News that the energy regulator Ofgem is warning of increased risk of power shortages by 2015 unless energy generation capacity is strengthened has highlighted the need for public debate about what the UK’s top infrastructure investment priorities should be – and where flood defences fit in.

Dieter Helm, Professor of Energy Policy, University of Oxford has called for the Draft Water Bill currently proceeding through Parliament to address the serious challenges posed by flood risk, commenting: “Flood defence investment is a clear national priority on which the Draft Bill is largely silent.”

The Professor’s newly-published critique has yet again served to emphasise the massive additional investment which will be required to address the challenge. However, there appears to be a curious lack of clarity at national level about which infrastructure projects should take priority, how they will be funded and how these decisions will be taken.

So where does this leave the increasing urgent requirement for significant funding for flood defence investment in the context of other major projects currently under consideration like the Thames Tunnel and HS2?

Earlier this year a Financial Instrument passed by the Government agreed that the proposed £4.9bn Thames Tunnel investment will be underwritten by the British taxpayer. Separately, the Financial Infrastructure (Financial Assistance) Bill 2012-13 presented to Parliament on 6 September 2012 will allow the Government to provide financial assistance of up to £50 billion in support of infrastructure investment – a limit which could be increased by order. The Government has already said it will guarantee in the region of £800 million of development costs for HS2 – currently estimated to cost around £32 billion.

In contrast there is a noticeable lack of clarity around whether flood defence is assigned the same level of importance as infrastructure or any specific level of costs attached to it.

Currently no flood defence provision in Infrastructure Bill

In the House of Commons debate on the Financial Infrastructure Bil in late September, Hugh Bayley, M.P. for York Central (an area impacted by last week’s floods) said that the Government’s national infrastructure plan, published in November last year, included flood defences and communications in its definition of “infrastructure”. He pointed out that while the Government would regard it as possible to use the resources that the Bill will make available to improve high-speed broadband, flood defences are not mentioned in the Bill. He then sought clarification from the Minister about whether flood defence schemes would be seen as infrastructure under the terms of the Bill, and therefore fundable from the £50 billion that is being set aside.

In response, Sajid Javid Economic Secretary to the Treasury, said he had been advised that “there is no reason for them to be excluded” and that the Government envisaged “their being part of the infrastructure that is being considered.”

In the same debate, Chris Leslie MP for Nottingham East described the Bill as “a curious little piece of legislation” commenting that “the lack of detail in the Bill …worries many people”. Nick Raynsford, the M.P. for Greenwich and Woolwich questioned who will be given financial assistance and what will be defined as nationally significant infrastructure, saying he had “searched in vain through the fine print for any definition of “national significance”.

Currently the Government has given no indication as to how these decisions be made and how projects will be benchmarked against each other. The key issue the Government has yet to clarify is what criteria are in place and how they will be applied.

The other issue which is also of particular relevance to the country’s flood defence requirements is the extent to which major construction projects like the Thames Tunnel, HS2 etc  are required to incorporate any flood defence requirements. The Institution of Civil Engineers is continuing to make a strong case for what it describes as interconnectivity e.g. major new roads, railways etc should not be constructed as single use assets without first considering whether they can also serve any other possible functions.

It would be interesting to know whether either the proposed supersewer or HS2 will incorporate any functionality in terms of flood defence requirements, or indeed whether either was required to take these into account. The Government’s current approach to flood defence infrastructure provision would appear to suggest that this is not the case.

Regulatory change needed to facilitate development of multi-function infrastructure

Infrastructure UK, a unit within HM Treasury's Enterprise and Growth Directorate, has been tasked with the core remit of providing greater clarity and coordination over the planning, prioritisation and enabling of investment in UK infrastructure.

Within that sits the Engineering Interdependencies Expert Group (EIEG) whose purpose is to bring together expertise from industry, academia and the public sector in a single forum. The EIEG is currently overseeing a workplan which includes the deliverables of assessing and reporting on systemic risks and opportunities in infrastructure and developing a roadmap of engineering challenges and decisions in future infrastructure.

As part of the work on infrastructure, HM Treasury and Infrastructure UK commissioned a short piece of work to explore infrastructure interdependencies in more detail and, in particular, to investigate the potential costs and benefits they give rise to. However, any reference to the need to examine where flood defences sit within critically important UK infrastructure is noticeably lacking.

Flood defence infrastructure not seen as a sector in its own right

 Systemic Risk and Opportunities in UK Infrastructure  only refers to flood risk in the context of climate change and accompanying increased risks to infrastructure in specific sectors like power and transport, rather than treating flood defence infrastructure as a sector in its own right.

As the report points out, multiple use assets raise complex issues – not least in financing terms. Currently there is no particular incentive to build for such joint use speculatively because this could both significantly increase the costs of construction and require firm commitment from other investors.

The Report states:

• Large infrastructure projects typically require decades of revenues to amortise the high upfront investment, in addition they have lengthy pre-construction and construction periods where no project revenues are available
• …are often built and managed under concessions with transfer of considerable risk to the project company and its private shareholders,
• …require long-term financing, in many cases over 25 years, with financing costs that can typically represent 20 per cent or more of the total project costs.

In order for asset sharing to take place, it says appropriate incentives would need to be provided to encourage utility asset owners and investors to explore such opportunities – which would in turn require changes in the regulatory framework to facilitate shared use of assets. It also points out that infrastructure delivery has long lead times and that policy frameworks of today will influence the nature and planning of infrastructure to be delivered up to two (or more) decades to come.

Given the urgent need to strengthen UK flood defences, the Government should be taking a long look at the Report’s call for consideration of infrastructure interdependency to sit at the heart of decision-making and interdependency to be embedded both strategically and within policy frameworks.

The UK Guarantees scheme to kick start £40 billion of infrastructure projects announced in July 2012 includes a requirement that they should be nationally significant and says that the Government will also consider other exceptional projects of national or economic significance on a case-by-case basis, such as university infrastructure. Strengthening flood defence provision and raising, rather than lowering, flood defence budgets should now be under serious consideration.

The Government should also consider whether major infrastructure civil engineering projects should include an assessment of whether they might also serve as potential flood defence structures - not simply single asset use. In view of the scale of UK infrastructure spending over the coming decades, no appropriate projects should get the go-ahead without first considering these issues.