Budget ‘Infrastructure revolution’ must be accompanied by ‘delivery revolution’ to avoid wasting £10 billion

The forthcoming Budget ‘infrastructure revolution’ must be accompanied by better planning, evaluation, and execution of projects, if the government is going to avoid losing £10bn of the £100bn it plans to invest in ‘levelling up’ the country, according to a new report published today (Wednesday) by the Resolution Foundation.

The report – Euston, we have a problem – says that the government’s plan to increase investment spending by up to £100 billion over the next five years is welcome given that the UK is a low public investor by both historic and global standards. Having tailed off markedly in the 80s and 90s, public sector net investment is, at 2 per cent of GDP, still around 0.7 percentage points below the UK’s post-war average, and around half a percentage point below the current OECD average.

The report says that as the UK increases its public investment spending up to 3 per cent of GDP, it should go far beyond the focus on large transport projects between regions and look to:

  • close significant regional disparities in infrastructure provision, reducing the 36 per cent gap between public investment per head of £1,200 in London and the South East compared an average of £885 in other regions;
  • address the legacy of underinvestment in health kit within hospitals (where the UK ranks among the lowest in the advanced world for access to diagnostic equipment) and social housing (given higher housing costs facing lower income UK households); and,
  • respond to the challenges of tomorrow by meeting the government’s share of the estimated 1-2 per cent of GDP cost of reaching net zero carbon emissions by 2050.

The report says that as well as ramping up investment spending, the Chancellor should also announce plans to ramp up focus on the delivery of these projects. This should help to address some of the UK’s longstanding investment problems, including high volatility in spending (the second highest in the G7), a lack of transparency over the selection of projects, and the fact that barely a third of projects are run outside of central government (compared to the majority of projects across other advanced economies).

The report estimates that the UK loses 10 per cent of the potential value of its investment relative to the most efficient advanced economies. Reducing this gap is important if the UK is to avoid wasting up to £10 billion on poorly chosen, designed, or executed infrastructure projects over the next five years, says the Foundation.

To close this investment efficiency gap, Euston, we have a problem sets out a 10-point plan to ensure the UK makes the most of these large increases in investment spending. These include:

  • more transparency by requiring government departments publish business cases and cost-benefit analyses of projects prior to their approval, ensuring any decisions to favour lower value projects in some areas are visible;
  • more oversight by requiring the independent National Infrastructure Commission to certify the analysis behind major project business cases; and,
  • more devolved investment through greater decentralisation of investment funds, including to Metro Mayors.

Finally, in order to reduce volatility in investment spending, drive a greater focus on maintaining our infrastructure once it is built, and demonstrate the wider public value of its infrastructure revolution, the Foundation says the government should replace its 3 per cent of GDP cap on with a target for the level of investment, and make improving the UK’s public sector net worth its main fiscal objective.

Cara Pacitti, Researcher at the Resolution Foundation, said:

“Government plans to increase investment spending by up to £100 billion over the next five years are very welcome. The UK’s retreat from public investment in previous decades has left significant gaps in our public asset base, from poor transport links outside London and the South East, to long waits for diagnostic tests in the NHS, and too little new social housing.

“But while an ‘infrastructure revolution’ is desperately needed, it’s equally important the government get its priorities right and ramps up the focus on delivery as much as it ramps up investment spending, otherwise it risks wasting billions of pounds.

“To do this we need a corresponding ‘delivery revolution’, with policy makers demonstrating projects’ economic benefits and value-for-money before they are approved, creating more independent oversight of these projects, and ensuring that more projects are designed by – and delivered for – people outside the capital.”