The UK needs infrastructure but not at any cost

Buro Happold

30/01/2013 Written by: Philip Bates No comments

For those who buy in to the Keynesian view of infrastructure and economic development, some of the recent comments by members of the UK Government on infrastructure are a positive sign.

For example, Deputy Prime Minister Nick Clegg said “If I'm going to be sort of self-critical, there was this reduction in capital spending when we came into the Coalition Government........But I think we've all realised that you actually need, in order to foster a recovery, to try and mobilise as much public and private capital into infrastructure as possible”. (House Magazine January 2013)

In addition, George Osborne recently described the plans for the HS2 (High Speed 2 – the proposed new rail network out of London) as "The engine for growth in the North and the Midlands of this country”.

However other recent comments that did not make the same headlines emphasise the importance of making the right investments in the right infrastructure. Firstly, on January 27, Dr Richard Wellings, Head of Transport at the Institute of Economic Affairs (IEA), said "The extension of HS 2 to the North of England is very bad news for taxpayers and the wider UK economy...... If the government wishes to boost the economy through infrastructure investment, it should allow private investment in profitable projects such as the Heathrow expansion and road schemes with very high rates of return”.

For those who want to know more of the IEA views on HS2 I would recommend their Discussion Paper 36 - High Speed 2: the next Government project disaster?

Even if we move away from the highly charged issue of HS2, we see similar concerns being raised about infrastructure investment. For example, the National Audit Office (NAO), in its January 2013 report Planning for Economic Infrastructure, identified five key risks to government getting value for money:

• Inaccurate identification of the need for infrastructure
• Policy uncertainty
• Failure to assess the cumulative impact on consumers of funding infrastructure through user charges
• Taxpayer exposure to losses
• Delivery costs higher than they should be

One of the seven recommendations made by the NAO was that “The treasury and departments may need to refine their prioritisation of infrastructure programmes and projects”. When the Government first announced it was developing a National Infrastructure Plan (NIP) many of us hoped that was exactly what it would do; look at the relative priorities between sectors (say power and transport) as well as between projects within sectors (say airports in the South East of England v HS2). Sadly, the current NIP fails to deliver this.

The decisions required to allow such a document to be produced may be politically unpalatable, not least because it forces us to set a direction for UK Plc. However, now more than ever, we need such a document, because, while we need infrastructure, we don’t need any old infrastructure at any cost.