Comments on the Government’s infrastructure spending plans

In his first budget, Chancellor Rishi Sunak (who, let’s remember, has been in the job for less than a month) unveiled a series of exciting spending promises, designed to increase infrastructure spending to a level not seen for decades. Overall, the Chancellor’s plans involve investing a massive £640bn for capital spending on infrastructure by 2025 – a generational change in the level of spending on public infrastructure.

The announcements raise the stakes on the previous Chancellor’s promise to deliver an “infrastructure revolution”, which was a prominent feature of the Conservative Party’s election campaign last year. The Budget was full of bold spending promises, by a Government that seems hell-bent on doing things differently and “getting it done”. “Getting it done” was the Chancellor’s rallying call for his first Budget and the headline-grabbing spending plans certainly suggest that we have a Government that is serious about doing just that.

Under Theresa May, previous Chancellor Philip Hammond had planned to spend £600bn on public and private infrastructure over a 10-year period, so the latest plans not only involve spending more money overall, but also spending it more quickly than the previous Government had planned to.

While much of the important detail has yet to be confirmed, and the publication of the long-awaited national infrastructure strategy has been delayed, the Chancellor’s spending announcements are likely to be well received by business, especially those in the community of infrastructure developers and investors. After Prime Minister Boris Johnson’s announcement last month that the controversial HS2 high-speed rail link will go ahead, the Budget is a further positive sign that this Government is prepared to make use of historically low interest rates to end the tendency of previous Governments to talk a lot about infrastructure investment, but to deliver very little.

The current Chancellor seems to be of the view that the very low interest rates that we have seen since the financial crisis will continue for some time, so has rejected assertions that his aggressive borrowing plans are irresponsible. His argument is that while overall Government borrowing may be higher than it has been in previous times, the cost of servicing the Government debt is actually lower.

While some in the industry will remain sceptical about how real, or new, some of the announcements are likely to be in practice, others will see the latest plans as being just what the industry has been waiting for.

As expected, many of the plans unveiled in the Budget are measures designed to rebalance opportunities in all parts of the UK and to lay the foundations for what the Chancellor has promised to be “a decade of growth for everybody”. The massive boost in infrastructure spending apparently includes:

  • £27 billion of strategic investment in roads and motorways;
  • £5 billion for new gigabit-capable broadband in the hardest to reach parts of the country;
  • £800 million for new carbon capture and storage clusters in the English regions and Scotland;
  • £500 million for the deployment of rapid charging hubs for electric vehicles; and
  • £12 billion of extra funding for building affordable homes.

Looking at these plans from a broader policy perspective, it is undoubtedly the case that infrastructure spending by Government serves many policy objectives (such as increasing prosperity, delivering visual regional investment, enabling other sectors), but for this Government right now, it can also be seen as supporting the investment case in global Britain and showing that Britain is thriving post-Brexit. The timing of this is obvious, but with pressure on infrastructure in the South East and a shortage of new mega projects that are already in development, it seems that the Government is keen to show the strength of UK engineering and innovation to the world, as well as to bulking up the engineering sector for activation by inward investors.

A question that has been raised by a number of industry-insiders is how the Government actually plans to deliver and fund the huge expansion in infrastructure spending that it has announced. The Chancellor made no mention of the potential use of private infrastructure finance models, so there is a concern among many that private sector investors may have a limited role in delivering the pipeline of new work.

Further concerns have been raised about the lack of specific measures designed to deliver on the Governments commitments to reduce carbon emissions and to reach net zero greenhouse gas emissions by 2050. The UK was the first major economy to legislate for net zero greenhouse gas emissions by this date and has since launched a Net Zero Review to help determine how the UK can maximise economic growth opportunities as it transforms into a green economy. Perhaps understandably at this stage (when you consider the other critical issues that the Government has to deal with at the moment), there was almost nothing in the Budget to indicate how real that commitment is and how the Government intends to achieve it.

We’re looking forward to learning more about precisely how the Chancellor’s spending promises will be delivered, and what other projects the Government plans to prioritise, when the national infrastructure strategy is published later in the spring.

It remains to be seen as to whether the Chancellor, and the Government, will deliver on its promises to “get it done” and deliver an “infrastructure revolution”, but this Budget certainly shows ambition.

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National Infrastructure Awards winners announced

Infrastructure Partnerships Australia (IPA) has announced the winners of the 2019 National Infrastructure Awards.

Convened annually, the Awards recognise excellence in public administration and business, across major projects.

The Awards were overseen by an independent judging panel, comprising:

  • Ms Leilani Frew, Chief Executive Officer, Infrastructure Project and Financing Agency (Chair)
  • Ms Kim Curtain, Interim Deputy Secretary, Trade, Tourism, Investment and Precincts, NSW Treasury
  • Dr Steven Kennedy PSM, Secretary, Federal Department of Infrastructure and Regional Development
  • Mr Jason Loos, Director, Department of Treasury and Finance, Victoria
  • Mr Neil Scales, Director-General, Queensland Department of Transport and Main Roads

The winners and finalists for each category in the 2019 Awards are as follows:

Project of the Year: Westconnex

Winner/s: NSW Treasury and Transport for NSW (Roads and Maritime Services) and their advisors Allens, Ashurst, BIS Oxford Economics, Clayton Utz, GHD, Goldman Sachs, Newgate Australia, Turner & Townsend, and PwC. Sydney Transport Partners (Transurban, AustralianSuper, Canadian Pension Plan Investment Board, and Tawreed Investments) and their advisors; Advisian, Aquasia, Clifford Chance, EY, E3 Advisory, Greenwoods & Herbert Smith Freehills, King & Wood Mallesons, KPMG, Macquarie Capital, Morgan Stanley, UBS, and WSP.

Finalists:

  • Canberra Light Rail – ACT Government (Transport Canberra) and their advisors; Arup, Clayton Utz, EY, HASSEL Studio, RPS Group, Sparke Helmore, Turner & Townsend, and WSP. Canberra Metro Consortium (Aberdeen Infrastructure Investments, CPB Contractors, John Holland, Mitsubishi Corporation, MUFG, Pacific Partnerships and UGL) and their advisors; AECOM, Architectus, CAF, Herbert Smith Freehills, R-Co, and SMEC.
  • Caulfield to Dandenong Level Crossing Removal Project – The Alliance (comprising of Aurecon, CPB Contractors, Lendlease, Metro Trains Melbourne, WSP), Arcadis, Level Crossing Removal Project, and Major Transport Infrastructure Program.
  • Wentworth to Broken Hill Pipeline – GHD, Jacobs, John Holland, MPC Kinetic, TRILITY, and WaterNSW

Advisory Excellence Award: Sydney Metro Martin Place integrated development

Winner/s: Advisors to Transport for NSW; Ashurst, CBRE, KPMG. Advisors to Macquarie Group; Herbert Smith Freehills, Macquarie Capital, MinterEllison, PwC, and Arup.

Finalists:

  • Infrastructure Victoria’s Advice on Automated and Zero Emissions Vehicles Infrastructure – Infrastructure Victoria
  • Sydney Metro Northwest OTS – Turner and Townsend
  • WestConnex Transaction – Advisors to the NSW Government; Allens, Ashurst, BIS Oxford Economics, Clayton Utz, GHD, Newgate Australia, PwC, and Turner & Townsend. Advisors to Sydney Transport Partners; Advisian, Clifford Chance, EY, E3 Advisory, Greenwoods & Herbert Smith Freehills, King & Wood Mallesons, KPMG, and WSP

Financial Excellence Award: Westconnex transaction

Winner/s: Financial Advisors to the NSW Government; Goldman Sachs, and NSW Treasury. Financial Advisors to Sydney Transport Partners; Aquasia, Macquarie Capital, Morgan Stanley, and UBS.

Finalists:

  • Agribo, Centre for Agribioscience Refinancing – Plenary Group
  • for Darling Harbour Live Refinancing – Capella Capital
  • Kwinana Waste to Energy – Macquarie Capital

Government Partnership Excellence Award: The Caulfield to Dandenong Level Crossing Removal Project

Winner/s: The Alliance (comprising of Aurecon, CPB Contractors, Lendlease, Metro Trains Melbourne, WSP), Level Crossing Removal Project, and Major Transport Infrastructure Program.

Finalists:

  • Canberra Light Rail – ACT Government (Transport Canberra), and Canberra Metro Consortium (Aberdeen Infrastructure Investments, CPB Contractors, John Holland, Mitsubishi Corporation, MUFG, Pacific Partnerships and UGL)
  • Metro Tunnel Project: Rail Projects Victoria and PwC Indigenous Consulting Partnership – PwC’s Indigenous Consulting and Rail Projects Victoria
  • Sydney Metro Martin Place Integrated Station Development – Macquarie Group, Sydney Metro, Transport for NSW

Contractor Excellence Award: Wentworth to Broken Hill pipeline

Winner/s: John Holland and MPC Kinetic

Finalists:

  • Bruce Highway Boundary Road Interchange – BMD Constructions
  • Caulfield to Dandenong Level Crossing Removal Project – CPB Contractors and Lendlease
  • M80 Ring Road Upgrade: Sunshine Avenue to Calder Freeway – Fulton Hogan

Operator and Service Provider Excellence Award: TasWater for the Regional Towns Water Supply Program – Stages 2 and 3

Winner/s: KBR, TasWater, and TRILITY

Finalists:

  • Queensland Schools Project – Plenary Schools Consortium (Plenary Group, DeltaFM and Watpac) and Queensland Department of Education
  • Incident Management Response – Transurban and Ventia

Innovation Excellence Award: uninterruptible power supply for Melbourne’s railway signalling network

Winner/s: AECOM, AEG, Metro Trains Melbourne, Public Transport Victoria, and Thycon

Finalists:

  • Dynamic Speed Management Trial – Transurban and VicRoads
  • Kwinana Waste to Energy – Acciona, Dutch Infrastructure Fund, Keppel-Seghers, Macquarie Capital, Phoenix Energy Australia, and Veolia
  • M80 Ring Road Upgrade: Sunshine Avenue to Calder Freeway – Cowri and Fulton Hogan

In addition, John Holland’s Simon Lehman won the Future Infrastructure Leader of the Year Award. Infrastructure Partnerships Australia said that Mr Lehmans’ profile stood out to the judging panel amongst all the other entries because of his extraordinary commitment to the infrastructure sector.

The judges found that Mr Lehman has proven to be a major asset and path-breaking engineer for the John Holland rail team. His on-the-job mentoring of younger team members and his exceptional work at the forefront of infrastructure delivery was exemplary.

Moreover, Major Road Project Victoria’s Alexis Davidson won the Award for Women’s Achievement in Infrastructure.

Ms Davidson has had a long and successful career in infrastructure over the last two decades. The judging panel said they were particularly impressed by her strong leadership and mentorship of other female engineers in the sector.

The judges praised Ms Davidson for consistently delivering outstanding business cases for Major Road Project Victoria and developing an impressive reputation for her innovative thinking and professionalism as a female engineer at the forefront of infrastructure delivery.

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Corrs wins National Infrastructure Award for Advisory Excellence

Australia’s leading independent law firm, Corrs Chambers Westgarth, together with KPMG, have won the National Infrastructure Award for Advisory Excellence for their role in advising BaptistCare in its partnership with the NSW Government and the Social and Affordable Housing Fund (SAHF).

Both Corrs and KPMG advised BaptistCare on its successful bid for the NSW Government’s SAHF to deliver 500 new social and affordable units and tailored support services for a period of 25 years.

According to Corrs’ lead partner on the matter, Airlie Fox, “Through this partnership with the NSW Government, BaptistCare will be able to provide housing and tailored support to a significant number of additional seniors and single-parent families who are experiencing housing stress.

“Corrs was delighted to assist BaptistCare on its successful bid and we are grateful that our firm, and KPMG, were recognised by Infrastructure Partnerships Australia with this significant award.”

The Judging Panel awarded Corrs Chambers Westgarth, and KPMG, the Advisory Excellence Award because of “their leadership and collaboration with the NSW Government to improve services for vulnerable communities in a complex policy environment”.

The Corrs team lead by Airlie included partners David Warren (Construction), Clare Corke (Banking and Finance) and Peter Calov (Property), with Consultant Trevor Danos providing strategic advice throughout the process.

BaptistCare is a registered Community Housing Provider under the National Regulatory System for Community Housing. The organisation has been providing affordable housing since 1953.

The SAHF is a key component of the NSW Future Directions for Social Housing in NSW strategy that will result in more social and affordable housing dwellings linked to tailored support, to help households gain independence.

For further information, please email Glenn Taylor or contact by phone on +61 2 9210 6593.

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Government needs to spend additional £20bn on infrastructure each year

The Government should spend an additional £20bn on infrastructure investment each year and establish a German-style publicly-owned National Investment Bank, according to a prominent progressive think tank.

The Institute for Public Policy Research (IPPR) will make the recommendation later this week.

Increasing investment spending by £20bn by 2021-22 would lift UK government investment as a share of GDP to around 3 per cent of GDP, which would be the highest for the UK since the financial crisis but still only roughly level to the OECD average.

The Bank of England raised interest rates earlier this month to 0.5 per cent on the basis of its view that there is virtually no longer any non-inflationary slack left in the British economy and that, without a higher cost of borrowing, price rises risks getting out of hand.

But the co-author of the IPPR report, Michael Jacobs, disagrees with the Bank and argues that there remains spare capacity in the UK, which ramped up investment spending from the state can help fill.

“The brute fact underlying our low productivity and investment rate is that the economy suffers from deficient demand. With businesses not investing enough, only the Government can take up the slack,” he argues.

Mr Jacobs also argues that with UK government borrowing rates on the market still negative in inflation-adjusted terms ministers have a golden opportunity to invest cheaply.

“At current negative real interest rates, next week’s Budget is the moment to increase public investment. It will pay for itself in higher growth and tax receipts,” he says.

The IPPR recommends that “much” of this funding could be delivered through a new publicly-owned National Investment Bank, modelled on Germany’s successful Kreditanstalt für Wiederaufbau, which helped to rebuild the infrastructure of that country after the devastation of the Second World War.

The proposals for considerably higher public infrastructure spending and the establishment of a new public investment bank were in Labour’s June manifesto.

But the IPPR argument also chimes with calls made recently by the Communities Secretary, Sajid Javid, for the Chancellor to borrow considerably more in order to spend on the delivery of more housing.

An Economic Justice Commission run by the IPPR – to which this work on infrastructure will feed into – published an interim report in September which said Britain’s existing economic model was “broken”.

It’s members include Sir Charlie Mayfield of the John Lewis Partnership, Jurgen Maier, the boss of Siemens UK, the McKinsey managing partner Dominic Barton, the economist Mariana Mazzucato and the Archbishop of Canterbury, Justin Welby.

The Commission’s final report will be published in the autumn of 2018.

CLAYTON UTZ

Advisory Excellence Award for Darling Harbour Live precinct project

The circa $1 billion Darling Harbour Live precinct project, on which Clayton Utz is the primary legal adviser, has won the Advisory Excellence Award at the 2014 National Infrastructure Awards convened by Infrastructure Partnerships Australia (IPA).

With construction expected to be completed in 2016, the Darling Harbour Live precinct project will provide Sydney with world-class facilities for a diverse range of convention, exhibition and entertainment events. Clayton Utz was appointed in August 2011 as primary legal advisers to Sydney Harbour Foreshore Authority (SFHA) and then to Infrastructure NSW (INSW), on the project.

The award judging panel acknowledged the major and complementary outcomes the projects advisers had secured for the State and for the people of NSW, through smart structuring and the use of interactive and competitive bidding. Other advisers on the project are KPMG (Financial Adviser to the State), Evans & Peck (Transaction Adviser to the State), Capella Capital (Financial Adviser to Darling Harbour Live) and Herbert Smith Freehills (Legal Adviser to Darling Harbour Live).

This is the latest accolade for the Darling Harbour Live precinct project, which was also named Asia-Pacific PPP Deal of the Year at the 2013 Project Finance International (PFI) Awards.

IPA’s National Infrastructure Awards celebrate and acknowledge the innovation and excellence of Australia’s public and private sectors in the delivery of infrastructure.

Bendigo Hospital Project, on which Clayton Utz is legal adviser to the Department of Health (Victoria), was also a finalist for the Advisory Excellence Award.