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Investing for society\'s future: what priority for infrastructure?

A Note by the Director (Ditchley 2007/03)
 
9-11 March 2007
With hints of early spring in the air, Ditchley turned to an economic issue, examining how best to plan and invest in a developed society’s physical infrastructure.  This subject is relevant to two of Ditchley’s long-running themes:  the difficulties for democratic governments in handling strategic issues over the long term; and the effect of accelerating change on modern society.  On such a wide ranging topic, we were careful to focus on transport, utilities, communications and distribution rather than on health, education and welfare.  But the growing impact of technological change and concern over the environment made it difficult to confine ourselves to too narrow an area.  We were also more UK-oriented than in most Ditchley conferences, though the input from the United States, Canada and France was both substantial and pertinent. 
It was good to get down to basics at the start.  Why did we need better infrastructure?  What priority should its development have in the scheme of things?  The benefits for economic efficiency and greater productivity were regarded as clear, but they could easily be capped by concern over quality of life; and individual choice in freer societies could not readily be predicted.  In the UK the problems were more immediately challenging because of the country’s higher population density.  Perhaps this was why the UK had thought harder about infrastructure planning and funding than most of its OECD peers.  Participants were also conscious of the growing inequality in the developed world, as the rich got richer and the poor did not.  With the Eddington Report on Transport having recently arrived, and with a government White Paper being expected in the summer of 2007, the issues in front of us were felt to be very topical. 
The discussion brought out plenty of dilemmas.  The short term was more compelling, but the long term more important.  Should the overall strategic framework take precedence over micro-solutions and localised projects?  It seemed sensible to disaggregate our approaches to infrastructure planning in different sectors at different levels, but coordination between all parts of the system also appeared to be vital.  Open consultation and decisiveness were both strongly advocated; and the public and private sectors each had their roles.  Did we need a clearer vision or did we need improved delivery?
Our detailed discussion was channelled into three main areas:  planning for the long term; finance; and the impact of change and new technology.  The three working groups in these areas in fact came out with coherent and compatible approaches in a number of relevant areas.  Even though the experience of different countries tended to affect the emphasis on different parts of the system, best practice on the one hand and the experience of failures on the other suggested the following:
-       Central government’s role was above all to set the overall framework and objectives and to create the possibility of consistent long-term planning and delivery.  Governments were probably better at this than they were given credit for.  The difficulties came in the reluctance of government to devolve responsibility for delivery either to the localities or to the private sector.  Different parts of the infrastructure needed different approaches and skills and central government would not be able to cover all of them effectively. 
-       Nevertheless government could not abrogate its responsibilities for security, care of the environment, the redressing of inequalities and the provision of externally influenced supplies such as energy.  The overall sustainability of the national structure had to be guarded at the centre.  It was important, however, not to deduce from these truths that central government must remain in charge of the whole detailed process. 
-       In national systems where central government retained full and detailed control of funding, as in the UK, the tendency to micro-manage had to be resisted.  This was especially true where, again as in the UK, the first duty of the Treasury appeared to be cost control and the careful accounting of taxpayers’ money.  Just as great a priority had to be given to wise long-term investment, at which the private sector was on the whole more skilled in making choices and allocating capital. 
-       These considerations made it important for central government to have the skills to combine the two essential principles:  macro-level control and imaginative oversight.  Many participants felt that there was a strong case for a separate agency to handle those areas where the public and the private sectors came together, not least on private finance initiatives and public-private partnerships.  These tended to be haphazardly managed in different government departments.  Such an agency might be staffed from both the public and the private sectors, which would give it the necessary skills to a higher degree than in the current civil service.
-       For its part, the private sector needed to approach infrastructure projects with a strong sense of commitment.  This would not happen without (a) clarity of objectives, (b) genuine devolution of responsibility and (c) consistency of decision-making.  The UK planning system – and this was reflected in the other countries represented – was still not clear enough or consistent enough for the purpose.  Too often planning enquiries tended to re-open the fundamental decision to proceed.  The terms of such enquiries needed to be set more carefully. 
-       This made it all the more important for the public to be consulted in a structured way, starting early on in the process.  Citizens in developed societies tended to understand that short-term sacrifices sometimes had to be made for long-term gain, or that the general benefit might entail local discomfort.  But the facts had to be explained credibly and the arguments fairly and consistently presented.  There was huge value for any government in establishing that kind of credibility from the beginning. 
-       As for the economics of infrastructure funding and use, most participants were persuaded at the end of this discussion that the principle of payment by users was a sound one.  In many sectors this was already working well or evolving sensibly:  power, water, waste disposal, air and rail travel.  There were new environmental considerations which might change the equation in these areas, but the principle was better established than most people realised.  The big exception in the UK, and to some extent in the other countries, was road travel.  Most people thought that it was inevitable that a broader system of road pricing would come in and could be made to work fairly – if it was clear that other motivations, such as spying on the citizen, were absent and if the burden on the less well-off was minimised. 
-       In looking at new trends, the conference focused more on changing attitudes and habits in society than on new technology.  The latter, and particularly new communications technology, could provide more efficient instruments for the use of space, time and resources; and here one of the brightest prospects was the more effective use of existing infrastructure and instruments, which could add huge value if properly organised.  Just as significant, however, would be the management of people’s expectations and the flexibility to adapt to changing work patterns, with more people working away from a central office.  This was another trend which might emphasise the importance of decision-making at the regional and local levels (already more advanced in the US, Canada and France than in the UK because of their different political traditions).
-       There were also noticeable changes in people’s attitude to the workings of democracy itself.  The internet in particular tended to give people the impression that they could readily be consulted in a deliberative, rather than in a representative, way.  Making “deliberative democracy” work better, without inspiring the chaos of a wholly individualistic society, was a real challenge for modern democracies, but one well worth examining in greater depth. 
-       Governments were asked not to forget the importance of the role of cities in this whole context.  They tended to be the places where the most imaginative solutions were generated; and yet the financing of city infrastructure projects, and of city life generally, seem to fall between the macro and the micro levels.  The different countries we were looking at had different national, regional and municipal relationships, but in all of them people felt that the role of cities needed more careful attention (cf the report (www.ditchley.co.uk – Reports) on Ditchley’s conference in Ontario in September 2005: ‘The World’s Cities: can they take the strain?’). 
We were conscious of the narrow geographical scope of our debate when a globalising world connected our themes to so many external factors.  Several participants thought that the way China and India developed their infrastructure needs, and their connections with the outside world, would sooner rather than later affect our approaches to these areas in our own countries.  A good example was the rapid development of Chinese ports to produce an export capacity which the ports of the developed world could not possibly handle at the same accelerated rate.  There were big-picture issues here which it would need several further conferences to examine.  But a warning sign was raised about being out-paced by global change. 
In the end, we could not escape the truth that it all came down to politics.  With so much time, capital, land and economic efficiency involved in the wise development of a country’s infrastructure, central government had to take the main responsibility.  Yet it was no good thinking that governments could exclude the views of citizens and just decide.  The structure of decision-making had to take account of all the sub-issues raised above, preferably under a well managed timetable.  It was certainly the view around the table that the UK did not yet have sufficiently structured decision-points for this sense of orderly process to be the norm.  The capacity to listen and the courage to delegate both had to accompany the determination to lead and achieve. 
We were fortunate in this multifaceted discussion to have such a range of professions, perspectives and experience.  The conference ended on rather an optimistic note, in the feeling that the right way forward was both affordable and organisable, if the theme of the quality of people’s lives – in philosophical, environmental and material terms proportionately – could be sustained.  We owed thanks to a vigorous, provocative and determined chairman for keeping us on the right lines.  And we generated plenty of issues for further discussion.  Participants interested in follow-up might like the following references to related papers:
Marshall, A (2007). Getting the Connections Right: Eddington and the future of urban transport investment. London: Centre for Cities discussion paper 10. Download at www.ippr.org/centreforcities.

Nathan, M (2007). A question of balance: Barker, cities and planning. London: Centre for Cities discussion paper 9. Download at www.ippr.org/centreforcities.

TCPA (2006). Connecting England: A Framework for Regional Development.
London: Town and Country Planning Association. Download at www.tcpa.org.uk
House of Commons Trade and Industry Committee Report on ‘Local Energy – turning consumers into producers’, January 2007.  Link at
This Note reflects the Director’s personal impressions of the conference.  No participant is in any way committed to its content or expression.
 
 
PARTICIPANTS
Chairman  :  Sir Digby Jones
Senior Advisor, Executive of Deloitte;  Senior Advisor, Barclays Capital;  Senior Advisor, Ford of Europe and the Premier Automotive Group;  UK Skills Envoy.  Formerly:  Director General, Confederation of British Industry (2000-06);  Vice-Chairman, Corporate Finance, KPMG (1998-2000).
CANADA
Mr Pierre Lefebvre

President and Chief Executive Officer, L’Agence des Partenariats Public-Privé, Montreal.
Mr Pierre Lortie
Senior Business Advisor, Fraser Milner Casgrain LLP (2006-).   Formerly:  President, Transition Committee of the Agglomeration of Montreal (2004-05);  President and COO, Bombardier Transportation (2000-03).  President, The Canadian Ditchley Foundation.
Mr John McNeil
Director, MMV financial Inc.  Formerly:  Chairman, Fairmont Hotels and Resorts Inc (2001-04);  Sun Life Assurance Company of Canada:  Chairman (1998-99),  Chairman and Chief Executive Officer (1988-98).  A Director, Canadian Ditchley Foundation.
Professor James Nolan
Associate Professor, Department of Agricultural Economics, College of Agriculture and Bioresources, University of Saskatchewan.
Ms Alina Osorio
Chief Executive Officer, Macquarie Canadian Infrastructure Management Limited;  General Partner, Macquarie Essential Assets Partnership, an unlisted fund investing in infrastructure assets in Canada and the US.
FRANCE
Mr David Azema

Co-Chief Executive Officer, VINCI Concessions (2002-).  Formerly:  Chairman, Intercontinental and Regional Railways Limited and Eurostar Group (1998-2002);  Adviser to the Chairman and Director for Subsidiaries and Investments, SNCF (1993-98).
Mr François Lagrange
Chairman, National Commission for Privatisation (1998-).  A Governor, The Ditchley Foundation.  Author.
OECD
Dr Barrie Stevens

Deputy Director, Advisory Unit to the Secretary-General, OECD, Paris.
UNITED KINGDOM
Lord Aldington

Chairman, Deutsche Bank London (2002-);  Member, Chairman’s Committee, LIBA (2003-);  Member, Chairman’s Committee, BBA (2003-);  Member, Council of the British-German Chamber of Commerce and Industry (1995-).  A Governor, The Ditchley Foundation.
Mr Andrew Armes
Head of Development and Design, Architecture MK, Milton Keynes (UK).
Mr Ben Bradshaw MP
Member of Parliament, Labour, Exeter (1997-);   Minister of State, Local Environment, Marine and Animal Welfare (2006-).
Ms Tania Branigan
Political Correspondent, The Guardian (2005-).  Formerly:  Reporter, The Guardian (2003-05);  Laurence Stern Fellow, The Washington Post (2003).
Mr Martin Callaghan
Partner, Infrastructure, Government and Utilities Group, PricewaterhouseCoopers, London (2004-).  Formerly:  Operations Director, Partnerships for Schools (2003-04);  London Underground Limited;  PPP Director (1999-2003).
Mr Anthony Dunnett CBE
President, International Health Partners (UK) Limited (2004-);  Member, Urban Task Force (1998 ).  Formerly:  Chief Executive, South East England Development Agency (1999-2003).
Mr Peter Hetherington
Chair, Town and Country Planning Association ‘Commission on England’s Future’;  Board Member, Academy for Sustainable Communities, Member, Local Government Independent Commission examining the LGA’s future role;  Correspondent, Society Guardian and other publications.
Mr Roger Higman
Head, Campaign Coordination, Friends of the Earth (2004-).  Formerly:  Friends of the Earth:  Head, Climate and Transport Team (2000-04);  Senior Campaigner, Atmosphere and Transport (1995-2000);  Campaigner, The Civic Trust (1988-95).
Mr Will Hutton
Chief Executive, The Work Foundation (2000-).  Columnist, The Observer.  Formerly:  Editor-in-Chief, The Observer;  Producer and Reporter, BBC TV.  Author.  A Governor, The Ditchley Foundation.
Mr Joe Irvin
Director of Public Affairs, British Airports Authority (2006-).
Mr Peter Luff MP
Member of Parliament, Conservative, Mid-Worcestershire (1997-);  Chairman, Trade and Industry Select Committee.  Formerly:  Member of Parliament, Conservative, Worcester (1992-97).
The Rt Hon The Lord MacDonald of Tradeston
Life Peer, Labour (1998-);  Chairman, Investment Banking Group, Macquarie Bank Limited, London (2004-).  Formerly:  Minister for the Cabinet Office and Chancellor of the Duchy of Lancaster (2001-03);  Minister for Transport (1999-2001);  Minister for Business and Industry, Scottish Office (1998-89).
Mr Bruce Mann
Head, Civil Contingencies Secretariat, Cabinet Office (2004-);  Secretary, Review of Intelligence on Weapons of Mass Destruction (2004-). 
Dr Adam Marshall
Senior Researcher, Centre for Cities, Institute for Public Policy Research (2004-).  Formerly:  Researcher, Cambridge-MIT Institute, Cambridge (2003-04).
Mr Emile Naus
Long Term Planning Manager, Tesco Stores Limited (2007-).
Mr Geoffrey Norris
Senior Policy Adviser on Trade, Industry, Energy, Employment and Planning, Prime Minister’s Policy directorate, 10 Downing Street.
Mr Steven Norris
Executive Chairman, Jarvis plc;  Director, IT IS Holdings plc.  Formerly:  Conservative Candidate for Mayor of London (2000 and 2004);  Member of Parliament, Conservative, Oxford East (1983 87), Epping Forest (1988-97);  Minister for Transport (1992-96).
Mr Paul Raynes
Programme Director, Local Government Association.
Lord Razzall of Mortlake CBE
Partner, Argonaut Associates (1996-);  Chairman, Liberal Democrats Campaign Committee (2000 ).  Formerly:  Deputy Leader, Richmond Council (1983-97);  Partner, Frere Cholmeley Bischoff, Solicitors (1973-96).
Ms Mary Reilly
Partner, Deloitte & Touche LLP, London;  Chair, London Development Agency;  Vice-Chair, CBE London Regional Council.  Formerly:  Board Member, London 2012 Olympic Bid Committee.
Dr Bill Robinson
Head of Economics, KPMG.  Formerly:  Head, UK Business Economist, PricewaterhouseCoopers;  Special Adviser to the Chancellor of the Exchequer;  Director, Institute for Fiscal Studies;  Senior Research Fellow, London Business School;  Head of Division Commission of European Communities;  Economic Adviser, HM Treasury. 
Professor John Ryan
Editor, Zeitgeist;  Professor, European Business School, London;  Professor, Heilbronn Business School, Germany.
Mr Lloyd Thomas 
Reorganisation Services, Deloitte & Touche, London (2006-);  Graduate, Wharton School of Business, University of Pennsylvania.
Mr Simon Webb CBE
Director General, Delivery and Security, Department for Transport (2004=).  Formerly:  Policy Director, Ministry of Defence (2001-2004).
Mr Tom Winsor
Partner, White & Case (2004-).  Formerly:  Rail Regulator and International Rail Regulator (1999-2004);  Oartner, Denton Hall (1991-9);  Chief Legal Advisor and General Counsel, Office of Rail Regulator (1993 95).
UNITED KINGDOM/UNITED STATES OF AMERICA
Ms Sarah Ichioka
Urban Consultant, Witherford Watson Mann Architects, London (2006-);  Consultant Curator, Tate Modern Gallery, London;  Research Associate, Urban Age Project, London (2004-).
Lady Judge
Chairman, United Kingdom Atomic Energy Authority (2004-);  Chairman, School of Oriental and African Studies;  Deputy Chairman, Financial Reporting Council (2003-);  Deputy Chairman, Friend’s Provident Plc (2001-);  Senior Independent Director, Quintain Estates and Development Plc, among others.  A Governor and Member of the Council of Management, The Ditchley Foundation.
UNITED STATES OF AMERICA
Mr Cary Koplin

Managing Director, Investment Management Division, Lehman Brothers/Neuberger Berman, LLC (2000-).  Formerly:  Managing Director, Schroder Wertheim & Co Inc/Wertheim & Co (1966-2000).  A Director, The American Ditchley Foundation.
Mr John Norquist
President and Chief Executive Officer, Congress For The New Urbanism, Chicago (2004-).  Formerly Mayor, City of Milwaukee, Wisconsin (1998-2003).
Mr Robert Puentes
Fellow, Metropolitan Policy Program, The Brookings Institution, Washington DC;  Adjunct Assistant Professor, Georgetown University;  Planning Commissioner, Falls Church, Virginia.  Formerly:  Director of Infrastructure Programs, Intelligent Transportation Society of America, Washington DC.
Mr David Riemer
Director, Wisconsin Health Project (2004-).  Formerly:  Budget Director, State of Wisconsin (2002-03);  Director of Administration, City of Milwaukee (1966-2002 and 1988-93).  A Member, American Ditchley Advisory Council.
UNITED STATES OF AMERICA/CANADA
Ms Anne Kinney
Director, Research and Consulting, Government Finance Officers Association, Chicago (2004-).
UNITED STATES OF AMERICA/UNITED KINGDOM
Mr Francis Finlay

Chairman, Clay Finlay Inc., New York (1982-).  Formerly:  Head, International Investment Department, Morgan Guaranty, New York;  Lazard Freres, New York and Paris.  A Director, American Ditchley Foundation;  a Governor, The Ditchley Foundation.
Professor Robin Hambleton
Dean, College of Urban Policy and Public Affairs, University of Illinois at Chicago.