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30/09/2019

Buildings towards 21st century infrastructure

Consturction of infrastructure / iStock-519524474

Is a 21st century Department for Economic Affairs the answer to the UK's infrastructure challenges and a solution to regional economic disparities? Andrew Silverman thinks it is

Whether Britain leaves the EU, with or without a deal on 31st October, the need to improve our infrastructure will remain as a key issue for the government of the day. What is clear from the views of industry groups is that the nation’s transport, energy and building infrastructure needs to be refreshed; with public expenditure allotted to ensure that we are fit for the future and an attractive venue for overseas investment.

Setting the debate in the current context, the Royal Town Planning Institute, in its Smarter Approach to Infrastructure Planning study, has called for the government to “to devolve powers and funding for infrastructure and recommended that local authorities establish dedicated teams focused solely on infrastructure coordination”; meanwhile the chancellor, Sajid Javid, has announced £3.6 billion of funding for the government’s New Towns Fund, as part of its one year spending round announcement.

There is, however, a broader question for government and this is whether overseas investors will continue to regard the UK as a safe haven for their funds – as recently evidenced by Alain Carrier, European senior MD of the £329bn Canada Pension Plan Investment Board (CPP),  who had said that he was “very cautious” about investing in the UK. If other major investors begin to take an equally dim view of the UK’s prospects, then this could have significant ramifications for major infrastructure projects across the country, a factor already emphasised by the government’s decision to review HS2 and failure to back a third runway at Heathrow Airport. 

The London Mayor Sadiq Khan backs a policy agenda based around greater localism to help boost the UK’s pool of investment. He accords with a report commissioned by the GLA on London's Local Industrial Strategy stating that “… it is vital that the whole of the UK grows together. That’s why the powers and resources of local governments across the country should be increased so that they can make the right spending decisions to boost their region’s growth". 

"In my view there is a strong argument for central government, in the aftermath of Brexit, to take a different approach to our infrastructure needs"

I would, however, gauge that the potential for institutional fiscal change will be limited by the effects of Brexit and the limited focus of a one-year spending settlement, conducted without the scrutiny of the Office for Budget Responsibility. 

In my view there is a strong argument for central government, in the aftermath of Brexit, to take a different approach to our infrastructure needs. This would involve a return to the principles of indicative planning, as first trialled by the mid-60s Wilson Government through its creation of a Department of Economic Affairs. In practice this would take the form of a national economic planning programme where targets are set for the growth of national output over a five-year period, with indicative estimates of what specific industries and sectors of the economy can achieve, through fiscal and investment policies.

A 21st century Department for Economic Affairs could take the lead on indicative planning for infrastructure growth, taking direct responsibility for the planning and financing of key projects from the Treasury and subsidiary departments from across Whitehall. 

Its indicative planning process could be drawn from a long-overdue national infrastructure review, with decisions taken on the priority projects over a five-year period and beyond. This would deliver the joined up thinking that would be required to deliver economic advancement for the English regions and devolved nations alike, while adding certainty and confidence for overseas investors who might otherwise avoid the UK market. 

Given the current hiatus in infrastructure investment a new Department for Economic Affairs could provide the both the mechanism and funding to deliver the infrastructure that the nation needs.

Andrew Silverman is a Business Director at Cascade Communications. He is former 10 Downing Street and Cabinet Office Civil Servant.

Image | iStock

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