Lauren Thorpe is Research and Corporate Partnership Director at the think-tank Reform.
Danny Alexander said earlier this week that government backing for £40 billion of infrastructure investments would “provide lasting benefits for thousands of people and a significant boost to the economy”. But the Chief Secretary to the Treasury ought to be honest. By all means build new infrastructure to upgrade the UKs ageing national grid and water network, improve the roads and rail infrastructure, and ensure that the country can deliver sustainable energy into the future. But don’t pretend this will do much for growth in the short term or mean that tough decisions can be put off.
We know that infrastructure is important, but it will probably do little for short-term growth. These are big projects with long lead times, and will have almost no impact on areas of real concern, like unemployment. The vast majority of the unemployed are not up to building new infrastructure. Only 20 per cent of the currently unemployed have backgrounds in technical or skilled trades, and even those with skills may not have them in the right areas. Building a new power station is not the same as fitting a kitchen.
Shifting forward projects is also rife with risk. Just look at the Spanish airports without planes or passengers, and Japanese bridges to nowhere. These projects have not delivered the growth that was anticipated. Let’s take Spain. In the past twenty years it has constructed the largest high-speed rail network in Europe, added over 5,000 kilometres of new roads, and built 48 new airports. Yet only 11 of the 48 airports built in Spain in the last 20 years make a profit. Rather than improved growth and economic prosperity, the legacy of this spending is white elephants and credit that is not so cheap.