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Infrastructure blog

How the UK decides what infrastructure projects it can afford to build

20 February 2024

The UK’s National Infrastructure Commission uses ruthless prioritisation to advise on which infrastructure projects can deliver the best social value.

How the UK decides what infrastructure projects it can afford to build
In its second National Infrastructure Assessment (NIA), the commission prioritised funding for mass transit projects in Birmingham, Bristol, Leeds and Manchester. Image credit: Shutterstock

As resources are invariably limited, strategic infrastructure planning supports the effective prioritisation of proposed projects to achieve the best value for society.

In the UK, the National Infrastructure Commission (NIC) advises the government on the development of economic infrastructure, such as public transport projects or flood mitigation schemes.

The NIC does this within fixed fiscal and economic remits to help it prioritise infrastructure recommendations.

The fiscal remit is a long-term funding guideline for public infrastructure investment, whereas the economic remit requires the commission to quantify the monetary impacts on households.

Ruthless prioritisation ensures the UK delivers social value through its infrastructure projects, embodying principle 6 of the Enabling Better Infrastructure guidance.

Principle 6 highlights the importance of using affordability to determine which projects will deliver on a country’s national vision.

Prioritising public investment

When first established, the NIC's fiscal remit was set to between 1.0 and 1.2% of GDP annually from 2020 to 2050.

This includes existing government funding commitments, maintenance costs and renewals.

In 2021, the fiscal remit was increased to 1.1% and 1.3% of GDP until 2055.

The fiscal remit may not vary by more than 0.1% of GDP year on year, and alternative recommendations for projects must also be made at the lower boundary of the remit.

Addressing long-term needs

This means the commission prioritises its recommendations for infrastructure investment, explaining how they address the UK’s long-term infrastructure needs.

For example, in its second National Infrastructure Assessment (NIA), the commission prioritised funding for mass transit projects in Birmingham, Bristol, Leeds and Manchester as important regional economic hubs.

Each of these cities has high projected population and employment growth, but below average levels of public transport capacity and connectivity.

Without greater public transport investment, the future growth potential of these cities will be limited, with knock-on effects for their surrounding regions.

Understanding the impact of infrastructure spending on society

The commission also describes how its recommendations will impact household costs using the economic remit.

This is important because, whether through higher taxes or household expenses, it’s ultimately people who fund infrastructure projects.

For this reason, new projects must bring social benefits to offset their initial investment. For example, through boosting productivity or lowering energy bills long-term.

Using a fiscal and economic remit produces a balanced estimate of the monetary impact of infrastructure projects on households over a 30-year horizon.

It does so by considering the project’s impacts by region, urban/rural status, ethnicity, gender, marital status, disability and age.

How does this look in practice?

Using the fiscal and economic remits, the commission produces a fully costed plan for infrastructure spending as part of the NIA.

An NIA is published once per parliamentary term.

The costed plan is affordable within the resources set out by the government and without undue costs to billpayers.

To date, the fiscal and economic remits have helped to focus the minds of institutions like the commission when making recommendations.

Due to the high standard of analysis and ruthless prioritisation needed by the fiscal and economic remits, the commission’s recommendations have also been shown to go above and beyond a wish list of infrastructure projects.

They are, instead, a viable and robust plan for the UK.

Next steps

At present, the commission is only required to present recommendations at the lower boundary of its fiscal remit.

The ICE has recommended that the fiscal remit is altered to require recommendations at upper and lower bands of investment, with the fiscal remit as the central band.

Using upper and lower bands would allow for public debate on the value and affordability of an investment and enable an adaptive approach.

To learn more about prioritising infrastructure, take a look at the 3-step process in our Enabling Better Infrastructure guidance.

  • Hannah Judd, policy manager at ICE