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How the UK can get better at infrastructure, housing, and planning for the future

We report the highlights of an event held at the Institute.

Earlier this week, the Institute for Government launched a report on the political economy of growth and institutional reform. It argued that the UK economy suffers from a number of structural weaknesses that damage the country’s prospects for future prosperity; and that these weaknesses are built into the institutions that shape big policy decisions. Here we report the highlights of an event held at the Institute to discuss the findings.

We invited Prof. Diane Coyle (Professor of Economics in the University of Manchester), Caroline Green (Assistant Chief Executive, Oxford City Council, and former Research Director of the Lyons Housing Review), and Sir John Armitt (author of an independent review of long-term infrastructure planning in the UK) to comment on our findings in a public seminar held at the Institute for Government. Diane Coyle noted that many economies struggle with ‘structural reform’ (economist-speak for ‘politically difficult reform’), but the UK has some quirks, such as first-past-the-post, oppositional politics, which make the boundary between political decision-making and expert/technocratic knowledge particularly fraught. Discussing problems in policy-making around infrastructure, she pointed out that not enough attention is paid to implementation, and that policy analysis is hampered by inadequate conceptual tools, both in economics and in government, for assessing the benefits of individual projects. Standard cost-benefit analysis, in particular, is designed for capturing marginal changes. It does not allow for the dynamic, large-scale changes and behavioural responses often associated with infrastructure projects. Drawing on her eight years’ experience at the Competition Commission, Diane argued that while sector regulators in some countries seem to struggle with problems of regulatory capture, in the UK they appear to suffer from ‘political capture’. In other words, regulators are more likely to become politicised, which creates political risk and damages companies’ ability to make strategic investment decisions. Diane finished with a fundamental question about the interactions between successful economies and modern democracies. Events in China are raising important questions about whether it is possible to have a successful economy without democracy. Events in Britain, she argued, are raising questions at the opposite end of the spectrum: can you have a successful economy with a populist, hyper-social-media-fuelled democracy? Sir John Armitt echoed Diane’s remarks on implementation, noting that, in the UK, praise usually comes to ministers and civil servants who create policies, not to those who deliver them. Both politicians and technocrats are fearful of putting too much information in the public eye, assuming that the more information is laid before the public, the more likely it will be challenged. This creates a tendency to get things through without proper discussion, leading to opposition and disruption – “we do not spend enough time at the front end [of infrastructure projects] thinking about what we really want, answering the why question; we love to get to the what and the how”. Commenting on housing, and drawing on work for the Lyons Housing Review commissioned by the Labour Party, Caroline Green expressed broad support for the central argument of our report that at the heart of the housing crisis is a problem of political representation with some interests, such as tenants and prospective buyers, not being properly reflected in the planning system. She argued, however, that the problem goes beyond local planning constraints. It includes the behaviours of all the players in the construction industry. The problem is not just the amount of sites with planning permission, but the rate at which they are built on. She also pointed out that local opposition to housing development is a complex problem – including concerns about house prices and the impact on local roads, services, and the environment – that requires in-depth engagement. Lack of evidence and independent information underpinning housing policy is, in her view, another key problem. It makes it easy for powerful interest groups to present evidence selectively, and leaves more room for argument at the local level about the number of houses needed and the ability to provide them. It also leads to a vicious circle of poorly studied policies, with ‘evidence’ retrofitted to support them and subsequent policies that have to be brought in to mitigate their impacts. Our findings are well aligned with all these comments. Our proposed solutions include improving decision-making on infrastructure by creating independent institutions to engage local communities, interest groups and experts. This is intended to make it easier for politicians to make well-informed long-term decisions instead of these issues becoming political footballs, as in the case of airport capacity in the Southeast. On housing, our research highlighted the need to change the planning system, to ensure it gives less weight to current homeowners and more to a wider set of interests; creates funding incentives for local authorities to encourage housebuilding; and moves away from the ‘development control’ mentality that has dominated land use planning since 1947. Without significant institutional innovation, we risk locking the economy into poor systems of infrastructure and housing development for many years to come, which will place a heavy burden on future prosperity.
Institute for Government

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