Not all infrastructure is created equal

The real value of the projects we should be starting now will be measured over decades.

After three years of vigorous disagreement the political and economic commentariat seem to have found common ground. Infrastructure. Left and right now agree that it’s vital for the UK’s economic renewal, requires much greater infrastructure investment, and the Chancellor looks set to move it closer to the centre stage in the Budget.

Less has been said on what kind of infrastructure we need, and what its impact will be on the economy. The Treasury claim to like anything that is "shovel ready". This presents an image of kindly but determined, fluorescent jacketed men, forming a Roman column, as they wait for the signal to strike with their pick axes. In reality Whitehall struggles to find these projects because the most valuable infrastructure such as broadband upgrades or new energy schemes take years to prepare for investment,  don’t require direct taxpayer money, and are largely driven by the confidence of the  private sector.

The only infrastructure where government still has a direct lever to pull are those projects which receive direct taxpayer investment, such as road and rail schemes, which is why the Treasury is desperately nudging the transport department for schemes they can fund, even as the wallet is more firmly shut to other departments. Road proposals that the DfT have long since relegated to the recycling bin as bad investments have been fished out by Treasury ministers desperate to be seen to do something. According to some in DfT, these zombie roads could risk undermining the strategic role of the £37.5bn already announced to upgrade our rail network. We should remember that not all infrastructure compliments each other. Also, while road schemes are good at generating a short burst of employment as they are built, there is little longer last impact and they have a longer downside by making the economy more dependent on imported and volatile oil prices.

In contrast the majority of infrastructure projects set to be built without government money will increase the resilience of the UK economy to fuel price increases, and should increase the UK’s productivity. Work we have done at Green Alliance on the Treasury’s infrastructure pipeline shows that over two thirds of projects planned up to 2020 are low carbon, and 94 per cent of them require no direct government investment.  A "dash for gas" won’t be much help – it makes up 3 per cent of possible investment before the next election. Offshore wind makes up two thirds. This is the difference between good infrastructure that strengthens the UK economy, and bad which does not rebalance our economy and is too small to have a macro-economic impact.

The problem for all infrastructure advocates, amongst which I’m one, is that none of these major projects will have a significant impact by the time of the next election. Their real value must be measured over decades.

The best things to encourage in the short-term are measures that encourage individuals and businesses to invest and benefit in smaller chunks, like energy efficiency. The last government had some success in 2008 with its boiler scrappage scheme, which stimulated millions of pounds of home owner investment at very low public cost, but there are still several million more of the least efficient G rated boilers in UK homes, and a similar number without sufficient insulation. Measures to make better buildings and upgrade appliances may not fit the conventional description of infrastructure but they can have a much bigger economic benefit than pouring tarmac.

This is where Heseltine’s review had some interesting thoughts, at least on how infrastructure is decided. His focus on local powers and responsibilities seem likely to be agreed by the Chancellor. Granting currently quite weak Local Enterprise Partnerships the “authority or resource” they need could prove interesting for ensuring we deliver a more effective approach to deciding our infrastructure.

Agreeing to infrastructure investment is the beginning, not the end, of the discussion. Because not all infrastructure is created equal, you can expect the economic consensus about its value to end as soon as the picks hit the ground. But if we are serious about its role in economic renewal we should be having that debate now. And we should be choosing the low carbon energy and communications infrastructure that makes our economy ready for today’s challenges, not those of the last century.

A construction worker builds a high-speed rail bridge in Germany. Photograph: Getty Images

Alastair Harper is Head of Politics for Green Alliance UK

Getty
Show Hide image

Former Irish premier John Bruton on Brexit: "Britain should pay for our border checks"

The former Taoiseach says Brexit has been interpreted as "a profoundly unfriendly act"

At Kapıkule, on the Turkish border with Bulgaria, the queue of lorries awaiting clearance to enter European Union territory can extend as long as 17km. Despite Turkey’s customs union for goods with the bloc, hauliers can spend up to 30 hours clearing a series of demanding administrative hoops. This is the nightmare keeping former Irish premier John Bruton up at night. Only this time, it's the post-Brexit border between Northern Ireland and the Republic, and it's much, much worse.   

Bruton (pictured below), Taoiseach between 1994 and 1997, is an ardent pro-European and was historically so sympathetic to Britain that, while in office, he was pilloried as "John Unionist" by his rivals. But he believes, should she continue her push for a hard Brexit, that Theresa May's promise for a “seamless, frictionless border” is unattainable. 

"A good example of the sort of thing that might arise is what’s happening on the Turkish-Bulgarian border," the former leader of Ireland's centre-right Fine Gael party told me. “The situation would be more severe in Ireland, because the UK proposes to leave the customs union as well."

The outlook for Ireland looks grim – and a world away from the dynamism of the Celtic Tiger days Bruton’s coalition government helped usher in. “There will be all sorts of problems," he said. "Separate permits for truck drivers operating across two jurisdictions, people having to pay for the right to use foreign roads, and a whole range of other issues.” 

Last week, an anti-Brexit protest on the border in Killeen, County Louth, saw mock customs checks bring traffic to a near standstill. But, so far, the discussion around what the future looks like for the 260 border crossings has focused predominantly on its potential effects on Ulster’s fragile peace. Last week Bruton’s successor as Taoiseach, Bertie Ahern, warned “any sort of physical border” would be “bad for the peace process”. 

Bruton does not disagree, and is concerned by what the UK’s withdrawal from the European Convention on Human Rights might mean for the Good Friday Agreement. But he believes the preoccupation with the legacy of violence has distracted British policymakers from the potentially devastating economic impact of Brexit. “I don’t believe that any serious thought was given to the wider impact on the economy of the two islands as a whole," he said. 

The collapse in the pound has already hit Irish exporters, for whom British sales are worth £15bn. Businesses that work across the border could yet face the crippling expense of duplicating their operations after the UK leaves the customs union and single market. This, he says, will “radically disturb” Ireland’s agriculture and food-processing industries – 55 per cent of whose products are sold to the UK. A transitional deal will "anaesthetise" people to the real impact, he says, but when it comes, it will be a more seismic change than many in London are expecting. He even believes it would be “logical” for the UK to cover the Irish government’s costs as it builds new infrastructure and employs new customs officials to deal with the new reality.

Despite his past support for Britain, the government's push for a hard Brexit has clearly tested Bruton's patience. “We’re attempting to unravel more than 40 years of joint work, joint rule-making, to create the largest multinational market in the world," he said. It is not just Bruton who is frustrated. The British decision to "tear that up", he said, "is regarded, particularly by people in Ireland, as a profoundly unfriendly act towards neighbours".

Nor does he think Leave campaigners, among them the former Northern Ireland secretary Theresa Villiers, gave due attention to the issue during the campaign. “The assurances that were given were of the nature of: ‘Well, it’ll be alright on the night!’," he said. "As if the Brexit advocates were in a position to give any assurances on that point.” 

Indeed, some of the more blimpish elements of the British right believe Ireland, wedded to its low corporate tax rates and east-west trade, would sooner follow its neighbour out of the EU than endure the disruption. Recent polling shows they are likely mistaken: some 80 per cent of Irish voters say they would vote to remain in an EU referendum.

Irexit remains a fringe cause and Bruton believes, post-Brexit, Dublin will have no choice but to align itself more closely with the EU27. “The UK is walking away,” he said. “This shift has been imposed upon us by our neighbour. Ireland will have to do the best it can: any EU without Britain is a more difficult EU for Ireland.” 

May, he says, has exacerbated those difficulties. Her appointment of her ally James Brokenshire as secretary of state for Northern Ireland was interpreted as a sign she understood the role’s strategic importance. But Bruton doubts Ireland has figured much in her biggest decisions on Brexit: “I don’t think serious thought was given to this before her conference speech, which insisted on immigration controls and on no jurisdiction for the European Court of Justice. Those two decisions essentially removed the possibility for Ireland and Britain to work together as part of the EEA or customs union – and were not even necessitated by the referendum decision.”

There are several avenues for Britain if it wants to avert the “voluntary injury” it looks set to inflict to Ireland’s economy and its own. One, which Bruton concedes is unlikely, is staying in the single market. He dismisses as “fanciful” the suggestions that Northern Ireland alone could negotiate European Economic Area membership, while a poll on Irish reunification is "only marginally" more likely. 

The other is a variation on the Remoaners’ favourite - a second referendum should Britain look set to crash out on World Trade Organisation terms without a satisfactory deal. “I don’t think a second referendum is going to be accepted by anybody at this stage. It is going to take a number of years,” he said. “I would like to see the negotiation proceed and for the European Union to keep the option of UK membership on 2015 terms on the table. It would be the best available alternative to an agreed outcome.” 

As things stand, however, Bruton is unambiguous. Brexit means the Northern Irish border will change for the worse. “That’s just inherent in the decision the UK electorate was invited to take, and took – or rather, the UK government took in interpreting the referendum.”