Today’s announcements about infrastructure spending are yet another U-turn for a coalition government which cut capital spending far too deeply at the last spending round.

By Ed Cox, director of IPPR North

Today’s announcements about infrastructure spending are yet another U-turn for a coalition government which cut capital spending far too deeply at the last spending round.

The figure of a pipeline of £100bn over the course of the next parliament – of which £70bn will go into transport, £20bn to schools, and over £10 billion to science, housing and flood defences – all make compelling headlines but rest upon some significant assumptions about private investment.

They also obscure the fact that the £50bn to be spent in 2014-15 is still £10bn less than was planned under the previous Labour administration.

In his statement to Parliament, Danny Alexander made much of name-checking many of the schemes contained within the new plan, much to the approval of different corners of the house.

However with the detailed pipeline data only available ‘later this year’, it’s impossible to tell whether the new announcements add up to a significant rebalancing of infrastructure investment to those parts of the country so vitally in need of infrastructure improvement.

According to IPPR North analysis, under current plans we are spending more than 500 times as much per person on transport infrastructure in the capital compared to the North East; 25 times more than in the North West and 15 times more than in Yorkshire & Humber.

And despite a slew of new road schemes outside London, the £9bn commitment to Crossrail 2 is likely to mean that as much as 90 per cent of all regional transport funding will be spent in London and the South East.

HS2 has been once again cited as being redress for this massive imbalance – and with a new price-tag of £42.6bn certainly promises a huge amount. But without the investment in the local infrastructure which connects into the main HS2 stations there is a danger there will be too much one-way traffic towards the capital and the regional benefits will not be realised.

At just £2bn the much vaunted Single Local Growth Fund is considerably less than the HS2 contingency fund itself and being made up of just three previously devolved transport funds, FE capital funds, ESF skills match funding and New Homes Bonus funds it is arguable that this is anything other than non-ringfencing old money.

On housing, Danny Alexander hailed the biggest public housing programme for 20 years. This claim is quite hard to square with the announcement for £3.3 billion for new affordable house building over three years, which is actually less per year than the current four year programme (due to end in 2015).

Many observers had expected such a cut in capital subsidies to be off-set by allowing housing associations to charge higher rents. However, the chancellor yesterday set out a long term social rent policy which is lower than the current one (and is therefore set to save the Treasury more than half a billion a year in lower Housing Benefit).

With no move to allow local councils to borrow more to finance new house building, a further cut in the capital grant and downward pressure on social rents and Housing Benefit, it is difficult to see where the growth in affordable house building is going to come from.

What is difficult to see from this scattergun approach to investment is any sense of strategy.

Theme by theme, project by project there was no sense of the whole adding up to more than the sum of its parts.

How does shale fit with wider plans for energy security and environmental sustainability? Why the focus on roads when most other developed countries are preoccupied with modal shift? How will infrastructure investments contribute to regional rebalancing? And how do we switch housing investment from benefits to bricks and mortar?

A pipeline is essential but it needs direction and strategy, not least beyond the M25.

Comments are closed.