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Subject: Long Term Infrastructure Investment Plan for London Report to: Oversight Committee Report of: Head of Paid Service and Executive Director of Development, Enterprise and Environment Date: 10 September 2013 This report will be considered in public 1. Summary 1.1 The London Finance Commission report ‘Raising the Capital’ report called for greater tax raising powers for London and recommended the GLA produce a high level plan to set out London’s long term infrastructure needs, how much they will cost and how they might be financed under current fiscal arrangements and in a more devolved future (the “Long Term Infrastructure Investment Plan for London” or “Plan”). 1.2 At the Committee’s meeting in July, the Head of Paid Service agreed to provide the Committee with an informal progress report on our preparatory work to deliver such an Infrastructure Investment Plan for London. This paper therefore updates the Assembly on our thoughts on the scope of the Plan and our approach to delivery. 2. Recommendations 2.1 That the Committee notes the emerging proposals for producing the Plan. 2.2 That the Committee notes this is a significant piece of work, which will be important in determining and planning for London’s ability to cater for its growing population and to remain competitive. It will also be central to London’s bid for fiscal devolution and London’s ability to attract investment. As such, it will take some time to deliver and will require external expertise, some of which will come from partner organisations and some may need to come from consultants. The Assembly will receive progress updates as the project develops to allow input into the approach to producing the Plan and to its contents. City Hall, The Queen’s Walk, London SE1 2AA Enquiries: 020 7983 4100 minicom: 020 7983 4458 www.london.gov.uk 3. Background 3.1 The Mayor’s Vision 2020 and Raising the Capital both emphasised that London’s population is growing and will continue to do so. Current projections suggest London’s population will reach 10 million by the early 2030s. By 2050 it is projected there will be around 10.8 million people living in London. The London economy will continue to grow and create new jobs. The number of workforce jobs (jobs located in London whether or not they are taken by Londoners) has grown by over 100,000 over the past year. London is likely to attract continually increasing numbers of visitors – there were over 15 million international visitors to London last year; Oxford Economics forecast this will increase to over 20 million by 2022. All will add pressure to London’s infrastructure, much of which is already operating at capacity. 3.2 The London Finance Commission (LFC) argued that funding arrangements in London should allow the GLA to make additional self-determined investments in its own infrastructure both to cater for the growth already forecast for its population and economy, and to promote additional economic growth. 3.3 The LFC clearly stated that fiscal devolution is necessary for the Mayor to be able to provide the long term financing needed to fund London’s infrastructure needs. At present almost all taxes collected in the UK are paid to central Government and spent and/or redistributed according to its priorities. Tax devolution allows sub-national government to raise some of its own tax revenues, delivering accountability and removing dependence on grants. The LFC called for greater tax raising power for London, particularly from property taxes. A thorough infrastructure and capital investment plan will be an important part of the argument for securing fiscal devolution. 3.4 The Mayor’s 2020 Vision set out the case for the investments needed for London by 2020. Infrastructure, particularly transport, featured heavily. The Mayor also committed to bringing forward a London Infrastructure Plan that will cost schemes and set out how they should be funded. 3.5 This is an opportunity to look beyond 2020 and assess London’s longer term needs and think more strategically rather than on a project by project basis. The intention is that the Plan should consider London’s high level infrastructure needs and provide a set of priorities and a timeline for delivery. 3.6 A great many of London’s infrastructure needs have already been set out in a variety of documents such as the London Plan, the London Plan Implementation Plan and the Mayor’s Transport Strategy, along with external documents such as the 5 year plans produced by the regulated utilities. Many of the projects set out in these documents are already in the pipeline. The Mayor’s 2020 Vision makes further proposals in this area. We will bring these existing plans together to provide a coherent prioritised plan setting out London’s high level needs in the medium term. This will provide the base for planning into the longer term. 3.7 It is not straightforward to provide an estimate of the scale of investment involved. On transport alone, the Mayor’s Transport Strategy estimates £4.8 billion a year for the next 5 years, and continuing investment of £3.5 billion to £4.5 billion a year to 2031. The London Plan Implementation Plan suggests somewhere in the region of £50 billion to £75 billion may be a reasonable estimate for total infrastructure spend over the next 5 to 10 years. This project will aim to provide more robust evidence on the total investment necessary for London’s long term infrastructure needs, split between different categories and demonstrating the funding and financing implications. 4. Issues for Consideration 4.1 This is a significant high profile piece of work, and the first time London has produced a long term look at its infrastructure needs. There are therefore a number of issues to consider in terms of how to approach the work. Scope 4.2 The Infrastructure Investment Plan will be as much a capital investment plan as an infrastructure plan. It will provide a high level assessment of London’s infrastructure needs; along with an assessment of the magnitude of costs associated with the required infrastructure. Importantly, it will also consider funding streams, both in a future where the current fiscal arrangements apply and in a more fiscally devolved future. We would aim to extend thinking on financing options. 4.3 Our current thinking is the Plan should include London’s high level strategic needs across the whole range of infrastructure (public transport, roads, energy, water, flood defences, sewerage, waste, telecoms, broadband, schools, hospitals, and green infrastructure). Some aspects, particularly those where the GLA has more control, may be covered in more detail. 4.4 The timescale we look to needs considering. We are currently minded to look to 2050. This is an ambitious horizon to consider - the next London Plan iteration will take us to 2036. The current Transport Strategy horizon is 20 years. However, this is not intended to be a one off piece of work that commits to a series of projects between now and 2050. Instead it will provide a first view on the scale of investment needed to ensure London has the infrastructure it needs to keep pace with a growing population and to remain competitive. It is worth noting that in terms of infrastructure planning and financing, this horizon is not excessively long. We are likely to still be paying for much of the infrastructure currently being planned in 2050. 4.5 Other cities have recently brought out long term plans, generally also looking to 2050. New York City’s “Plan NYC” covers the period to 2050, with a recent announcement to extend it to 2100. We are looking into how other cities have managed the processes. 4.6 As we develop the work further, it may become clear that looking this far is not feasible and a 2030 horizon may be more realistic. Approach 4.7 We expect the project will need to be delivered through a mixture of in-house work , consultancy and external input. The Economic and Business Policy Unit will project manage the process. An iterative approach will be taken to the project, using findings from each stage to inform the content of the next. The first stage is taking place in house and will be completed by the end of September, it will include the following: Literature review of infrastructure planning in other cities; Assessment of existing infrastructure and infrastructure plans; High level costed infrastructure plan to 2020; and Long term projections for London’s population, employment and infrastructure requirements. 4.8 In carrying out this initial work we are starting to identify emerging themes, key questions and sources of expertise, along with the main issues facing each sector of infrastructure. The next stage will develop a long term vision of London and the potential financing options available. This will allow us to then consider the city’s high level infrastructure requirements and how these fit with the funding and finance available. 4.9 External input will be sought to ensure buy-in. The London Enterprise Panel and the London Infrastructure Group will provide strategic input. We will also consult with key stakeholders, for example through events organised with London First and London Councils. Partner organisations, such as London Councils and the City of London, will input through evidence papers. 4.10 We are likely to also need some consultancy support, to provide industry and finance expertise. The funding for this has not yet been agreed. As it becomes clear exactly where this input will be required, we will assess the financial implications. Outputs 4.9 The final product is envisaged as a published report, which sets out the high level infrastructure needed to ensure London keeps pace with population growth; the economy remains internationally competitive and regeneration and growth are unlocked in specific areas. This will be backed up with explanations of needs, costs and financing proposals. Financing options will be given for current arrangements and in a more devolved future. 4.10 The published report may need to be supported by a more detailed report and supporting documentation to the Mayor. 4.11 This will not be a one off exercise; the city’s needs will of course change over time. As such the Infrastructure Investment Plan will need to be revisited periodically. Timing 4.12 As we are still in the early stages of the work, it not yet clear exactly how long will be needed to produce the end product. Adequate time is needed to undertake the necessary background, work up the detail and consult on recommendations. 4.13 London First have organised an Infrastructure Summit for late March 2014, at which the Mayor is speaking. By March 2014 we should be a position to publicly talk about the potential content of the plan and use this event to an opportunity for businesses to debate. 4.14 We hope to be in position to publish by summer 2014. We will keep this under review and update the Assembly as things become clearer. Risks 4.15 Given the high profile nature of the project and its importance in arguing for the investment needed to support London’s infrastructure, it carries significant risks. The main risk is that the report does not have the desired impacts. The report could be seen as simply a lobbying document for a long list of expensive projects. At the other extreme it could be too high level to have any real impact. Further, without buy-in from infrastructure providers or central Government any recommendations may simply be ignored. 4.16 We are aware of these risks. The final report will not be overly specific on the exact infrastructure requirements, to avoid either being seen as a list of projects or as trying to predict the precise consequences of technical change over the longer term. All key stakeholders are being engaged throughout the project to provide them the opportunity to input evidence and discuss recommendations. So far there is support for the project. Infrastructure UK has been involved and will continue to be, to ensure a level of central Government buy in. 5. Legal Implications 5.1 Under section 30 of the Greater London Authority Act 1999, the GLA has power to do anything which furthers any of its principal purposes (subject to certain limitations, not material to the present proposal at this stage, under section 31). Those principal purposes comprise promoting economic development and wealth creation, promoting social development, and promoting the improvement of the environment, all in Greater London. 5.2 Under section 34(1) of the same Act, the GLA may do anything which is calculated to facilitate, or is conducive or incidental to, the exercise of any of its functions. Under section 34(2), this is subject to the proviso that the GLA may not “by virtue of this section raise money (whether by precepts, borrowing or otherwise) or lend money, except in accordance with the enactments relating to those matters”. 5.3 This paper proposes the preparation of a “Long Term Infrastructure Plan” for London, which is understood to be intended to cover London’s infrastructure needs as far ahead as 2050, and the extent of the investment which would be required to supply the infrastructure. 5.4 The requirements of Greater London for infrastructure in the foreseeable future touch on all of the GLA’s three principal purposes. The process of identification, examination and discussion of those requirements is within the powers of the GLA. 5.5 The contemplated fiscal devolution would require legislative change; the form of any fiscal devolution agreed by central government would determine the nature and extent of the legislative change. 5.6 It is currently proposed that publication take place approximately a month before the date projected for local (and European Parliament) elections in 2014. This may need to be considered again nearer the proposed time, specifically by reference to the sections relating to elections in the Code of Recommended Practice on Local Authority Publicity, and generally to ensure compliance with the conventions in relation to activity by local authorities in pre-election periods which is, or could be interpreted as, party political. 5.7 Officers are further advised to seek specific legal advice as the project progresses, and to be mindful of the following: a) that all relevant approvals are obtained (via DD/MD as appropriate); and b) that any procurement for services is undertaken in accordance with the Contracts and Funding Code working with TfL procurement. This includes completion of a single source request form is a suitable exemption is permissible. 6. Financial Implications 6.1 This report seeks approval for the proposed Long Term Infrastructure Investment Plan for London. As this is a significant piece of work, it will take some time to deliver and require external expertise. The costs associated with the need for consultancy support to provide industry and finance expertise cannot be substantiated at the time of this report. There is currently no budget allocated for this purpose and the approval of any budgetary requirements will be subject to the Authority’s decision making process. Local Government (Access to Information) Act 1985 List of Background Papers: None Contact Officer: Suzanne Moroney Telephone: 020 7449 6569 E-mail: [email protected]