Infrastructure is the in-word for public policy across the world. Its re-emergence comes as a result of three separate by related topics: the economic crisis and the need to stimulate demand; the poor state of much infrastructure; and the link between infrastructure, productivity and economic growth.
In Britain, there has been a continuing flow of initiatives, policies and announcements. The National Infrastructure Plan, and the planning law reforms, were supposed to give an overall cohesion and set sectoral priorities at the national level. As with most such plans, it has come to be dominated by a small number of very large projects, each with a strong political edge. These are: HS2, Crossrail 1 & 2, a new runway in the Southeast, Hinkley nuclear power station and the Thames Tideway.
The enthusiasm has not been matched with delivery, and there has been little harmonisation of the contracts and the financial approaches. Each project has had it’s own structure. Much of the design has been driven by the political imperative of keeping as much as possible off the government’s balance sheet, and to attract foreign investment. Much less thought has been given to the combined financial burden on future customers, and their ability to pay. Savings now are not equal to investment. No longer is the public sector pay-as-you-go translating current savings into current investment. Instead we have pay-when-delivered and usually well beyond the life of the current governments.
The challenge is to develop smart ways to use the government’s much lower borrowing costs, and to assign risk between the state and the market on the basis of the ability to manage and control it. The next steps involve the creation and development of proper national balance sheets, with assets and liabilities clearly set out.
We live in extraordinary times. Real interests are negative, have been negative for several years and the forward guidance from central bankers suggests that they believe they are going to stay that way for several years to come. Yet this is a very unnatu
The state of British infrastructure is the source of almost continuous study and criticism. There is now a host of new demands in water, energy, transport and communications which require a step change in investment. The Coalition government has made a se
Oxford Review of Economic Policy, Volume 25, Number 3, 2009, pp.411–434 Abstract The paper documents the significant changes of ownership since the infrastructure utilities were privatized and, in particular, the shifts from the initial focus on dispersed
Chapter in "Delivering a 21st Century Infrastructure for Britain" co-authored with Ben Caldecott and James Wardlaw. Published by Policy Exchange. The British economy at the end of the first decade of the 21st century is not in good shape. The credit crunc
Financial Times piece. How did the UK get into such an economic mess? There are many causes, but central to any explanation is that consumption has been unsustainably high at least since 2000, and this excess has been based upon ever-higher levels of priv