Bri­tain, we need to get build­ing

The Jewish Chronicle - - Business -

YOU DON’T need to be an econ­o­mist to un­der­stand that in­vest­ment in the na­tion’s in­fra­struc­ture is grossly in­ad­e­quate. Wil­lie Walsh, chief ex­ec­u­tive of IAG, the hold­ing com­pany for Bri­tish Air­ways, fre­quently takes to the me­dia to ex­press his con­cerns about the lack of run­way ca­pac­ity in the south-east of Bri­tain.

Drought or­ders across great swathes of the coun­try pro­vide a sharp re­main­der of how lit­tle has been done by the pri­va­tised water util­i­ties to cre­ate some kind of grid which al­lows water to be moved from high rain­fall ar­eas to harder pressed parts of the coun­try.

Trunk roads are over­crowded, neigh­bour­hood roads dan­ger­ously pot­holed and the need to im­prove ca­pac­ity on the rail sys­tem is des­per­ate. And a lack of in­vest­ment in new power sys­tems means there is a se­ri­ous risk of power short­ages later this decade while we await the ar­rival of new nu­clear fa­cil­i­ties.

In his Bud­get the Chan­cel­lor Ge­orge Os­borne made great play of the gov­ern­ment’s 2011 Na­tional In­fra­struc­ture Plan as part of the Coali­tion’s in­tended projects, in­clud­ing a na­tional roads strat­egy, plans for ul­trafast high-speed broad­band, a cen­tre for aero­dy­nam­ics and an up­grade of Net­work Rail’s North­ern Hub. He also out­lined ef­forts to har­ness pen­sion fund cash and sov­er­eign wealth funds for in­vest­ment in the UK in­fra­struc­ture. The re­al­ity how­ever, is that the value to the econ­omy of all of these mea­sures added to­gether amounts to just 0.003 per cent of na­tional out­put.

Yet there is am­ple ev­i­dence from work done by the OECD, World Bank and oth­ers, that show the pay­back from im­proved in­fra­struc­ture can be huge if the money can be har­nessed.

Cer­tainly, there are big UK projects in the pipe­line, in­clud­ing Cross­rail and the plans for a £32 bil­lion in­vest­ment in HS2, pro­vid­ing a high-speed rail con­nec­tion from London to Birm­ing­ham and even­tu­ally to Manch­ester. But it is scarcely off the ground. Crit­ics note that while it passes within 12 kilo­me­tres of Heathrow, it will not di­rectly con­nect the air­port to Birm­ing­ham as orig­i­nally en­vis­aged.

Sim­i­larly, the gov­ern­ment is start­ing to recog­nise the fool­ish­ness of its decision to rule out a third run­way at Heathrow. But only now is it start­ing to recog­nise the harm that the halt on air­port ex­pan­sion is do­ing to Bri­tain’s econ­omy. And the UK seems to lack the will, for in­stance, to pur­sue London Mayor Boris John­son’s vi­sion of a new London air­port in the Thames es­tu­ary con­nected to the cen­tre of the City by high-speed rail.

Fund­ing in­fra­struc­ture de­vel­op­ment, at a time of na­tional aus­ter­ity, might seem an im­pos­si­bil­ity how­ever Os­borne, dur­ing his visit to Washington with David Cameron and sub­se­quently in his Bud­get speech, looked to be grop­ing to­wards a po­ten­tial so­lu­tion.

The Chan­cel­lor hinted that Bri­tain should take ad­van­tage of its “AAA” credit rat­ing and low bor­row­ing costs on in­ter­na­tional mar­kets by is­su­ing 100-year or per­pet­ual bonds, sim­i­lar to the War Loans used to fi­nance the First World War.

There is noth­ing how­ever, to stop the gov­ern­ment from is­su­ing in­fra­struc­ture bonds di­rectly tied into projects. There could be HS2 bonds for the rail­way sys­tem and so on.

Such bond fi­nance, build­ing on a strong credit rat­ing, is widely used in in­ter­na­tional fi­nance. It is the main source of fund­ing for the World Bank, which funds big projects in emerg­ing mar­kets, and the Euro­pean In­vest­ment Bank that has largely been re­spon­si­ble for build­ing road net­works across the EU.

Ma­tu­ri­ties on the bonds could be matched to the needs of pen­sion and sov­er­eign wealth funds look­ing for sound long-term in­vest­ment. What is fairly clear is that there are few in­cen­tives for such funds to take the risk of in­vest­ing di­rectly in road projects which may, or may not, even­tu­ally be al­lowed to charge users.

The small sums which the gov­ern­ment is will­ing to put into R&D are pitiful when one con­sid­ers the scale of the po­ten­tial mar­ket. The econ­omy faces a short­age of de­mand — that is hold­ing up re­cov­ery — and up-to-date and mod­ernised in­fra­struc­ture if it is to be com­pet­i­tive in the glob­alised world. Os­borne and the gov­ern­ment need to get on with the job. Alex Brum­mer is City Ed­i­tor of the Daily Mail. His new book, Bri­tain for Sale, is pub­lished by Ran­dom House to­day

FREEPHONE CALLS are meant to be, er, free — not that you would know that if you di­alled from a mo­bile where it can cost up to 33p/minute. And while the reg­u­la­tor Of­com has pub­lished plans to change this from 2014, there are ways to al­ready call 0800s for free from your de­vice.

The easy way is via It will give you a nor­mal lo­cal phone num­ber to call. Then, any­time you need to call an 0800 num­ber, just dial that num­ber first to ac­cess its sys­tem, then the freephone num­ber and then press # to start the call. Those with smart­phones can down­load apps which do much the same thing, such as the 0800 Wizard.

If you don’t have in­clu­sive min­utes you will be charged stan­dard lo­cal rates for these calls – though in some cases it is cheaper than the cost of call­ing 0800 num­bers from mo­biles any­way. See www.moneysaving­ex­pert. com/0800buster.

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