Infrastructure is the life-blood of an economy. Coming in the form of energy, transport, communications, water and waste, it creates the national networks in which we live our lives.
In the short term, infrastructure investment brings a stimulus to local areas. Each pound spent on a project generates £2.84 during the construction phase. In the long term, its effects can be transformational for towns, regions and entire economies, linking commuters to previously inaccessible labour markets, allowing firms to trade across the world, and keeping friends and families connected.
Most of us understand what infrastructure is, and can point to anything from ports to pylons to plumbing. What is less well understood is how it is financed. While most assume government always foots the bill, the 2013 National Infrastructure Plan showed that just 19 per cent of planned infrastructure will be financed by the state, with 64 per cent being directly owned and operated by the private sector.
Privatisation of utilities, communications and power networks has affected how decisions on infrastructure provision are taken. A decision to invest in a particular project is less often taken by a minister in Whitehall weighing public expenditure over expected benefits, than by a bank, insurance firm or pension fund seeing it as an asset with a risk/return profile that must be compared to gilts, bonds or equities. The most important role government can play now is to encourage this investment into the projects we need to grow our economy.
Here the government has failed. Last week National Grid announced that this winter we would have just five per cent spare electricity capacity, down from 17 per cent three years ago. The United Kingdom is now ranked 27th for infrastructure quality on the World Economic Forum’s Global Competitiveness Index. On Monday the Confederation of British Industry’s infrastructure survey offered a damning verdict on its record from business leaders, with over two-thirds saying energy infrastructure has worsened over the last five years, and over half saying the same about transport.
The survey’s main finding was that 97 per cent of firms that provide infrastructure say political uncertainty is discouraging investment. This is a major problem preventing the vital projects we need to get the economy back on track from being built.
Labour offers an innovative solution through the Armitt review. This suggested an independent National Infrastructure Commission to assess the country’s infrastructure needs over a 25-30-year period and monitor the government’s plans to meet them. John Woodcock MP proposed a UK infrastructure board in Progress’ The Politics of Solutions. The board would identify long-term investment priorities, be independent of government, and be staffed by technical experts.
This is a popular solution with the business community, with 89 per cent of CBI members supporting the Armitt proposals. Earlier research found that just six per cent of the public think government ministers are best placed to explain the benefits and costs of major projects, with 54 per cent wanting to hear from technical experts. When asked who should take key decisions on meeting infrastructure needs 64 per cent said technical experts, and just 22 per cent said politicians.
Decisions such as how to increase our airport capacity have been delayed for too long, because ministers from all parties have worried about the consequences in marginal constituencies. Through the Armitt proposals Labour is pushing full steam ahead with a vision to boosting British infrastructure, while the government has hit the buffers.
Rowan Ree is a former infrastructure policy adviser at the CBI. He tweets @RowanRee
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