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How does infrastructure spending impact your bills?

Infrastructure illustration

Many of us have noticed the impact of rising energy bills. New private spending on infrastructure will push bills up further. We’re concerned no one is making sure it’s affordable.

It’s vital that we invest in new infrastructure – whether that’s upgrading train tracks to help us get from A to B, or building new power stations to ensure we can keep the lights on.

However, this kind of investment is expensive – really expensive. We analysed the Government’s National Infrastructure plan, and found that there is £327bn of infrastructure spending planned between now and 2021. And that’s just on the energy, water, telecoms and transport sectors. Some of that is paid for by the Government through tax. However, the majority – £214bn – will be privately funded. This means companies will eventually claw back their spending through higher gas, electricity or water bills and transport fares.

Paying for it with energy bills

£214bn of private funding in the UK works out as a whopping £1,150 per household per year. In reality, that’s not how much each of us will see our bills rise. It’s more complicated than that. Companies might recoup their costs over a longer or shorter time. Businesses also pay bills, so will pay for some of these costs. But that gives you an idea of the scale we’re talking about.

At Which?, we’re concerned that no one has a proper grip on how this investment will filter through into consumer bills, and whether we can actually afford it. As you will know from reading the papers and your bank statements, the price of these essential services has risen a lot in the last few years.

We want to see better scrutiny of infrastructure spending. This will ensure it is being delivered efficiently, offers value for money, and is affordable for consumers. Tomorrow, the House of Commons will debate an amendment to the Infrastructure Bill that we’re backing. The amendment would create an independent body to scrutinise infrastructure spending and publish its findings. This would allow the Government to check infrastructure projects are on track and decide whether new investment is affordable for consumers.

Are you worried about the costs of new infrastructure projects? Are there other issues relating to infrastructure that concern you?

Comments
Profile photo of Patrick Taylor
Member

The extension of Which?’s interest to future infrastructure bills is interesting but I am surprised but hopeful that matters more immediate like:

– the trade treaty – TTIP and the ramifications if passed
– AllTrials in making sure medical companies do not hide adverse trial results and what has happened in the past when they did/do
– the existence of cartels in the EU and Australia in recent cases where the consumer has been a victim when buying soaps and cosmetics from major multi-nationals.

These to me are much more immediate matters of interest to the consuming public. As Which? moves away from product to policy then these matters need a background.

Profile photo of andmikel
Member

TTIP is antidemocratic and a whip for big business to use as they please and we will foot the bill all the way to their bank. Parliament or even EU will be directed by the courts even more than now. We will not be equal before the law. Makes the spare bedroom tax very small beer. If the clauses have to be discussed in secret the obvious conclusion is that they are not acceptable to the electorate. Similarly the failure to produce all drug trial results is equally unjust. Cartels are illegal and the burden of proof should be that all communications between colluding company’s should be in the public domain. Too much reliance on commercial confidentiality leads to moral corruption. All bids for competetive tender should be made public along with the reasons for accepting the winning bid. Open society is the basis of trust. That trust has been betrayed severely over the last few years.

Profile photo of malcolm r
Member

My concerns are that infrastructure spending should be made because it is necessary, not because it is politically motivated. So vanity projects (HS2, remember O2,) and dubious green initiatives – proliferation of wind farms – should be rejected or, at worst, given full public scrutiny. (HS2’s justification – or lack of – has been suppressed presumably because it didn’t add up).

Projects should be funded in a straighforward way and not through PFI2 to keep them off the books. Govt should borrow money cheaply and justify it being on debt, not pay through the nose to keep it “off the books” just to look good.

We also need real competence at instigating large projects. The deal with EDF to build a nuclear power station is subsidised to give guaranteed electricity at twice the price they could have got – and subsequently have in an auction.

How do we get competence? I don’t believe the civil service has it.

Profile photo of John Ward
Member

I certainly think your final sentence hits the thumb firmly on the nail. The whole point of government engaging in fundamental national infrastructure is that its covenant is so good that it can borrow money at far lower rates than any other contender [but that should not be used as an excuse to go on a reckless spending spree just because its credit card is hot and handy]. Over the past fifteen years [or longer perhaps] governments have lost control of power generation, health services, transport, welfare, education and – probably – security and defence. It appears to me that so much of the ‘investment’ that has been made in these fields has been tainted by the most appalling incompetence, procrastination, and financial waste so that we are now far worse off than we should be and are having to play catch-up big time to keep the lights on and the traffic moving. I can’t altogether share Malcolm’s opinion on the new railway capacity being projected to the northern cities – although to some extent it is a ‘vanity project’; I am conscious that we have the safest railways in Europe but some of the most chronically congested roads so I would capitalise on that and opt for rail over roads as taking much less land and being much greener in operation. I strongly advocated wind turbines for energy generation in certain previous Conversations. I still think it was the right thing to do but it has been bungled abominably: it is taking too long to bear fruit, comes at great financial penalty, and is technologically inhibited by the lack of energy storage investment [which the UK once pioneered].

Profile photo of malcolm r
Member

John, I am totally in favour of improving the railways – both for passengers and freight. Although I would hope we commuters would try to live nearer work (or work nearer home) and not continually expect to make longer and longer daily journeys that clog the system.

What bothers me about HS2 is the high cost and disruption, by limiting the track design, just to achieve very high speed for a limited market. I would much rather see money spent on new and improved infrastructure and rolling stock for standard speed trains to increase capacity and reduce journey times over the whole country. Think about the total journey time – from leaving home to reaching your final destination and does shaving half an hour of the rail journey to Birmingham really warrant the huge cost? .

Profile photo of John Ward
Member

I’m with you on that Malcolm, but I suppose if you’re building a new railway you would naturally give it the potential to go fast. It doesn’t mean that all the trains have to go at maximum line speed all the time [that would be not be energy efficient] and provide no intermediate journey opportunities [escpecially as there is talk of HS2 being joined to HS1 which goes to Paris and Brussels]. The only thing that persuades me to support HS2 conceptually is that it should release a lot of capacity on the original lines which could get more freight off our roads; a downside is that it will also release capacity that could be used to increase long-distance commuting. In another one of these perverse incentives, season ticket-holders pay the least pro rata for the network and its actually cheaper per mile to commute for longer distances – lower housing costs balance the equation but nothing makes up for the lost time although people say the quality of life is better when you get there.

Profile photo of malcolm r
Member

John, I believe the high speed of HS2 adds very substantially to the cost of the rolling stock and track, and limits the route due to necessary track alignment. Plus it does not give intermediate stops. I would rather spend the money adding to and updating conventional railways and vehicles – I see them as fast enough for most of us normal mortals.

Profile photo of John Ward
Member

I see today that the House of Commons Public Accounts Committee has concerns about value for money, the potential for cost over-runs due to poor project control to be concealed within the contingency provision, and the government’s lack of a clear strategic plan for the railways. The Department of Transport, which has traditionally been so tight-fisted over railway investment compared to highways, burbles away – “HS2 will have a transformational effect, rebalancing the economy and helping secure the UK’s future prosperity, providing high value for money to the taxpayer”. So that’s alright then. As Malcolm says, a more modest investment in track and trains might achieve a better-value outcome – potentially quicker to deliver too because the results would arise incrementally [although the current rate of modernisation of the English railway network is not exactly electrifying].

Profile photo of Patrick Taylor
Member

I share concerns about infrastructure projects, and the increasing dominance of the South East, etc however I still feel faintly surprised that it is a Which? subject. It is a very important debate but whether we would all be better served by using more mainstream avenues to post in our concerns I wonder.

Off hand one might think the Taxpayers Alliance as being the natural venue for discussing these matters. Belonging to an actual political party seems very much diminished avenue for any effective action.

Profile photo of wavechange
Member

We are having smart meters imposed on us. I don’t foresee much benefit for the consumer, who will pay handsomely for them. Rather than spending money on HS2 and other transport-related projects, why not invest the money in getting people to live nearer where they work, so that they are able to walk or cycle. That would probably help to tackle the growing obesity problem too.

If it’s our own money, we can choose to be as careful as we want to be or need to be. I want to see those in charge of infrastructure projects to demonstrate that these are good value to the public.

Profile photo of Jon Date
Member

Hi all,

The amendment to the Infrastructure Bill that we’ve been supporting was debated yesterday (Thursday).

Unfortunately the Government didn’t support the amendment so it was withdrawn. However, we’ll continue to push to ensure infrastructure costs are kept under control and for better scrutiny of the impact investment will have on your bills.

If you are interested in reading the debate, you can see it here:

http://www.publications.parliament.uk/pa/cm201415/cmpublic/infrastructure/150115/pm/150115s01.htm

We’ve been supporting New Clauses 14 and 15 – search the website for the word ‘consumer’ and you’ll find what was said.

Jon

Profile photo of terfar
Member

I agree. If you are spending others money, then the value-for-money equation is ignored. Hence we end up with hair-brained projects such as HS2, the Millennium Dome and the Channel Tunnel.

But it also goes for other Public Service companies, not just the government. When an energy company or water company believes it needs to spend on infrastructure, the company doesn’t have to go cap in hand to the bank for a huge loan: it just hikes up the cost to the end user so that it has ‘surplus’ to use on new investments in infrastructure. This may seem a sensible way to avoid borrowing costs, but it eliminates the check system. Can we afford to borrow the money? Is the investment value for money? Do we really need it?

They don’t actually care about any of those answers because it is the end consumer that is coughing up the money.

Profile photo of malcolm r
Member

And, terfar, so often these schemes are dreamed up by people who lack knowledge, who employ “consultants” to do their jobs for them (often badly), who have a vested interest in the outcome, who have commercial jobs waiting for them when their civil service or political careers are retired, and so on. What hope do we have of ever running this country on a sound basis?

Member
Simon S. says:
2 February 2015

I am not sure if this is the correct place to raise this issue. I have recently had a smart meter installed by British Gas, It stopped working, it now displays electricity usage but not gas usage. Several calls to British Gas have not produced a resolution. I am told it is a known fault and I am guessing it is a communication fault (zigbee) between the main meter and the display unit. I cannot believe that I am the only one with this problem.