Remember: the first Industrial Revolution was driven by regional capitalby Stephen Hammond / March 22, 2018 / Leave a comment
It is a tenet of this government’s economic policy that regional imbalances must be addressed to boost productivity. The news that productivity has seen an uptick in the last two quarters is welcome. However, the need for investment remains. Few would disagree with the proposition that infrastructure is a key driver of economic growth and productivity. To many, infrastructure just means transport—it must also mean housing, access to broadband, utilities and energy.
Infrastructure creates jobs, raises incomes and regional growth. So when people ask whether HS2 is worth it and whether it will help people outside London, the answer to both is unequivocally yes. The increased capacity and connectivity will make regions more accessible, will bring investment and jobs.
Evidence suggests that HS2 will be even more effective if it links into fast transport systems in other major conurbations in the North. More jobs will be created if industrial and housing developments occur alongside new transport and utility projects. This highlights the principle that, though there must be a UK-wide strategy for infrastructure, national schemes must be integrated into local projects.
Why isn’t there a Minister of Infrastructure based in the Treasury?
The National Infrastructure Commission is a key part of being able to deliver a national strategy. But if we accept that infrastructure will drive growth and productivity, why isn’t there a Minister of Infrastructure based in the Treasury? The next reshuffle should see this rectified.
An process of power transfer and accountability is needed. Locating power closer to those it affects can make investment more precisely focused and the authorities more accountable. The experience of London and Manchester suggests there is much to be gained by replicating their successes elsewhere in the country.
Decision-making power is only effective when accompanied by the means to act. Any initial analysis of regional transport spending shows that London and the southeast gets greater funding than other regions. The only caveat is that many projects can be based in these two regions and drive regional as well as national growth. However, lower regional spending undoubtedly leads to regional disparity. The evidence is that, if there were a northern, east-west transport corridor it could unlock anything up to £100bn of growth.
I was pleased to see the Chancellor reaffirm his commitment to a £840m fund for city transport priorities in the Spring Statement. It was also good to see a commitment to working with elected Mayors, and city deals with Stirling and Clackmannanshire, Tay Cities, Borderlands, North Wales, Mid Wales, and Belfast.
The answer is to make the greatest possible use of private investment. The first Industrial Revolution was driven by regional capital. The government should allow the creation of Infrastructure Bonds and allow the greater involvement of pension funds, as in other countries. The reluctance of the Treasury to push these possible means of financing has almost certainly frustrated the ability to deliver much-needed schemes.
The often-cited rationale for this reluctance is that any project adds to national borrowing. The two responses are that if we had a National Balance Sheet we would have an asset calculation to set against the borrowing. Secondly if we were to recognise the longevity and the economic potential of projects then there could be a longer timescale for funding and payback.
Though Brexit seems to be absorbing all government energy, giving decision making and financial powers to regions, cities and conurbations to take control over infrastructure will be the key to creating a country that works for everyone.