03 December 2019

When it comes to the political parties’ plans for infrastructure, Giles Wilkes is sceptical about conveniently round numbers and worryingly little detail.

No one is ever against infrastructure. It is one of those terms that is met with such general approval – like small business, apprenticeship and innovation – as to deaden the quality of public debate. 

Flick through the parties’ manifestos and you might believe more infrastructure is the answer to every economic or social ill. More infrastructure spending was what would drag us out of the economic slump following the financial crisis. It is what will fix the UK’s decades-long regional inequalities. “Climate friendly” infrastructure is key to the environment (Liberal Democrats); “civic” infrastructure for reviving our towns and cities (Conservatives).

Whatever the question, £100bn is the answer

The figures bandied around are sufficiently large and round that they must mean little in the public mind. The number £100bn keeps popping up. It is what Chief Secretary to the Treasury Danny Alexander promised back in 2013 for the 2015–20 Parliament; what Chancellor George Osborne committed to three years later; then what Conservative leadership contender Sajid Javid promised in 2019 to reboot the economy. £100bn is even the amount that 80 MPs demanded be stumped up for road and rail projects in the Northern Powerhouse by 2050. 

Now we have a Conservative manifesto once again promising £100bn, this time for the additional infrastructure spending earmarked for the next parliamentary term. The figure – which is an increase of over £20bn more per year – would appear more remarkable were it not for the even more expansive promises of the other parties. The Liberal Democrats have gone with £130bn of additional investment while Labour’s various ‘transformation funds’ would more than double annual investment spending from £47bn to £100bn, of course.

The focus on the government's investment levels distracts from how much infrastructure has been provided by the private sector under regulatory supervision – there has been over £100bn invested in national and local energy grids, for example, since energy company privatisation. It is also hard to avoid the conclusion that £100bn is chosen not through any fine calculation of what the economy needs, but because it fits the political need for a large, round, memorable number. It is so large as to render the political argument around the scale of investment promised in infrastructure close to meaningless. Such a rapid increase removes the sort of binding constraints that impose really difficult trade-offs, and it is in the trade-offs that the politics can be found.

Runways and railway lines cause problems for all parties

It is with the what and how that the debate regains some interesting political flavour. Despite the invention of multiple infrastructure plans, commissions and assessments, all intended to take this beyond the threat of political whim, there is still a lot of heat generated around specific projects such as runways and high speed lines.

Labour is much more gung-ho about HS2 than either of the other parties, claiming that it would extend the already over-budget route all the way to Scotland. The Conservatives hedge, calling HS2 a “great ambition” but punting the decisions about its future into the Oakervee review. The Liberal Democrats sit somewhere in between, promising to support all the various rail projects in the works (HS2 but also Northern Powerhouse Rail, East–West Rail and Crossrail 2) but trusting in tighter financial controls as the answer to habitually spiralling costs.

There is a similar range of views on the third runway at Heathrow. The Liberal Democrats flatly reject it, declaring a moratorium on any new runways at all, whereas the Conservatives gingerly point to Parliament’s prior approval and hope to shift the task of responsible delivery onto Heathrow itself. Such prevarication, frustrating for business, is explained by the number of key marginal seats under the flight-path. Labour manage the same dilemma by remaining altogether silent.

Labour's announcement of a sharp cut in rail fares contains perhaps the biggest infrastructure choice: the £1.5bn cost is to be funded from revenues hitherto set aside for road building and maintenance, and represents a clear dividing line with the Conservatives. Against this, there is much that the parties agree on, such as in their support for electric vehicle charging points, broadband and cycle paths. 

The politics is in the particulars when it comes to infrastructure investment 

The really big difference between the parties lies not so much in what they want to achieve, but in how. The Conservatives and Liberal Democrats mostly leave the current structures of government in place. What institutional inventions they attempt are restricted to funds designed to prod the private sector into doing something for the state: for example, in the Conservative manifesto a Cycling Infrastructure Fund and Single Housing Infrastructure Fund join the already created Shared Prosperity Fund, Stronger Towns Fund and Future High Streets Fund. The Liberal Democrats re-invent the already created and privatised Green Investment Bank. 

However, “funds” can prove slow as competitive processes need to be designed, consulted upon and then delivered. For example, the Charging Infrastructure Fund, announced in autumn 2017, was still at the stage of selecting fund managers almost two years later.  

Labour's focus on state ownership and direction is what sets the party apart. Its approach comes much closer to replacing private sector incentives altogether, and sits along a broad commitment to renationalise a swathe of privately owned assets in energy, broadband, water and more. Superficially, a state-owned company sounds less constrained in its pursuit of government investment plans than the arm’s-length prodding and cajoling of the named “fund” approach. But the dilemmas and trade-offs that gum up the process of competitive tendering and delivery cannot be wished away – they just move to within the state-owned organisation. What might once have been delivered by markets has to be settled in bureaucratic argument. 

Without more details, it is right to remain sceptical about all these various plans. All the parties are happy to boast infrastructure spending numbers of quite unprecedented ambition. None have yet convincingly shown how they can reach them.