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Posts Tagged ‘infrastructure’

Billed, Billed, Billed – the government sets out its economic recovery mission

WA’s Naomi Harris analyses the Prime Minister’s speech for what’s getting top billing; how big the bill will be; and what Bills we can expect to follow as he promises to ‘build back better’.

What’s getting top billing

The Prime Minister has earmarked £5 billion to ‘accelerate’ infrastructure to create jobs and support his ambition to ‘build back, better’. To turbo charge the stalled delivery of his ‘levelling up’ agenda and to invest in public goods that aid future prosperity, Johnson is carving up the money for capital spending in health, education and local infrastructure projects – the majority to be spent in the next two years.

The Chancellor is expected to go further next week when he delivers his ‘mini Budget’. Although Number 11 is keen for this not to be seen as an ‘emergency Budget’, it will be presented against a backdrop of the worst quarterly GDP figures since 1979 and, so far, the first local lockdown.

It will again focus on job retention with more detail on changes to employment and business support mechanisms and a potential temporary cut in VAT to help stimulate demand. We can also expect more from the Chancellor on job creation with further information on the earmarked ‘shovel ready’ projects and plans to support a ‘green recovery’. These two speeches are, however, stepping stones towards the much anticipated – and much delayed – National Infrastructure Strategy, now slated for the autumn.

How much the bill will be and who will pay

Uncertain about tax receipts and with public borrowing soaring, some have said that £5 billion is too much on top of the £298 billion that the ONS has said could be the final bill for existing support measures. Others say that £5 billion is a drop in the ocean if the Prime Minister truly wants to “use this crisis to tackle this country’s great unresolved challenges of the last three decades”.

It is undisputed that this government has thrown off austerity and has a new outlook. Ministers are happy to acknowledge where mistakes were made by previous Conservative governments and in his speech the Prime Minister spoke of a government that is “powerful and determined and that puts its arms around people at times of crisis”. Positively Keynesian, although this Prime Minister prefers the Roosevelt comparison.

In all of this it should be recognised that the Prime Minister’s ‘New Deal’ is not just about government spending but rather incentivising private sector investment. Just like Roosevelt, who created the Reconstruction Finance Corporation to design lending systems and new finance mechanisms to draw private investment into projects and insulate business from risk, Johnson is looking to encourage business to stump up capital through regulatory changes. Could this be the time for a Contract for Difference 2.0 or PFI 3.0?

The British taxpayer will undoubtedly be asked to start paying in eventually, but exactly who and when is an open question. Those who have been seen to do well from the crisis are likely to be at the top of the list for a windfall tax.

The Bills that we can expect to follow

We can expect the legislative pipeline to increase significantly in the tail end of this year as the government seeks to put its policy ambitions into action. The return of key personnel to Downing Street combined with rumours that the Cabinet Office and Number 10 may merge speaks of a government looking to increase its firepower on delivery.

 

 

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Communication matters: Covid-19 and the UK broadband sector

Broadband: a fourth utility

Yesterday should have seen the closure of Ofcom’s huge three month consultation examining almost all aspects of regulation for the UK’s fixed telecoms market. This exercise sits in the context of a very ambitious political target to deliver gigabit capable broadband to every UK premises by 2025.

Instead, Ofcom has suspended all consultation deadlines and has put any new consultation or decisions on hold in response to Covid-19.

The world has changed for every sector of the economy in the last three weeks and telecoms is no exception.

The challenge facing the sector has gone from racing to be part of the gigabit capable rollout and seeking every avenue to help accelerate build plans to maintaining what is now, more than ever, a vital fourth utility for a population largely unable to leave their homes.

Securing political recognition of the importance of maintaining these vital communication services has not been hard. With most of the population now attempting to work, educate their children and fulfil all their recreational needs without leaving the house, classing maintenance of broadband and mobile services as an essential service is a no-brainer.

The COVID-19 challenge

Securing classification of their engineers and street works operatives as key workers was a critical win. So is new guidance endorsed by DfT and DCMS underlining the importance of street works for this activity to continue.

So, what is the challenge?

In short, ensuring that the operational capacity is in place to maintain these vital networks and, where possible, for new network building to continue. This will mean flagging to government at an early stage if, and when, additional support measures to facilitate this are going to be required.

Protecting the supply chain will be critical to ensure that vital materials can continue to make it to the teams that need them. The risk is that suppliers further down the supply chain are impacted by an extended period of lockdown which may require more specific measures to ensure that the manufacturing and transportation of key materials can continue.

Government is alive to these dangers, but ensuring clear and regular communications between the sector and key officials and ministers will be critical. Government will need to understand as quickly as possible if new operational or regulatory constraints emerge that need to be dealt with at a political level and how they can help to fix them.

Looking ahead

What happens when the immediate crisis abates and attention turns back to medium term policy priorities?

Ofcom has been clear that this remains a critical area of focus, stating:

“The current situation has confirmed the vital role of our industries, and we are conscious that we need to be ready to support our sectors in being ready for the future as the country comes out of the crisis. Investment in fibre and 5G connections will remain of critical importance. Our review on promoting investment and competition in fibre networks and the 5G auction are important building blocks for this.”

The question the telecoms sector will be asking itself is: Does that mean everything just gets picked back up where it left off? Or will the experience of managing the worst pandemic in 100 years change the terms of the debate and shake up the familiar arguments over competition, the role of Openreach and how other players can access its passive infrastructure, full fibre vs gigabit capable etc?

Most likely it will be a bit of both.

This experience has reinforced the critical importance of delivering next generation connectivity to the whole country. The 2025 rollout target may be slightly relaxed if the operational impact makes it even clearer that it is not realistic. But the political sentiment and impetus behind full fibre rollout will, if anything, strengthen.

However, it is unlikely that the perspective of government or individual companies will be completely unchanged by this experience.

When everyone dusts off their draft Ofcom consultation responses or key messaging for the DCMS select committee inquiry on full fibre rollout there are almost certainly going to be new points to make and new angles to explore.

How might the policy debate change?

With telecoms and broadband edging closer to being classed as a critical utility in the same way as gas, water and electricity there will be renewed questions in the minds of policy makers about what this means for consumer protection.

Ofcom is already looking at this and undoubtedly ensuring the consumer gets a good deal and is protected will likely come into even sharper focus.

Early signs can be seen in the commitments from the main broadband retailers to lift data caps and adopt a flexible approach to consumers struggling to pay bills during the current crisis.

Furthermore, when building new gigabit capable networks, this may finally prompt more assertive action on the regulations governing the access of rivals to Openreach’s passive infrastructure (and to other wholesalers’ passive infrastructure in future).

This will now be viewed not just from a commercial perspective but from the perspective of maintaining network resilience.

Precisely how these new questions will evolve into the policy debate will be informed by the experience of the industry in the coming weeks. We are still a long way from being out of the woods but the process of learning lessons from the current experience to produce more effective policy outcomes that help accelerate the UK’s digital infrastructure upgrade is already underway.

For example, does there need to be an increased focus on network resilience when driving forward full fibre rollout and how can this be factored in? What additional protections, if any, are required for consumers, particularly in vulnerable groups? How can the efficiency and resilience of the supply chain, both of contractors and materials, be reinforced?

Those companies able to start that forward-looking process sooner rather than later stand to benefit a great deal in terms of their ability to shape the policy environment in the months and years ahead.

 

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