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

    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

    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

    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

    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

    Comment number 137.

    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..... 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.

  • rate this

    Comment number 136.

    Education, Clean energy & Local food production !

  • rate this

    Comment number 135.

    All meant to inflate the prices of the land holdings the banks cling to.

    For good reason too. For them that is.

    If these asset prices are shown to be not worth their previously declared values then the banks will be further in default than they admit to.

    Even bust banks continue to hold out their begging bowls.
    If we don't allow them to rip us off they will simply ask for another bailout.

  • rate this

    Comment number 134.

    Affordable houses for first time buyers.

  • rate this

    Comment number 133.

    29th September 2012 - 3:54

    China and othrs complte the same projects in 2 or 3 years.

    Chinese govt use bulldozers first & may be discuss compensation later (if any occupants still alive)

  • rate this

    Comment number 132.

    May I have an 8m extension at the back of my house? Please?

    Of course I'll need some of the neighbours' gardens as well, but they won't mind if it helps the economy, I am sure.

  • rate this

    Comment number 131.

    Seems we are seriously short of flood prevention infrastructure. It cannot be right that so many peoples' homes are at risk on such a regular basis.
    As the flooding has been widespread across most regions, investing in flood prevention would give broad stimulus across the country.

  • rate this

    Comment number 130.

    Dear Ms Flanders,

    Yes, I have one. In fact, it is not my mine it is Boris'.

    Build a new airport in the Thames estuary with five runways with HS2 rail link to link with Eurostar, Manchester, Birmingham and Leeds. Use a tender process and the winner gets Heathrow to be developed into low cost housing.

  • rate this

    Comment number 129.

    Workman to banker: I need to charge you a bit more for this

    Banker: Oh no, if you want money, you should get into finance and make loads of it like me. Be wealthy

    Workman: But what use is all your money?

    Banker: For buying stuff. I buy loads of stuff. That makes me wealthy

    Workman: So stuff is wealth

    Banker: Er, yes

    Workman: Then, creating wealth is actually a matter of maufacturing stuff.

  • rate this

    Comment number 128.

    #124, when all is gone speculated away,then we enslave our workers and make them do all the bidding of the elite,stark choice that is what we are heading for,days of drudgery in this green and pleasant land.digging for britain and all that,i owe my soul to the company store,maybe that was yesterday what about tommorow.hurry on sundown see what tomorrow brings, warmth,light wate,roofs over our head

  • rate this

    Comment number 127.

    tomorrow,enrole in pensions for all woorkers,real money to be saved and invested,maybe we should direct that cash from the tripatete of employee,employer and goverment into a infrastucture fund,severn barrage,thorium nuclear reactors all kinds of green iniatives to help is future

  • rate this

    Comment number 126.

    Investing in infrastructure is only worthwhile if the return from that investment covers the initial outlay to build the infrastructure and the (not insignificant) cost of the maintenance of that infrastructure. Investing in education is a one off investment that gives a good 40 year return and has no maintenance costs. Free world class education would give a much better return than trams or roads

  • rate this

    Comment number 125.

    To invest £5B in Britain's infrastructure sensibly & reasonably quickly? Here is my postcard. Pls forward to Her Majesty's Treasury.
    1. When something the size of a truck falls through a hole in road, fill the hole.
    2. When interest is lost in one computer app, generate new one - advertise.
    3. Take all those Olympic milieus & convert to something useful, then maintain them.

  • rate this

    Comment number 124.

    The Uk is only in a better position than Spain and Greece because it has Already sold off most of our the national assets to foreign companies, I.e. water, electricity, communications, British Manufacturing and mining, our gold etc. Now the best housing is being sold off and Tories want to privatise the roads. That is great short termism except what do you do when there is nothing left to sell?

  • rate this

    Comment number 123.

    Post 3, very good point. I bet no one in government thought about how we are going to pay to maintain the olympic park etc, one of the reasons Greece and Spain are in such a mess and we will be joining them soon. At least when people in the UK cannot afford basic medicines and food that will naturally start the process of reverse migration.

  • rate this

    Comment number 122.

    SF, UKs current economic problems, creaking infrastructure, are partly due to sucking in too many migrants. We need to leave the EU now before full accession of the Balkan states, bulgaria and Romania. I say that as a Pro European. THere is not much time left.


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