It is quite remarkable how Britain has seemingly become dysfunctional about these challenges. You would think for a nation that struggles to show any sustainable significant real GDP growth, and with identifiable weak public and private sector investment along with poor productivity growth, there would be intense focus on sorting them out. But apparently not.
When I became Commercial Secretary to the Treasury in May 2015, my job notionally included the brief of infrastructure projects. As a newbie around Whitehall, I wasn’t quite sure as to what real input I was expected to give on these projects, especially the big ones, like — at the time — Heathrow, Hinkley and HS2. I couldn’t really understand the framework for any of them, and how they all fitted together.
After more reflection, I suggested to senior Treasury officials a sky-gazing 2050 document on what the country ideally required across all its investment needs, and asked why they couldn’t lead such work. While there were some polite nods to my nerve, most officials probably thought I would be regarded as a bit of fruitcake.
Coincidentally, not so long after, the Chancellor’s new economic advisor had a similar thought, which led to the decision to set up an independent Infrastructure Commission to analyse the country’s needs and assess various project proposals. The commission was given some statutory powers but, eight years later, it doesn’t carry the weight it should, not least because it is restricted from some of the sectors it could cover, for example housing.
On the specifics of the three big Hs, reading my briefing, none struck me as especially compelling, although it seemed obvious that not to proceed with them would carry a huge cost to the country’s credibility and to all those in the infrastructure provision business.
As a result, I also made a suggestion relating to both HS2 and Heathrow (versus Gatwick) after discovering that there was a plan for an HS2 station at Birmingham Airport. My idea was that turning Birmingham into a major international airport would be more preferable than Gatwick, and if it were directly linked into the spirit of the Northern Powerhouse, the Midlands Engine and rebalancing, probably better than Heathrow. The answer I got was these things are looked at separately.
Which takes me to Hammersmith Bridge, which has now been closed for the best part of three years and could take another seven years to repair if and when the £150 million or so required is found. Fulham and Hammersmith council technically “own” the responsibility for bridge repair, and TfL either will not or cannot give them the money.
It is such a ridiculously narrow framework. Anyone coming from the South West of the country who has to go through London knows that this closure is a nightmare issue for all the other congested access routes, and this could be solved for just £150 million. The bridge closure is a huge cost to daily efficiency and productivity.
To solve this madness, the Government needs to get away from investment spending decisions being constrained by some short-term, arbitrary fiscal constraint (imposed by itself) and allow for growth-improving, productivity-boosting and long-term-debt-reducing investment projects.
The independent OBR has a framework for doing this in its annual long-term fiscal sustainability report. Simply adding a tool for infrastructure projects under consideration from a truly empowered Infrastructure Commission, would allow a financially credible way of raising our investment spending without causing markets to panic, and help our crazy country start functioning better.
Jim O’Neill is Chair of the Northern Powerhouse Partnership, Chair of Northern Gritstone, Senior Advisor to Chatham House, and ex Commercial Secretary to the Treasury