This article was produced by Nabarro LLP, which joined CMS on 1 May 2017.
The Mayor of London has launched London’s first long-term infrastructure plan that aims to deliver London’s infrastructure needs between now and 2050. With London’s population projected to grow by 37% by 2050 significant challenges have been identified in ensuring London stays competitive as a leading world-class city. The projected population increase is anticipated to place greater and greater demands on transport, housing, education and power and water resources.
The London Infrastructure Plan consultation document identifies that whilst London is world leading in terms of competitiveness, its infrastructure ranks poorly compared to its peer cities with historic underinvestment being at the heart of this issue.
The areas identified for investment and specific projects are:
- Transport - completing Crossrail 1 and delivering Crossrail 2; an extension to the Bakerloo Line into South London; transforming National Rail services including a new orbital line; new river crossings in East London; and the Mayor’s preferred new hub airport.
- Housing - in order to meet the demand for housing and clear the existing backlog nearly 50,000 new homes a year will need to be built.
- Education - with a growing population as many as 600 new schools and colleges will be required.
- Energy - securing reliable supply for growing energy demands; developing an effective market in locally produced energy to provide 74MW additional capacity; and reducing CO2 emissions by 80% by 2050.
- Water - delivery of the Thames Tideway Tunnel; and managing London’s flood risk.
- Waste - aiming to reduce waste for disposal to very low levels by 2050 reducing disposal costs by £5billion; driving the move to a circular economy where the reuse of resources becomes the norm.
- Digital Infrastructure - improved broadband coverage and speed; and making London the first 5G city.
- Green Infrastructure - including the creation of 9000 hectares of new accessible green space.
The need to expand London's traditional core beyond its borders is flagged as a way in which new business centres and communities can be developed leveraged off improved transport infrastructure and connections. The development of Old Oak Common in West London is seen as an opportunity to create a new Canary Wharf with 90,000 jobs and 20,000 homes projected to be achievable.
To deliver this infrastructure it is estimated that £1trillion, and possibly as much as £1.7trillion, will need to be spent between 2016 and 2050 with 77% of the projected costs being attributed to transport and housing. A number of options to fund the current gap in spending and this projected expenditure are considered including fiscal devolution for London to allow London to have greater control over investment in infrastructure and to borrow to fund that investment.
No particular financing model is proposed or supported but examples of recent project finance approaches are given with it being recognised that most projects will require a mix of private and public sector support. These include:
- Funding via consumer bills in regulated industries with or without government guarantees in respect of construction risk.
- Increased tax from developer contributions and business rate supplements.
- Contributions from direct beneficiaries, such as developers or airport operators, particularly in respect of improved transport infrastructure.
- Fares or tolls from new or improved transport infrastructure.
The consultation period is open for three months and closes on 31 October 2014 with a final report scheduled for early 2015. The projects and investment set out in the London Infrastructure Plan are clearly ambitious and a welcome sign of intent to invest in new and improved infrastructure in London. It remains to be seen if the Plan can be funded and delivered and the final report will be hotly anticipated particularly with investment in housing and transport likely to be key issues in the General Election in May 2015.