NIESR General Election Briefing: ‘Infrastructure in the UK- Time to Rebuild?’
Infrastructure investment is vital for sustainable economic growth but the UK lags behind its major competitors in the quality of its infrastructure assets, a new briefing by the National Institute recently highlighted.
The briefing argues that there is a well-established case for the government to intervene where there is market failure and urges the government to play a lead role as a provider, facilitator and financer of infrastructure projects and services.
The briefing also outlines that:
- Infrastructure pays for itself: infrastructure projects tend to have large upfront costs and benefits that accrue over many years. The economic literature struggles to establish a clear link between infrastructure spending and GDP growth, but NIESR believes that projects that are cost effective and well-designed pay for themselves.
- Governance: Infrastructure projects in the UK have been plagued by long delays and cost overruns, often because of myopic thinking and political considerations. There is a pressing need to address these failures by creating a non-partisan body that can provide the government of the day sound advice based on the long term infrastructure needs based on research and without the distraction of political pressures. The National Infrastructure Commission (NIC) has been specifically set-up to do just that, but the Commission must be strengthened through statutory powers to be able to drive the infrastructure agenda more fully.
- Fiscal rules: NIESR has for long recommended that fiscal rules related to budget deficit and debt targets should not crowd out investment spending. Here again there is progress – as part of the latest fiscal remit, the government has pledged spending of between 1.0-1.2% of GDP on infrastructure for 30 years from 2020. The fiscal remit has undergone many changes over the last 10 years and there is little confidence in the durability of the fiscal rules. We urge the government to stick to its commitment to investment, including infrastructure spending.
Briefing co-author Amit Kara concluded:
“The UK has suffered a persistent productivity gap against its major competitors and alongside that, housing affordability remains acute. These are other factors have focussed the minds of policy makers in recent years and concrete steps have been taken in response. The new National Infrastructure Commission (NIC) and the National Productivity Investment Fund (NPIF) are examples of policy action in the right direction, but more can be done. The NIC should be granted statutory powers. Also, the budget targets in the fiscal rule should focus on day-to-day spending instead of overall spending.”
Notes for editors:
The full briefing, “Infrastructure in the UK- Time to Rebuild?” is available on NIESR’s special General Election page. It was co-authored by Oriol Carreras and Amit Kara.
The briefing is part of a series made possible thanks to funding by the Nuffield Foundation to ensure public debate in the run-up to the General Election is informed by independent and rigorous evidence.
NIESR aims to promote, through quantitative and qualitative research, a deeper understanding of the interaction of economic and social forces that affect people's lives, and the ways in which policies can improve them.
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