Policy Exchange, one of the leading UK think-tank organisations, has published a proposals that argue the Government should spend more on capital investment and that now is the time to push ahead with key aspects of the Nation’s infrastructure including transport and broadband. The case was already strong before the Covid-19 crisis and has been strengthened since, as its financing has become more affordable.
The paper ‘Why the Government should spend more on capital’highlights the importance of taking advantage of the present macro-economic environment afforded by low borrowing costs to provide stable – and sizeable – funding for new infrastructure through an increase in capital spending by the public sector. Additional capital spending, in excess of the fiscal rules, would be sustainable and affordable.
Policy Exchange proposes that central Government should not control any project costing under £500 million and that the Government should prioritise shovel-ready, and usually smaller, projects. Grand designs often takes year to get planning approval and legal sign-off today. Even medium-sized projects have a habit of getting delayed.
In the foreword Lord Darling, the former chancellor said: “Wherever possible, central government should hand funds and control to regional and local powers. For the largest projects, there is of course a role for central Government in keeping costs down, project managing and delivering on time.”
The Covid-19 crisis will affect the levelling up agenda and the type of infrastructure spending, as people may change how they work, live and travel.
Even when borrowing costs are low, productivity improvements arising from infrastructure still depend upon what gets built effectively. The evidence that improving infrastructure alone leads to higher national productivity is mixed.