Paul Waugh and Daniel Bond
Sir John Armitt is nothing if not busy. On the day he meets The House, he’s
already taken part in a lunchtime roundtable on infrastructure investment
and done a stint at his office at City & Guilds. His next stop is
monitoring fellow Airports Commissioner Sir Howard Davies giving evidence
to Parliament.
When you add in his other roles as board member of Transport for London,
chairman of National Express and deputy chairman of Berkeley Group, it’s
clear that the 67-year-old has no intention of slowing down.
At a time when many people have an eye on retirement, Sir John seems like
he’s only just getting into his stride. And as he starts work drafting
legislation for Labour’s independent infrastructure commission, the urgency
of the next general election appears to be quickening the pace further.
His current task, to produce by this summer an Opposition ‘White Paper’ on
long-term rail, road and other projects, may be second nature for a man who
is in many ways the UK’s Mr Infrastructure.
A former civil engineer with John Laing plc, former chief executive of
Network Rail and current chairman of the Olympic Delivery Authority, his
lifelong passion has been building things. From Sizewell B nuclear power
station, through the Channel Tunnel Rail Link (aka High Speed One) to the
Second Severn Road Bridge and the Olympic stadium, he’s overseen some of
the biggest British projects of the past 30 years.
SNIP
But the biggest infrastructure challenge facing the UK, Armitt says, is in
the energy sector. Earlier this month Armitt was accused of “alarmist”
rhetoric after he suggested power blackouts would be “the best possible
thing” for the market, as they would force politicians to sit up and take
notice of the looming capacity crisis. The National Grid is currently
running with just a 5% cushion of reserve generation capacity, with the
closure of several coal and oil-fired plants expected to slash it further
to by 2016.
Armitt has “reasonable faith” that blackouts can be avoided. But he says
there are still “huge challenges” ahead to ensure long-term stability in
the market, and warns that may mean rethinking the UK’s current target for
reducing carbon emissions.
“At the end of the day if any politician faces the lights going out or
more CO2 emissions, I know which one he’s going to choose,” Armitt says.
“Frankly he has to ensure that society’s got the power it needs, because
the risks of being on the downside frankly are too great, and therefore
he’s got to take the risk that he doesn’t achieve his emission targets as
quickly.
“Energy is a real conundrum, because we want it cheap, we want it clean
and we want enough of it. And those three things don’t easily mix together.
We’ve put a lot of our eggs into the offshore wind basket, but the wind
doesn’t blow all the time and you need backup systems. They can easily be
provided by gas fired stations, which are the quickest and easiest to
build, and probably the securest to invest in from investors’ point of
view. But they don’t necessarily help you to meet your climate change targets.
“I think it’s probably the biggest policy challenge the Government faces,
how to square off those different criteria. But it’s [being] prepared to
take a risk on making a decision not for the next five years but for the
next 20 years, because that’s what’s going to be required to give the
certainty for investment.”
Attracting major private investment in the energy market is vital to
keeping the lights on, he says. But with the energy market remaining at the
top of the political agenda, the future of the industry is far from
certain, not least as firms face a 16 month wait until the election before
they will find out if they face an Ed Miliband-imposed price freeze.
Is there a danger that in the current political climate, investors will
be forced to think twice before putting money into the energy sector? “I
think what gives them jitters is if they make decisions on the basis of
uncertain policies, and then see those policies change, and there is no
protection in their commercial arrangements for that change. And you can
understand that.
“The more governments wants to have the opportunity to reflect, if you
like, the differences in public opinion and change policy, if they want the
private sector to invest then they’re going to have to accept that they
have to give the private sector and the investor some protection against
those changes.”
Armitt welcomes Labour’s attempts to seek out and define a more
“responsible capitalism”, and says, at a time of squeezed living standards,
it’s inevitable that people will be angered by profiteering and by “what’s
seen as being too great wealth held in the hand of individuals or large
corporations”.
But attempts to intervene in markets are rarely helpful, he warns.
“People in markets are by and large very quick, very sharp, very bright.
One thing that can be certain is that when politicians have interfered in
markets to the extent where they completely nullify the effect of the
market then the economies do a darn sight worse.”
Is that the danger of Labour’s proposed energy bill freeze? “You are
directly intervening, andyou get a short term political benefit, and you
get a short term benefit to people in their pockets, but it doesn’t address
the long term problem.
“Unless it acts as a stimulus to the energy companies and government
working more closely together to understand what’s the right balance to
ensure energy prices are contained as far as possible to a sensible level.”
SNIP
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