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Infrastructure Policy Watch: US infrastructure plan, Indian Budget, and UK competition reform

23 February 2021

— Biden infrastructure plan should look to strategic infrastructure planning principles
— Indian Budget targets unlocking new finance through sales and a ‘bank’
— Review of UK competition policy recommends a reduction in the role of asset owners

Infrastructure Policy Watch: US infrastructure plan, Indian Budget, and UK competition reform
Infrastructure plan was key part of US President Joe Biden's election campaign. Image credit: Shutterstock

Biden administration prepares to roll out an infrastructure plan

New York City traffic

The new US administration is preparing to roll out its second economic package in as many months, following the nearly USD 2 trillion Covid-19 stimulus package. President Biden’s team plans a further $2 trillion to put together a ‘climate-focused infrastructure plan’. 

The plan was part of President Biden’s election platform and would focus on fixing the US’s crumbling infrastructure, something our sister organisation ASCE has been highlighting for years. Their upcoming Infrastructure Report Card next month is likely to show the continuing decline in US infrastructure networks. 

The plan, subject to Congressional approval, would see railways expanded and electrified, the expansion of city-region transport, repair to water and sewerage, and broadband to rural areas to make access ‘universal’. 

Quality of infrastructure is a significant issue in the United States, and previous US presidents have sought to address it through similar infrastructure plans.

The country faces similar problems to others, funding and financing challenges being one.
However, the biggest challenge is knowing where to start. The approaches to strategic infrastructure planning at the city, state and federal level are cumbersome or non-existent.

ICE's view: These challenges were explored at the launch of the Enabling Better Infrastructure Programme in New York, which highlighted the benefits of applying the 12 guiding principles to the US. The principles are a good place for the new administration to look as it develops its infrastructure plan, particularly if it wants it to make a long-term difference.

Establishing a vision, as they have done, is an excellent first step. What is needed next is a thorough and independent needs assessment of the US infrastructure system. 

Indian Union Budget 2021 targets infrastructure to support the recovery 

Indian currency

The Indian Finance Minister delivered the Union Budget this month, focusing on unleashing infrastructure investment to support the economic recovery from Covid-19 through finance and funding policy changes. 

Of particular note was the announced creation of a government-owned Development Finance Institution, akin to an infrastructure bank, to provide long-term debt finance for projects. 

The Minister also announced a 'national monetisation pipeline of infrastructure assets' to unlock finance for new projects. The monetisation approach is similar to asset recycling, which is gaining traction in countries such as Australia to unlock the financial value of existing assets by selling or granting concessions to operate to private companies. 

ICE's view: Asset recycling and infrastructure banks are useful policy solutions to increase finance flow to infrastructure system development. ICE explored these solutions in our 2018 State of the Nation report on funding and financing, noting the benefits.

As we explored in the previous Infrastructure Policy Watch, the UK government is set to come forward with its proposals for a UK Infrastructure Bank imminently. 

UK review of competition calls for all infrastructure network additions to be independently auctioned 

auction mallet

In a new report, Power to the People, John Penrose MP has made recommendations to the UK government on how to transform competition policy to achieve a ‘dynamic, innovation-driven economy which delivers for consumers and businesses across all regions and nations of the UK.’ 

The wide-ranging report, which was commissioned by the government last September, sets out several recommendations to reform the UK’s competition institutions for the digital age.  

Of particular note for infrastructure development, the report recommends that for new-build or upgrades to networks, contracts should be independently auctioned to increase competition, rather than being handed to the incumbent asset owners.

This would be similar to recent approaches such as Ofgem’s Offshore Wind Transmission programme and Ofwat’s Direct Procurement for Customers mechanism for the Thames Tideway Tunnel. The government has promised to respond to the report in due course. 

ICE's view: The need for regulatory reform is gaining a lot of traction in the UK, given the significant scale of investment required to meet national objectives around house building, decarbonisation, adaptation to climate change and digitising networks. The current regulatory set-up is focused on achieving the lowest cost to the consumer, which can create perverse disincentives to think long-term.

In a policy paper last year, we set out changes that needed to be made, some of which align with the Power to the People report recommendations. 

In case you missed it... 

Check back in a fortnight for the next edition of the ICE's Infrastructure Policy Watch. You can also sign up to ICE Informs to get a monthly digest of the latest policy activities from ICE, including calls for evidence to support our ongoing advice to policymakers. 

  • Chris Richards, director of policy at Institution of Civil Engineers