The £5bn UK infrastructure challenge

 
Work on the Crossrail project in central London Infrastructure investment would boost employment

Invest more in infrastructure. Talk to many economists about Britain's current economic problems and that is very likely to be part of their answer.

On Radio 4's Today programme we are debating whether that's right - or practically feasible.

Investing in infrastructure might be a good way to get more young people into work, some will tell you. It might also give welcome relief to the construction industry, where output has fallen by more than 10% in the past year, one of the big factors tipping Britain back into recession.

Others will tell you that investment in infrastructure would let the government borrow more.

The financial markets might not want to see George Osborne tear up his borrowing forecasts. But even some quite sober city economists will tell you that in the current climate, borrowing for new investment would be a lot less troubling than most.

That's because building a road - or a railway - is a one time job. it doesn't carry on forever - unlike new spending on the NHS. And the extra investment ought to boost the economy long term, not just right now.

If the chancellor stood up to say he was borrowing more to invest in roads - or airports - it's even possible, the supporters say, that the markets would cheer.

But, most in the City would probably prefer him to find some long-term benefit cuts at the same time. After all, public investment spending has fallen by nearly £20bn in the past two years. The rest of the budget has risen, by more than £40bn.

Finally, these fans of public infrastructure will tell you, there's the price. Right now, the chancellor could borrow £5bn, for 50 years, at a real interest rate, after inflation, of less than one tenth of 1% (around 0.04%, in fact).

Past chancellors would consider that a bargain at ten times the price.

There's just one problem: what, exactly should the chancellor invest In?

Coming up with a wish list is not so hard. Every minister or think tank has their own pet project.

But coming up with a list that every interested party can sign up to - a road that everyone wants, say, or, a piece of technology that isn't going to be old hat by the time it's finished? Well, that is much more difficult.

It might be a miracle solution to you, but for the chancellor it might just be a massive can of worms. Just look, he will say, at the trouble he's had building 140 miles of high speed track.

If you also want it to be under way within a year, Treasury officials will tell you the list of potential investments gets very small indeed.

Do you think there's a way to invest £5bn in Britain's infrastructure sensibly - and reasonably quickly? Answers, please on a postcard. But for goodness sake don't send it to me. Send them to Her Majesty's Treasury.

 
Stephanie Flanders Article written by Stephanie Flanders Stephanie Flanders Former economics editor

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  • rate this
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    Comment number 141.

    Of course we don't have to build seven new cities the size of Birmingham by 2027 to house 70 million population as swollen by mass immigration - UK economy will collapse with or without the new cities after food, fuel and housing shortage & property & rental price inflation again in 10 -15 years time. Best not to build any new houisng & so that immigrants go home as taxpayer can't afford this.

  • rate this
    +1

    Comment number 140.

    #138. You say it's not hard if you have some imagination. Steph wrote that any infrastructure projects would need to avoid local objections and not be old hat almost as soon as they finished. Optical fibre might be sound ,but the rest will be obsolete within a decade and the Severn Barrier would make the protests about HS2 and Heathrow runways seem like a local dispute about a leylandii hedge.

  • rate this
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    Comment number 139.

    well its good if you know a good projetc t spend such money. Lets ensure we have a suitable evaluation of all proposals. Thats where it will end up 5b wasted along with so much other funds for what ever reason. Lets evaluate the advantages along with how many UK jobs it will create & consider the areas needed that will get boosted by employment as a priority

  • rate this
    -1

    Comment number 138.

    £5bn Things that are fast and easy and a damn site more useful than high speed rail? Charging points for electric cars in every major city. Solar panels on every suitable roof in the country. Optical fIbre to every street cabinet. No planning permission required. If you want to make a serious dent in our energy dependence then a barrier on the Severn. It's not hard if you have any imagination!

  • rate this
    +2

    Comment number 137.

    Little_Old_Me
    29th September 2012 - 7:27
    Infrastructure investment is a prime example of the "free market" is not the be all & end all of a sustainable economy.....

    ....how often do ever hear of companies building their own roads/railways/ports etc?
    ==
    Actually, Government never initially built any of the above, nor canals,nor air/shipping lines - they just nationalised them.

 

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