Comment

The colossal cost of infrastructure is a British disease nobody can cure

Better for the Chancellor to invest in full-fibre internet than to throw money at expensive white elephants

Britain's Chancellor of the Exchequer Rishi Sunak arrives at the Foreign and Commonwealth Office (FCO), ahead of a cabinet meeting to be held at the FCO, for the first time since the COVID-19 lockdown in London, Britain July 21, 2020. Stefan Rousseau/Pool via REUTERS 
Before he starts his spending splurge, can the Chancellor assure the hard-pressed taxpayer that he has a grip on these costs? Credit: Stefan Rousseau/Pool via REUTERS 

We will get a lot of very big figures from Rishi Sunak on Wednesday. So big, indeed, that the eyes will glaze over because they are almost impossible to comprehend. The largest will be the national debt, now above £2 trillion or more than 100 per cent of GDP, reflecting the massive borrowing needed to pay for the pandemic. It will be followed in an order of magnitude by the £600 billion or so that the Chancellor will pledge for infrastructure projects in the coming years, the biggest package of investment for generations, as Boris Johnson called it on Monday.

Most people will ask how we can spend so much as a nation when we owe so much; but if the economy is to grow sufficiently to pay off the debt, investment is crucial, provided it involves the right schemes at affordable cost. The Chancellor has described his Wednesday statement as a “down-payment” on future promises. It is intended to show intent to those parts of the country that voted Conservative last year in order to get a slice of the action that is usually directed towards London and the South. The Prime Minister has already flagged up the programme under the slogan “build, build, build” echoing the notorious Sixties pools winner Viv Nicholson, who vowed to “spend, spend, spend” her £150,000 winnings before blowing the lot. Let us hope Mr Sunak is less profligate.

We know much of what is in the pipeline, including long-term investments in green technology and transport. There will be promises of money for flood defences and to repair pot-holes. The biggest investment of all is needed in full fibre broadband. We are still basing connectivity decisions on the notion that rail and road traffic will increase when the pandemic suggests otherwise.

As more people continue to work from home and businesses leave their expensively rented city centre premises, there will be less commuting. When HS2 was finally given the go-ahead in February, the coronavirus was something we thought would stop in China. The fact that it didn’t has changed all calculations about the type of infrastructure that will be needed.

As Mr Johnson discovered on Monday when his web-link to the Commons crashed, being able to work easily and effectively online from home anywhere in the country will be critical. That requires the fastest broadband connections. Yet we are being sold so-called superfast networks in this country which are nothing of the sort. Full fibre networks all the way to the home are still thin on the ground. Ofcom reported recently that full fibre covers just 14 per cent of premises. Japan and South Korea have 95 per cent coverage. Despite being the world’s fifth largest economy, the UK is ranked 35th out of 37 countries assessed by the OECD for the total fibre in its fixed broadband infrastructure.

At the last election, Labour promised full fibre in every home but linked it to the nationalisation of the system which would guarantee that it would never happen. None the less, the Government needs to create the conditions in which the UK can catch up with the rest of the world in a globally competitive market place.

Better broadband may sound a bit too prosaic for a Prime Minister with a fondness for grands projets but it is more important on a day-to-day basis to most people than a bridge across the Irish Sea, which one hopes does not feature in Wednesday's announcements. Mr Johnson’s vaunted island airport never materialised and the Crossrail project in London, which was the flagship scheme of his mayoralty and should have opened in 2018, remains beset with problems. The expansion of Heathrow Airport is on hold pending yet another court case.

But the biggest problem with infrastructure in this country is the eye-watering expense of doing anything. How can it possibly cost more than £100 billion, the latest estimate for HS2, to build a relatively short railway? Or £1.6 billion for a two-mile road tunnel under Stonehenge, a project originally budgeted at £50 million when it was first proposed around the time the ancient Britons were dragging the Sarsen stones into place. Both of these projects should be scrapped on the grounds of cost alone, leave aside whether they are needed, as in the case of HS2, or represent an act of wanton vandalism, as with Stonehenge.

I would suggest two alternative uses for this colossal waste of money: a tidal barrage either on the Severn or Swansea Bay; and a grid using the canals and river systems to transport water around the country in anticipation of the droughts expected to affect London and the South in 25 years’ time. These would be far more likely to give the country long-term benefits than a faster train to Birmingham or a quicker drive along part of the A303.

Again, however, the issue would be one of cost and the perennial mystery as to why it is so much higher in the UK than elsewhere. Successive governments have grappled with this conundrum without coming up with an obvious explanation. An official government report in 2010 opened with this sentence: “The UK is an expensive place in which to build infrastructure. The weight of evidence confirms that costs are higher than in other European countries and demonstrates that, irrespective of its comparative position, there are significant opportunities to reduce costs in the delivery of infrastructure.”

Needless to say nothing happened, or not much that can be easily identified. Take HS2. The cost per mile is around £300 million. Yet the French LGV Est fast link cost 20 times less than that. Germany’s Nurnberg-Erfurt high-speed line that opened in 2017 was cheaper by a factor of 10 as is the planned Ostlanken line in Sweden. Why this massive difference? Among the reasons given is high urban density but that is true elsewhere in Europe. A road can be built in Holland at a third of the cost here. The high price of land is also blamed as is poor procurement and contract management.

So before he starts his spending splurge, can the Chancellor assure the hard-pressed taxpayer that he has a grip on these costs – or should we just brace ourselves for another very big figure when all these projects overrun even their inflated budgets in years to come?