HM Government: PM speech on infrastructure

In the early months of the coalition the Deputy Prime Minister and I set out the two great purposes of this government. First, we want to bring about a power shift, putting power into people's hands.

That is an aim that we are achieving through public service reform, as in schools where we are giving parents more control over their children's education. We are achieving it through decentralisation, as in the Localism Act, whose provisions enabling local communities to take over the running of local services and decide their neighbourhood plan come into effect in the next few weeks.

And we are also achieving it through political reform, as in the new Police and Crime Commissioners who will be elected in November and, I hope, new Executive Mayors in our great cities following what I hope will be the positive referendums in May.

But the second great purpose of this government is to engineer a horizon shift to prepare Britain for long-term success, and that is what I want to talk about today. Now, of course, the most immediate example of our long-term thinking is our commitment to deal with the disastrous legacy of debt and deficit that we inherited. The tough and responsible decisions that we are taking on tax and spending are an essential starting point for long term economic success but they are, of course, the starting point not the end point. Yes, we should avoid leaving liabilities for the future, but as well as that we should also be leaving assets to sustain future prosperity. Good government is about building for tomorrow.

Now, more than anything else, those assets mean infrastructure and, today, as we approach the Budget, I want to set out a vision for this country's infrastructure in the 21st century; what we need, how we can pay for it and some specific steps that we are going to take.

First, I just want to explain why infrastructure matters so much and what has gone wrong with the way that we provide it in Britain. The truth is we are falling behind; we are falling behind our competitors and we are falling behind the great world-beating, pioneering tradition set by those who came before us. There is now an urgent need to repair the decades-long degradation of our national infrastructure and to build for the future with as much confidence and ambition as the Victorians once did.

Infrastructure matters because it is the magic ingredient in so much of modern life; it is not secondary to other more high-profile elements of economic strategy, it affects the competitiveness of every business in the country, it is the invisible thread that ties our prosperity together. It gets power to our lights, water to our taps, workers to their jobs and food to our shops. It enables factories, offices, warehouses and workshops to function, to trade and to grow.

But infrastructure is not just about business and it is not just about big, high-profile projects; it is an all-pervasive force in society too. It is the network that powers smart phones, it allows us to log on to Facebook, to travel, to live the lives we choose; it is, if you like, the platform for active citizenship. Its value lies in its ability to make things possible tomorrow that we cannot even imagine today. If our infrastructure is second-rate then our country will be too.

We used to understand this in Britain; after all, here we all are in the Institute of Civil Engineers, the birthplace of so much of the infrastructure that we depend on today. Our national heroes include men of iron and steam like Brunel, Stephenson and Telford, all commemorated in Westminster Abbey alongside former Prime Ministers and great authors like Charles Dickens. Our inheritance includes daring bridges and soaring stations; structures built with Victorian swagger and intended to last like Norman castles. Our national legacy to the world can be seen not just in language and culture but through the steam engine, the jet engine, the railway and civil nuclear power.

Today, too, we are keeping that flame of ingenuity burning. Last year we launched the Queen Elizabeth Prize for Engineering. This summer the eyes of the world will be on the Olympics, an amazing new city created out of almost nothing in London's East End in five years. Javelin Trains will fly there from St Pancras in just eight minutes; from Europe's finest station and biggest transport hub to the best Games in history. From East London to the West, Crossrail is the largest engineering project in all of Europe. Our engineering firms like Arup work miracles in steel and glass. Great British architects like Richard Rogers, Norman Foster and Zaha Hadid design airports in China, viaducts in France and factories in Germany.

So we should not accept the idea that our glories were all in the past or that these days we cannot deliver great infrastructure or that it is not even worth starting because projects always run late or over budget. This morning, as I speak, the fantastic new concourse at King's Cross station is welcoming its first passengers; more proof that when we set out the vision, when we find the funding, when we maintain the drive, Britain can get it right.

But there are problems too. You only have to travel abroad and compare it to the experience at home to see that we are seriously exposed as technologies change, as demand grows and as our competitors outpace us. Yes, some of our infrastructure works well and I am not here to run everything down. I accept, too, that the last government, despite borrowing to spend rather than to invest thereby allowing much of our infrastructure to degrade, did make progress on important projects like the completion of High Speed 1 and the opening of the new St Pancras station.

But the truth is no government in Britain in living memory has set out a sufficiently comprehensive and ambitious vision of this country's infrastructure needs. And by a comprehensive and ambitious vision, I do not just mean a list of projects; I mean an overall system, an integrated set of networks that collectively deliver the economic and social goods.

As well as this failure of vision, there has also been a failure of financing. Everybody knows that infrastructure is expensive; one academic assessment puts the bill at £500 billion just to meet our current commitments. And we cannot hide from the fact that new infrastructure has to be paid for either by those who use it, by government or by a combination of the two.

We also know that in any political argument about the allocation of resources, the voice of the present can be a lot louder than the voice of the future. But compared to some other aspects of government activity, the upfront investment in infrastructure should be ripe for a non-governmental approach. Investment in infrastructure produces real, tangible assets that can earn a return, and yet no government has really solved the problem of how to finance the infrastructure we need within the public spending constraints that we obviously have.

Finally, on top of the failures of vision and financing, there has been a simple failure of nerve. No government has acted with the necessary determination to blast through the vested interests and bureaucratic hurdles in order to provide what the long-term national interest really demands. To put it crudely, we have become in Britain very good at sweating old assets, but if you do that for too long there is a price to pay.

It is not enough just to keep the existing infrastructure going, we need to build, as other countries are building, the completely new infrastructure we need for the future. That is not about picking winners; it is about helping British companies to be winners. We have not done anything like enough to help grow British expertise and jobs in building not only the infrastructure that we need here, but in the booming markets overseas as well.

Now, after all these years of failure, compromise and lack of ambition, the reckoning is upon us. We lose £7 billion a year because of congestion on our roads, and yet the last administration only built around 25 miles of new motorway.

Our railways are crowded and expensive. Compared to the French, Dutch and Swiss railways our fares are 30% higher, our running costs are 40% higher and our public subsidy is double theirs. Now, you have to admit it is something of a miracle to achieve higher fares, bigger subsides and poorer performance all at the same time. Take our average broadband speed; that is eight megabits per second and in South Korea the figure is 31.6.

Our planning system for infrastructure is much too expensive and unbelievably slow; it took almost 20 years to get Terminal 5 at Heathrow. It will take at least 14 years for the first section of High Speed 2 to open. Now, compare that to Stephenson's London to Birmingham railway in 1838; this was the world's first major intercity railway and it was built in just five years from the application to parliament through to the first through train. The kind of things we did almost 200 years ago, China does today. And that matters because we are not just up against old world economies with old world infrastructure, we face new competitors who can leap ahead of us and install completely modern infrastructure from scratch. India has 20 nuclear power stations in service and 23 more planned or being built. In 2010, for example, Beijing Capital Airport overtook Heathrow as the world's second busiest. So, we can all see the challenge; the question is how to respond.Â

Now, consistent with our purpose of preparing Britain for long term success, the coalition government has been focussed on this issue from the start. We've worked hard to protect capital spending; we've made progress in sorting out planning - getting projects from the drawing board to construction; bringing forward super-fast broadband; and we're making sure that social and environmental sustainability is not an afterthought. That's why we're systematically de-carbonising our energy and transport and creating the Natural Capital Committee, to ensure economic development projects protect our environment.

But the real innovation is in the new framework we're creating and that is tackling the three failures that have held back the development of our infrastructure: failure of vision; failure of financing; and failure of nerve. We're moving from a tactical, piecemeal, make-do-and-mend mind-set to a strategic, comprehensive, systematic vision.

Now, the starting point, as has been mentioned, is our National Infrastructure Plan. This is the first time any government has drawn together an audit of what we have, what needs to change and what the timescale should be. In transport, better trains and roads; in energy, the cleaner, dependable electricity supplies; in telecoms, faster broadband and new mobile technologies; and in construction, a planning system that unlocks sustainable growth rather than holds it back.

Now it is, of course, the responsibility of the state to set out an assessment of future infrastructure needs; but we should not look to the state to make all the plans and pay all the bills. If we wait for the state to fund the infrastructure challenge, we'll be waiting forever. But equally, it's wrong to think that this job should fall entirely on the shoulders of the private sector. Getting infrastructure right is a challenge over many decades. It requires private money, but it also requires political support and stability for the creation of what Adam Smith taught us to see as 'public goods'. So, when it comes to the question of financing, we need to use the power of the state to unlock the dynamism of the market. Government has a duty to provide a framework in which demand can be met and which attracts investors - pension funds and sovereign wealth funds - because they can rely upon fair returns. That, in turn, means getting regulation right, so that consumers and the taxpayer don't end up with high bills and too much of the risk.Â

Now, Britain already has a long and successful track-record of regulating infrastructure providers such as the water industry, and now we need to go much further and faster in opening up the financing of our infrastructure. So, we're encouraging the appetite of investors, both at home and abroad, for investment in British infrastructure; taking advantage of our stability and our open markets. In a world in which too much investment has been high risk and short term, there should be huge potential for a different approach. For example, we've established a green investment bank, which will take £3 billion of taxpayers' money and use it to lever in several multiples of that figure from the private sector to build our green infrastructure. We're also working with leading British pension funds so they can invest in solid infrastructure assets, as happens elsewhere in the world. And I can announce today that they will make the first wave of £2 billion of investment by 2013. But this is just a small taste of what I hope will follow if we get this right. Over time, I believe investment in good infrastructure can pay for itself.

But none of this will happen unless we tackle the third failure of the past: the failure of nerve. So, I'm determined to show that this government is serious about building for the future. We will take difficult decisions; we will risk short term unpopularity - I think we've demonstrated that over HS2 - and we will hold fast to our vision in the face of vested interest, because our motivation and our duty is to protect and champion the national interest.

So, let me indicate some of the specific areas where I think we need to act soon to secure the things our county needs. First, the transport challenge facing us is clear. Demand for rail is higher than at any point since the Second World War. Our roads are congested. Our key hub airport is full. By 2030 the distance travelled by road and rail in the UK is expected to increase by at least a third. Now, without world-class transport we will not get growth; people won't invest in here; and regions in decline will be left further behind. Without better transport, we will also continue to pollute, as well.

Now, in rail, I think we are making real progress. If you take Crossrail, in London, tunnelling began this month; it's a project we've protected from cuts. Now of course, it would've been easier to delay - that's what governments have always done before - but we took the bold decision to make the commitment and to unlock the funds. The innovative funding package has the taxpayer, the fare payer and the private sector contributing in equal proportions. This will transform East-West links under our capital; it's a project with immense economic and social dividends for the whole of Britain for decades to come. We're doing the same with High Speed Two; it's a project that will transform connections in our country, just as motorways did in the 1960s. It's not only about a quicker line between London and Birmingham - that is just the first stage - but it's about a national network that connects to Leeds and Manchester with faster, better services. And later this year, we'll be setting out detailed plans for this second stage. Meanwhile, we're acting now to deliver a massive programme to electrify key rail routes: West to Wales and across the Pennines from Liverpool to York. Again, this is something that could've been postponed; but we took the right decision, making more difficult spending decisions elsewhere, and therefore it was able to go ahead. We recently announced a radical programme of rail reform, aiming at tackling fares, subsidy and performance, as I mentioned at the beginning. And in the summer, we'll announce the next set of investment plans for rail.

But good railways are only part of the answer on transport; we need good roads, too. Again, the problem is clear: we don't have enough capacity in the places of key demand. Now, there is nothing green about a traffic jam and gridlock holds our economy back. So, here is what we should do: yes, move passengers and heavy goods onto rail; but also widen pinch points, add lanes to motorways by using the hard shoulder to increase capacity and dual overcrowded A-roads. The massive programme announced in last year's Growth Review made a good start; but how do we do more, frankly, when there isn't enough money? I think we need to look at innovative approaches to the funding of our national roads to increase investment to reduce congestion.

Now, road tolling is one option, but we are only considering this for new, not existing capacity. For example, we're looking at how improvements to the A14 could be part-funded through tolling. But we now need to be more ambitious. We should be asking ourselves, 'Why is it that other infrastructure' - for example, water - 'is funded by private sector capital through privately owned, independently regulated utilities, but roads in Britain still call on the public finances for funding?' We need to look urgently at the options for getting large-scale private investment into the national roads network; from sovereign wealth funds, from pension funds, from other investors. That is why I've asked the Department for Transport and the Treasury to carry out a feasibility study of new ownership and financing models for the national roads system and to report progress to me in the autumn. Let me be clear: this is not about mass tolling and, as I've said, we're not tolling existing roads; it's about getting more out of the money that motorists already pay.

And yes, there is one other transport challenge we need to be bold about too. I'm not blind to the need to increase airport capacity, particularly in the Southeast. We're acting now to make the best use of existing capacity. Gatwick is emerging as a business airport for London under a new owner, competing with Heathrow. But we need to retain our status as a key global hub for air travel; not just a feeder route to big airports elsewhere in Frankfurt, Amsterdam of Dubai. Now yes, this will be controversial and we will need to take decisions for the long term; and we'll be bringing forward options in our Aviation Strategy which will include an examination of the pros and cons of a new airport in the Thames estuary.Â

Now, the next area where we're planning bold transformation is energy. We need to find diverse, secure sources of energy that can meet demand, keep prices stable and cut the impact of carbon on our planet. But this is the problem we inherited: we are powering our county through an out of date, inefficient grid and ageing, polluting power stations. We need to replace the coal plants; invest in modern gas power and affordable, renewable energy. Gas power will continue to be absolutely vital for our electricity system and we'll work with industry to develop a new gas generation strategy that draws in investment and secures electricity supply.

Today, nuclear energy forms the backbone of our low carbon generation fleet, but the nine plants still left in service in Britain are reaching the end of their life. I am convinced that we need to press ahead with their replacement, but that involves three big challenges. One, getting the price right without state subsidy, two, getting plants built on time and three, making sure we maximise the economic benefits to the UK in terms of skills, jobs and manufacturing.

So today I can confirm our intention to work with the private sector to deliver the new plants that companies would like to build between now and 2030. We will continue investing in nuclear decommissioning and we will assess whether there is a commercially viable proposition for turning nuclear waste into fuel for the next generation of reactors.

Our electricity market reforms will allow the private sector to invest in Britain with confidence and renewable energy should be the final component in the balanced energy mix. Our focus here will be on offshore wind for hard headed reasons. It is secure, it's generated at home rather than imported and it's one of the world's fastest growing energy sources, which means substantial economic and export opportunities. I believe we're well placed to become a world leader in offshore wind power and this government is going to do all it can to make sure that happens.

Now, we can also aspire to global leadership in telecommunications, the third area of infrastructure where we will not shy away from big decisions and bold moves. The old economy was built on links through the Royal Mail and then the telephone. Now the world economy depends on digital communication, a route to market for our creative industries that is every bit as essential as the canals which once carried the cotton.

The problem is we risk leaving some people behind. While 99% of our population have access to the last decade's standards of broadband, the market alone will deliver the next generation of broadband but to only two thirds of the country. So we risk falling further behind countries like South Korea and Japan. So we're working with the private sector to ensure 90% of properties have access to high speed broadband by 2015 and that the remaining 10% of the hard to reach can have access to at least functional broadband of two megabits per second. And this week the Chancellor will be announcing ten super connected cities which will have universal access to ultra fast 100 megabit broadband, making them some of the fastest and best connected cities anywhere in the world.

But alongside this we will also need far better fast mobile data signals. The USA already has 4G capacity in place and our major European competitors are ahead of us in setting up their networks. So we'll press ahead urgently with the auction of 4G spectrum so companies can invest and get the network set up while including tough new conditions so that it covers 99% of the population. In the meantime this will significantly reduce mobile signal black holes by 2015. That is a major boost to economic productivity. Although it will mean of course you will not be able to escape your office.

Now, finally planning and I think this is the area where we've seen the greatest loss of nerve in the past, but it is the place where it should all come together; a planning system for infrastructure that should allow better transport, cleaner energy and modern telecommunications to deliver their potential.

This is the challenge. The growth of our towns and cities has been held back by a planning system that has encouraged development of the wrong sort in the wrong places. We need homes for people who need them in the places they want them while protecting our fine landscapes and preserving the green belt.

Now, it seems to me that our post-war predecessors had the right idea, embodied in the visionary plan prepared by Patrick Abercrombie in 1944. His plan underpinned the Southeast's economic success by proposing well planned and well located new towns, which would in time become new engines of economic growth. And he twinned that vision with proposals for a new London green belt to prevent sprawl.

Now, while everyone celebrates the success of the green belt, far fewer people celebrate the contribution that the new towns made to maintaining it intact. Some people feel we've lost the art of creating great places with the right social and environmental infrastructure. Now, certainly mistakes were made in the new towns with the state deciding, often rather arrogantly, what people ought to like and what they should not like. But in the last century private and social enterprises also created places like Hampstead Garden Suburb, Letchworth, Welwyn Garden City, not perfect, but popular, green, planned, secure with gardens, places to play and character-full houses, not just car dominated concrete grids.

So, yes, we need more housing, but sprawling over the countryside isn't the answer. We must absolutely protect our green belts and national parks, but we also urgently need to find places where we're prepared to allow significant new growth to happen. That is why we'll begin consultation later this year on how to apply the principles of garden cities to areas with high potential growth in places people want to live. And we must get our planning system fit for purpose; it needs to be quick, it needs to be easier to use and it needs to better support growth, jobs and homes.

We have given national consent for 16 new energy projects in the last year, enough to produce electricity for eight million homes.And we've simplified and improved the major infrastructure planning for future schemes. Already our housing strategy is beginning to get Britain building again. The £420 million we committed in November to get sites with planning permission underway has been massively oversubscribed. And I can announce today the Chancellor will allocate a further £150 million to extend the success of this scheme because these are shovel ready people ready to go and the additional funds will make that happen.

But obviously, most importantly, we will shortly publish a whole new national planning policy framework, the biggest simplification to our bureaucratic top down planning laws in 60 years. It will support sustainable development and it will play a key role in delivering for Britain the infrastructure we need to be successful in the 21st century.

Now, today I've set out some of the challenges that face us; the need for faster communications, better housing, secure and stable energy supplies. And I've suggested ways in which it might be funded, the leveraging of the power of the state to unlock private capital. Now, I'm not dogmatic about this. There will be costs and there will be protests and I'm certainly not doing it in the hope of immediate political advantage. I can see the furious objections, the banner headlines already. Indeed, I read some of them this morning before coming out to make this speech.

But rather than give in we should ask instead, what is it that people want for the future? They want reasonable things; a decent home, a clean environment, jobs for their children, the ability to get around without hassle, huge costs or endless jams. And having considered those things we should take the necessary steps to make them a reality, not leave future generations to deal with, frankly, what would be the consequences of our own cowardice. We can be so much better than that as a nation if we choose to be. Great engineering, good infrastructure, a beautiful environment, these things are actually in our national soul.

I began today by talking about the Victorians. Every transforming generation in our history has left a legacy like theirs and I say we must get out, be bold and create a legacy of our own.

Thank you for listening.