Business

The £5bn UK infrastructure challenge

  • 29 September 2012
  • From the section Business
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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.