What might a Labour government mean for the infrastructure sector?

Government policy often drives the development priorities for the infrastructure sector. After decades of underinvestment, whichever party is in power come the summer, the next government will need to give some thought to what is next for infrastructure.

Our experts consider what might be in store for the sector should Labour form the next government, as current opinion polls suggest is likely to happen.

Housing

In an effort to meet the housing crisis, Labour has pledged 1.5 million new homes, accelerated via planning reform and other similar measures. It will also "deliver the biggest increase in social and affordable housebuilding in a generation".     

As part of these measures, Labour has devised a new land class, termed "grey belt" which it would unlock for residential development to help solve the country's housing crisis. Grey belt is the term Labour has applied to areas of existing green belt which are either brownfield sites or are of poorer quality. Examples would be car parks and scrubland on the outskirts of towns, disused petrol stations, or around railway stations. 

The Labour Party accompanies its pledge with a commitment to impose tough conditions on developers, to ensure that the priorities of house building and environmental protection are met hand in hand. (For more on Labour's policy on the built environment sector, see our Insight.)

Housing development will only succeed in meeting housing and environmental issues if related infrastructure requirements are addressed. The grey belt will be in the town and city outskirts or beyond, potentially creating more high carbon car-dependent suburban areas. To alleviate this and align the housing and environmental aspects of Labour's plans, in our view, any housing development will need to be accompanied by sufficient provision of nursery places, primary and secondary schools, health centres, places of worship, local shops, sports facilities, and affordable public transport provision. Marrying these provisions to a faster and more streamlined planning system will clearly be a challenge alongside the existing and increasing focus on and challenge of flood risk.

Energy infrastructure

Labour has committed to ambitious targets for clean generation technologies, each of which is higher than the current government equivalent. This includes, "doubling onshore wind, tripling solar power, and quadrupling offshore wind by 2030" and investing in carbon capture and storage, hydrogen and marine energy, and ensuring the UK has the long-term energy storage it needs.

Significantly, Labour has promised to overturn the effective ban on new onshore wind developments, through reform of planning regulations including the National Planning Policy Statement and Nationally Significant Infrastructure Project regimes. The party hopes this will enable onshore wind capacity to more than double to reach 35GW by 2030.

Further investment has been promised into nascent technologies such as long duration energy storage, and small modular nuclear reactors. Labour has underlined its support of nuclear as a key part of a net-zero generation mix.

While the intent is to increase investment, a solution to challenges around the grid will be required to deliver on any of these promises – as Labour states in its manifesto, the grid is the "single biggest obstacle to the deployment of cheap, clean power generation and the electrification of industry". Labour has pledged to upgrade the national transmission infrastructure but there is little detail as to how that will be achieved in practice, given the scale of the challenge faced.

Labour has also promised to create a National Wealth Fund to invest around £7.3bn into sectors identified as a priority for progress towards net zero. Proposed allocations include:

• £1.5bn for the construction of gigafactories;
• up to £500m into green hydrogen manufacturing
• £1bn to accelerate the deployment of carbon capture.

It is not yet clear how the National Wealth Fund will work alongside, rather than compete with, the high levels of private investment already being made into green energy projects. Meeting the ambitious targets will require public and private investment to work in harmony. The impact of Labour's proposed state-owned energy company Great British Energy remains to be seen, and although further detail has been provided in the manifesto (headquarters in Scotland, for example) how exactly Great British Energy will co-invest in leading technologies, support capital intensive projects or deploy local energy production is not yet known. (For more on the impact of the election on energy policy, see our Insight.)

Transport

In a plan described as the biggest overhaul in a generation, Labour has pledged to renationalise the passenger rail network within its first term of office. If elected, it will seek to deliver a unified rail system with the main aim of enhancing capacity, reliability and efficiency across the network. Labour anticipates that the core terms of existing contracts will have expired within five years of a Labour government coming to power, allowing all operating contracts to be transitioned into its newly created statutory body, "Great British Railways".

"Great British Railways", will be an independent body created to oversee the management of the rail network and its renationalisation.

Labour's plans for the transport sector are interlinked with its "Get Britain building again" campaign which focuses in part on developing critical transport infrastructure including building roads and ports, and stimulating economic growth in the process.

Announcements in other areas of transport are less grand but still require significant investment in infrastructure:

• Renewing roads, fixing one million potholes each year of parliament
• Accelerating roll out of electric vehicle (EV) charge points
• Lifting ban on municipal ownership of bus services

Large scale and social infrastructure

At the UK Real Estate and Infrastructure Investment Forum, Labour announced its plans to create a new National Infrastructure & Service Transformation Authority (NISTA), merging the National Infrastructure Commission and the Infrastructure and Projects Authority (IPA).

NISTA will be given new powers to direct major projects and include a directorate to continue the IPA's work on major technology and service transformation.

The new body will be asked to focus on four areas:

• Streamlining delivery
• Reinforcing government backing
• Scrutiny and transparency
• Setting clear targets.

In addition to developing a forward looking delivery approach, NISTA will be tasked with identifying vital projects which are "stuck", with the intent of removing road blocks to help secure the next generation of infrastructure without the delays experienced in recent years.

While this announcement was not specifically targeted towards social infrastructure, this is a key area of under investment for the current government. The new hospital programme, school improvements and expansion schemes and wider projects to alleviate the strain on public services may well be the projects which NISTA targets.

Building on this announcement, Labour's manifesto pledge includes reform to the planning regime to reduce red tape for infrastructure, promising these changes will make it faster and cheaper to deliver major projects such as new roads railways and reservoirs.

It also mentions a focus on infrastructure required for a "modern economy" such as digital infrastructure, laboratories and gigafactories. 

Osborne Clarke comment

Our recent conference with an eminent politician, closely associated with the Mobility and Infrastructure Sector, and leading industry figures tells us that the need for infrastructure investment in the UK is acute with hardly any sector escaping the need for urgent attention and substantial financial resources.

However it is clear that there is no "magic money tree" and the proceeds of public taxation are going to be very limited. Without some form of direct public-private investment (whether a version of PFI or some other structure), the challenge is going to be accessing private capital and deploying it where it is most needed.

Large scale infrastructure investment has happened during the course of a Conservative government utilising public money (HS2) and private capital (Thames Tideway). Moving forward, it is likely that a greater proportion of the funds are going to have to come from the private sector. That will drive the conversation back to one of the fundamental principles of the original PFI schemes of ensuring value for money, leveraging the innovation and management of the private sector with the long term security of government backed projects.

The apparent focus of Labour on housebuilding as the engine the drives infrastructure (increased housing, which is necessary, increases energy demand, transport demand, schools, hospitals and so on) will form the bedrock of a Labour administration's infrastructure plans.  As successive governments have found, any "housing boom" will require profound reform of the planning system and control of land acquisition costs by statutory means. Only by this two-pronged approach can everyone achieve their stated objective of "growth".

However, put simply, the money is not available in the public purse to fund these costs at the speed being anticipated. It will therefore, in one form or another, have to come from the private sector.

Pro-growth policies are going to require substantial infrastructure investment and the first King's Speech of the new parliament on 17 July 2024 will provide an indication of whether the required reforms of the planning and land acquisition process will be a priority of whatever administration is in office.