NIC faces up to uncertainty

The National Infrastructure Commission has published a new paper which sets out how it intends to handle uncertainty about the future when it makes policy recommendations.

The independent advisory body, chaired by Sir John Armitt, suggests that the scale of uncertainty about major factors like population size, post-Covid behaviour trends and technological progress make long term planning challenging – but stresses that cannot mean big decisions are avoided.

Noting the typical length of planning and construction phase of many infrastructure projects, and even longer asset lifespans, the Commission explores how decisions can be taken that stand the test of time.

The paper recommends that all infrastructure schemes need to be rigorously tested against a range of future plausible scenarios for infrastructure demand.

This would help avoid paralysis in decision making and minimise the risk of “conviction narratives” which can mean projects fail or grind to a halt some years down the line, once the future becomes clearer.

“Political capital can be gained from grand promises, which create delivery momentum and focus teams on the solution they are building. But not all decisions need to be made at such an early stage and within a context of consistent long term policy goals, keeping options open can materially improve the chances of delivering benefits as the future becomes clearer,” the report says.

The paper goes on to note that while there may be expense associated with keeping options open, the costs of locking into the wrong project or the wrong approach too early may be much higher.

The Commission proposes that policy makers can de-risk decisions by:

• Using adaptive approaches where feasible; that is, sequencing projects to begin with a stable core and then learning from initial phases to take further decisions as more information becomes available;
• Allowing space for high-reward strategic bets as part of a wider portfolio of investments which also includes robust, lower risk projects;
• Using hedging strategies to insure against even very unlikely scenarios.

NIC head of economic analysis Chris Durham told Infrastructure Intelligence: “In an uncertain world, it is sensible to prepare for a wide range of possible futures. The approach we’ve set out is partly an internal tool to help shape our portfolio of recommendations, but it also offers others a way of thinking about the potential impact of future events when they have no recent parallel.”

The NIC says it will assess its emerging policy recommendations for the next National Infrastructure Assessment against a range of scenarios, and in finalising its costed package to government the Commission will seek to adopt the kind of risk portfolio approach the paper outlines.

The next National Infrastructure Assessment is due to be published in the second half of 2023. The NIC has previously announced that the document will focus on three core strategic aims of achieving net zero, improving climate resilience, and levelling up.

Last month, Jim Hall, Kate Willard and Nick Winser were appointed to serve on the Commission, set up in 2015 to provide expert advice to government on long term infrastructure challenges.