Transport and the Economy

Debate between Lord Harrington of Watford and Stephen Hammond

Tuesday 28th February 2012 Commons Chamber

[Stephen Hammond]

I certainly agree with the latter point. It is beyond the scope of my comments this afternoon to go into the differing amounts of regional money. I accept that there clearly is some imbalance in subsidy between varying regions of the country. It is important to analyse what that can deliver and its efficacy. It is interesting to speculate what Crossrail might bring to London in future, as opposed to what the northern hub might bring to the north. I suspect that the benefits of the northern hub might be greater than those of Crossrail. We will wait and see. I am sure the Minister and the DFT will continue to reflect on that.

As a practitioner of the dark art of economics, I know that different economists will always have differing views on everything. Reading the report, I was struck by the comments of the former chief economist at the DFT. Although those may have been made only in response to the question that he was asked, it seemed to me to miss out quite a lot when he said that if one looks at the history of the British economy, it is clear

“how little the underlying rate of economic growth has varied.”

He went on to add that transport had done very little to affect the overall growth rate of the British economy. That seemed to miss out the fact that we have had wildly varying periods across history.

The witness's analysis went back almost 200 years. Over that time, we have had wildly differing levels of infrastructure investment, and there have been periods when the growth rate of the UK economy has been well in excess of the 2% that he mentioned. His analysis also failed to consider the impact of under-investment, which is a well known phenomenon, how that would have dragged down the underlying potential growth rate of the economy even in a period when investment had resumed, and the potential growth rate had there been consistent investment. Although the analysis that Mr Riley presented to the Committee may or may not be valid, it seems to me that it falls foul of the law of averages. I think that the analysis should look at the potential for economic growth with a consistent approach to investment.

[Richard Harrington (Watford) (Con)]

Having listened carefully to my hon. Friend’s argument and seen some of the evidence that was given to the Committee, it seems to me that, although it could be argued that investment in transport might not be such a direct factor in economic growth, we must also consider what would happen if we did not make that investment and this country fell further behind, which I think would lead to economic shrinkage.

[Stephen Hammond]

I thank my hon. Friend, who more than eloquently makes the absolutely correct point—the final point in my analysis of the economic situation—about the economic analysis presented by Mr Riley.

One of the other learned gentlemen who gave evidence, Professor Goodwin, spoke of the potential for investment not to be transformational, but to be strategic—I am not sure whether he was playing with semantics. He did not like the word “transformational” but said that there was an element of strategy—I think “strategic” is the word he used. He is right that there has been a continued over-egging of the ability of certain single projects to produce the sort of result that some people hope for.

However, if we look at the sheer size of certain schemes and the investment that this and previous Governments have made that complements and adds to what is already in place, and/or if we look at the smarter changes and smarter choices in transport packages, we will see that there is a real chance for transport and infrastructure investment to be transformational. I suspect that some of the moves on work travel packages, which aim to increase access to work, and some of the major electrification projects, which are combined with other minor schemes in parts of the south-west, will in five or six years’ time be considered transformational. In that regard, the evidence given to the Committee probably fails to recognise transport’s ability to be transformational and, more importantly, to enable economic growth.

Moreover, the point that neither of those two learned gentlemen discussed—this is where I disagree with the analysis of the hon. Member for Liverpool, Riverside—is that if transport is part of a cluster of other investments, including increases in education, access to work, economic development zones and others, its ability to contribute to the potential for economic growth is far in excess of what that would have been had the investment been made on its own. A number of people will have made a better analysis of the cluster theory than I have, but that is broadly what it says. Yet again, if transport is combined with other Government policies, its ability to have a significant impact should not be underestimated.

I will finish with a few other remarks. I warmly welcome and support the conclusion that using transport to support and stimulate the economy and to attempt to reduce regional economic disparities is surely right. The test of the Government in that regard must be whether they are showing any understanding of those challenges. In a time when the key overriding economic priority must be to reduce the economic deficit and ensure that the public finances are put on a more stable profile, this Government are undertaking a number of measures which recognise those challenges and provide economic support in relation to it. We have seen that, significantly, through the Minister’s sponsorship of several local transport plans and investment programmes, and they are having on a small scale quite a huge impact on bus routes, local transport—in terms of local rail—and other issues.

Equally, the support for major projects throughout the regions, such as the northern hub, which has been mentioned, the electrification of the south-west main line and the investment in the east coast main line over the past 10 years, strikes me as sending a clear message that this Government recognise the need to maintain transport infrastructure spend.

As the Chairman of the Transport Committee pointed out, the Department for Transport has done relatively well from the overall comprehensive spending review debate, and that represents the Government’s understanding of the need for and importance of transport infrastructure.

I have spoken principally about rail in my last few remarks, but it is clear also that we neglect at our peril the need to maintain and upgrade our roads, and some smaller road schemes will have a bigger impact than some major, strategic ones, so the £3 billion that the Government are putting into local road schemes over four years is likely to have a positive impact on local, regional and overall economic growth.

I welcome the report, which has sponsored a debate about transport and the economy. I welcome also the Government having evidenced by their actions their understanding of the need for infrastructure in order to support economic growth and the quality of life of our citizens. I am sure that the Minister, in his winding-up remarks, will say that this is not just the start but a continuing policy of the Government.