Based on current plans, infrastructure spending is set to ramp up significantly after the next general election. But current plans keep changing and as we approach the election, just as with last time around, political parties will start to talk about big infrastructure projects (cuddly toy!) they want to promote over and above what has been announced.
Infrastructure for infrastructure's sake?
EEF has long argued that public spending on infrastructure needs to have a rationale. Our previous comments on publications such as the National Infrastructure Plan were that a clear answer to 'why?' needs to be set out for each project to ensure that we are clear about trade-offs.
Our worry is the answer is increasingly becoming – ‘why not?' With more and more infrastructure 'prizes' put on the conveyor belt, rolling by and disappearing out of sight. This lack of objectivity needs to be challenged for a number of reasons which we set out below.
Public understanding and acceptance
When faced with a new infrastructure project, the question the public will ask is – ‘what is the problem this project is seeking to solve and is this the best way to solve it?'
Naturally, new projects are presented alongside the analysis used to support them as governments don't want to highlight that they know a problem exists without having a solution to address it. However this creates a problem, the public often view the analysis presented as being politically motivated to get the 'right' answer [i.e. the proposed project] in the first place.
Without a clear explanation of the problem upfront, projects are more likely to come up against strong opposition. This strong opposition creates delay and if the problem was one that needed to be urgently addressed the wider economy suffers.
Resourcing capital - the scores on the doors
While public funding for infrastructure projects comes in the form of capital spending, public funding for maintaining these assets comes in the form of resource spending, competing against other demands such as education and social care costs.
Often these long term infrastructure costs are downplayed when projects are being talked about but as many Spanish cities are now learning these long term costs can literally bankrupt you. These costs, if excluded from the debate until after the project is completed, help to undermine the case for future, potentially more crucial, projects.
While infrastructure projects are often announced along with an estimate of how many jobs may be created, having several large infrastructure projects all running in parallel (particularly without a significant lead in time) runs the risk of capacity constraints.
Infrastructure projects rely not just on people to put 'shovels in the ground' but a significant number of professional services that do a large volume of work before shovels are even ready to hit the ground.
Such specialist skills can't simply be conjured up overnight and companies won't keep such skills on standby, particularly not in an environment where announced infrastructure projects can get cancelled within a short period of time.
Such skills constraints, along with resource constraints could end up leading to cost increases on projects. This supply side inflation is something we've written about before within the context of infrastructure.
How can this be overcome?
A fundamental change in how we identify projects is needed; as we argued in our letter to the press alongside a number of organisations.
Future infrastructure requirements need to be set out by a neutral body, the basis for prioritising these must be debated openly in consultation with the public, businesses and other stakeholders to help achieve an accepted sense of importance beneath the political debate. We plan to outline what such a body should look like and do within the next week.