A regional view gives the big infrastructure picture
Professors Brian Morgan and Gerry Holtham and Dr Selyf Morgan of Cardiff Metropolitan University explain why Wales needs regional development corporations
INVESTMENT in infrastructure pays off relatively quickly, builds long-term capacity and employs resources, so raising the short-term growth rate.
But how do we decide on the importance of infrastructure in comparison with other government capital spending?
And then how do you prioritise expenditure, whether in areas such as rail electrification, road infrastructure, high speed broadband or green energy?
These are some of the questions that await the Welsh Government’s proposed National Infrastructure Commission for Wales (NIFCW).
But the context for the NIFCW is not promising.
The major components of the NIFCW’s work, such as a national transport plan, have weak strategic underpinning. Policy is in danger of being reactive, and of simply addressing current bottlenecks. Is a commission the only way? The Government needs a stronger means of setting priorities, but an infrastructure commission isn’t strictly speaking necessary.
The role of Welsh Cabinet Government could be strengthened so it can better decide on priorities. A cross-departmental unit could be set up with the necessary resources to establish the balance of project costs and benefits to facilitate Cabinet priority-setting.
Harder to tackle is the problem of the political cycle, that is, the temptation to back short-term solutions, which is a key argument in support of an infrastructure commission.
Another advantage of a commission is that its findings would be published and have more prestige than the work of an internal unit; it would promote informed public debate and so exert a greater influence on decision-making.
An executive agency not another advisory body?
However, an advisory NIFCW as proposed is not the best option. There are already too many advisory bodies in Wales, and there is a need for greater focus on delivery. Such focus requires some form of executive agency, with the resources to identify options and ensure implementation of projects once agreed by the Welsh Government.
However, a single agency may be too unwieldy to work effectively, particularly across the range of infrastructure areas in Wales. Rather, executive agencies (regional development corporations) could be introduced at the level of each city region and a national body (the NIFCW) could be tasked with developing and co-ordinating a nationally based plan, in tandem with these city regions.
The NIFCW should have a highpowered research capability; technical and economic expertise to assess infrastructure projects; and be the repository of skills that would help deliver projects, while its reports would be published.
Consultation would be undertaken with other agencies, local government and business on a “wish list” of projects.
Once projects are ranked, signed off by the Welsh Government’s cabinet, they then proceed to implementation, overseen by one of the regional infrastructure agencies.
Where’s the money coming from for infrastructure investment?
The capital budget could be expanded by prudent borrowing. With an annual Welsh Government budget of about £15bn, some 1% devoted to debt service provides £150m.
At current borrowing rates for public and private capital, this could support debt of at least £2.5bn, and the government could lever in other funds to exceed that total.
And a good time to invest in infrastructure is when interest rates are low, like now.
Such a scenario would require that financial planning has to accompany physical planning, meaning tighter Welsh Treasury control of the Welsh capital budget.
The regional infrastructure bodies would require co-ordination, where failure would be high-profile. However, without such an approach we risk another decade of meandering policy on infrastructure to the detriment of economic development.