impact Locations
could be deployed in these areas to assist implementation alongside any          which reflect the regional priorities. The region has also asked
funding to support the removal of bottlenecks in infrastructure provision.       Government to consider the creation of a Regional Infrastructure Fund.
Agency funding could be made contingent upon the adoption of a best              The approach has had a profound influence upon emerging ideas for the
practice model within targeted authorities.                                      Single Integrated Regional Strategy (SIRS) and its associated delivery
                                                                                 plan for the West Midlands, where partners now intend to use the focus on
Whilst a large number of organisations are involved with infrastructure, the
                                                                                 deliverability in other aspects of infrastructure provision (e.g. environment
position of the Homes and Communities Agency justifies particular
                                                                                 and health).
attention. The Homes and Communities Agency also has a strategic role
in securing housing development and regeneration in the East Midlands.           Emerging from the second workshop delivered as part of this study was
In an era of mixed use/ sustainable development, alignment with economic         the idea of the establishment of a Regional Utilities Group (with
development is critical to the region’s success.                                 representation from emda, HCA, HA Local Authorities and Utility
                                                                                 providers) to map strategic and operational plans and priorities to identify
The actual involvement of the HCA in infrastructure discussions and
                                                                                 the gap over say a ten year period. This is similar to a model developed by
planning has varied at the regional level in accordance with local
                                                                                 Yorkshire Forward which has led to more effective planning and joint
circumstances. For example, in the South West, the HCA has taken a
                                                                                 understanding of the challenges facing the region.
leading role in the Regional Funding Allocations discussions, partly as a
result of the transfer of key executives from the RDA to the HCA and partly
as a result of the number of urban extensions and settlements planned or
in need of support.
The “Single Conversation” has provided the key mechanism for
discussions on alignment and regional investment priorities. The HCA
(East Midlands) has been involved in the RFA consultation exercise which
has set out a broad direction of travel for the region in terms of priorities.
The HCA have acknowledged that further arrangements need to be put in
place if real alignment and joint investment is to be achieved.
In the West Midlands, key partners (comprising chief executives and
senior officers from AWM, Local Government, Assembly, Highways
Agency, Homes and Communities Agency, Learning & Skills Council and
Government Office), under the auspices of the Joint Strategy &



                                                                                                                                              Ove Arup & Partners Ltd
                                                                                                                                       Published by emda August 2010
East Midlands Development Agency                                                                                                  Executive Summary



                                                                            Action                                           Quick       Med           Long
11. Establishing an Action Plan                                                                                              Win         Term          Term
This study has identified a number of actions which the Agency could take   Infrastructure Delivery Plans
forward to support the future delivery of infrastructure within the East
Midlands. These are summarised in Table 2 below.                            Emda to develop a Best Practice Model and
                                                                            guidance to inform and guide key authorities /
                                                                            groups of authorities within the region
Table 2 Establishing an Action Plan                                         New Funding Regimes
                                                                            Emda to work with other RDAs and HCA and
Action                                             Quick   Med     Long     government to develop new innovative funding
                                                   Win     Term    Term     national and regional models to support future
Regulators                                                                  infrastructure delivery.

Either alone or together with the other RDAs,                               Investment Impact Locations
seek to ensure that the Regulators understand                               Work with regional partners to identify
the need for long term infrastructure                                       investment Impact Locations, where funding
investment to underpin regional growth                                      can be targeted
Utility Providers                                                           Develop interactive GIS tool to inform and
Involve regional representatives of the                                     guide decision makers
infrastructure providers, together with other
organisations (eg local authorities, HCA) in a
new ‘Regional Infrastructure Group’, and
emda to engage with the business planning
processes of the Utility providers.
Develop a Regional Infrastructure Strategy
to guide investment plans of utilities and other
infrastructure providers, and secure ‘sign off’
by regulators.




                                                                                                                                     Ove Arup & Partners Ltd
                                                                                                                              Published by emda August 2010
East Midlands Development Agency                                                                                                          Executive Summary




12. Conclusions                                                                  •   Infrastructure need can and will be met in the future by a combination
                                                                                     of new capacity and demand management measures. This is
 This study has explored the nature of infrastructure provision in the East
                                                                                     demonstrated in the Water Resource Plans for the region which
 Midlands and the extent to which infrastructure providers are connected
                                                                                     assume efficiency savings.
 into the growth agenda for the region. The study has revealed a range of
 issues including:                                                              The Agency has an exciting opportunity to use its strategic leadership
                                                                                capabilities to embed good practice in the region at minimal resource cost.
 •    Inconsistencies between the geographical areas covered by the
                                                                                A range of actions have been identified, some with limited resource
      various infrastructure and utility providers eg water and electricity
                                                                                implications for emda, and others likely to require some potentially
      providers do not share common boundaries for business and service
                                                                                significant funding commitments to take forward. However, in different
      planning;
                                                                                ways these actions could have real impact and value to emda and wider
 •    The boundaries between infrastructure providers and the utilities are     partners involved in the planning and delivery of development.
      not consistent with those of the regional or local authorities;
                                                                                By reducing the uncertainties and opportunity costs associated with critical
 •     Different infrastructure and utility providers operate on different      infrastructure provision, the Agency can help minimise the debt charges
      business planning cycles, which in many cases do not co-incide with       paid by developers on scarce capital arising from hold ups in infrastructure
      those for spatial planning;                                               provision and barriers created by the excessive loading of network costs
                                                                                onto first phase developers.
 •    These discontinuities also exist in the business and investment
      planning that supports the various parts of the water cycle eg the        The Agency can also act as a conduit between the very large bodies
      Water Resource Plans for drinking water are 25 year plans for             planning infrastructure networks and the local planning authorities
      investment, but no equivalent exists for sewerage and drainage;           controlling spatial planning.
 •    Transportation is the form of infrastructure provision best connected     Opportunities exist for the Agency to engage with the HCA within a single
      to the spatial planning and growth agenda;                                infrastructure planning framework with the Agency playing to its strengths
                                                                                around employment interests looking to a future where homes and jobs
 •    Most infrastructure providers and utility companies are commercial
                                                                                will need to be delivered jointly to achieve wider sustainable development
      organisations. As such their decisions are affected by a combination
                                                                                objectives.
      of commercial realities and the regulator’s rules. Because a growth
      area has been indentified by government, it does not automatically        Although considered unlikely in the current and foreseeable climate, any
      follow that investment in infrastructure provision to support that        future headroom in emda capital funding could be usefully used to support
      growth will take place at the time required.                              the creation of infrastructure funds either using a decentralised (essentially
                                                                                project based) model or centralised through the creation of a RIF.
 •    Legacy infrastructure is also an issue for infrastructure providers and
                                                                                However, practical discussions with partners such as HCA would still be
      utilities. This also requires expenditure on renewal.
                                                                                sensible to develop regional thinking on how to best use existing and
                                                                                future known resources to achieve agreed regional objectives.



                                                                                                                                             Ove Arup & Partners Ltd
                                                                                                                                      Published by emda August 2010
East Midlands Development Agency       Executive Summary




                                          Ove Arup & Partners Ltd
                                   Published by emda August 2010

				
DOCUMENT INFO
Shared By:
Categories:
Tags:
Stats:
views:4
posted:9/19/2011
language:English
pages:17