National Infrastructure

Lord Hollick Excerpts

Thursday 22nd January 2015 Lords Chamber

[Lord Hollick (Lab)]

I would like to thank my noble friend Lord Adonis for securing this debate. All major parties have enthusiastically committed to infrastructure investment, but there are some key differences that have emerged over the level of funding, the process for evaluating projects and whether responsibility should reside in Westminster or increasingly in the nations and regions of the UK.

The Conservatives are clear that they will seek to achieve an overall budget surplus by 2018-19, with investment spending maintained at the current 1.2% share of GDP. Labour has sensibly proposed to unbundle current and capital expenditure and committed to secure a current budget surplus as soon as possible, to reduce the national debt as a share of GDP, but—critically—to increase infrastructure spend as a percentage of GDP back to 1.5%. The difference between the Labour and Conservative plans for infrastructure spend has been independently assessed as being up to £20 billion by the end of the next Parliament. The case for increasing the level of infrastructure spend at a time of record low long-term borrowing rates and when it can sustain and improve the current momentum in the economy is indeed powerful.

Another key difference between the main parties is the process of evaluating and deciding which of the many competing projects to pursue. The coalition published a National Infrastructure Plan, which has been referenced, and has subsequently published updates. This approach is most important. It has focused on delivery, cost control and implementation—all of which are of absolute and vital importance. But we are invariably proceeding without a clearly articulated strategic plan. As my noble friend Lord McFall mentioned, the Economics Affairs Committee is currently reviewing the economic case for HS2. Many of our witnesses have criticised the absence of a comprehensive strategy for HS2. This, they say, has undermined public confidence and stands in the way of a thorough and transparent review of alternative solutions. Professor Overman said that the case for HS2 and the alternatives presented to Parliament was so poorly analysed that it left MPs in a quite hopeless position to make a decision.

This is the crux of the problem: without a clear strategy, how are the Government, let alone the public, to decide what are the most appropriate and cost-effective options, and to prioritise investment? The Treasury carries out rigorous, zero-based capital reviews to determine priorities. But it is HS2 and the Department of Transport which are responsible for providing all of the data and analysis to support this evaluation. There is no independent review and the detailed analysis is not made public. This stifles informed debate and independent analysis.

The establishment of the national infrastructure commission—described by my noble friend—by the next Labour Government, will allow future Governments the luxury of making their decisions on which infrastructure options to pursue in the light of an overall strategy, and only after rigorous independent, impartial assessment.

The huge regional disparity in infrastructure spend was a very hot topic when our HS2 enquiry took evidence in Manchester from five Midlands and northern city authorities. The cities want to combine into large metro groups and take responsibility for infrastructure planning and implementation. Spending per head on infrastructure in 2013 was £2,595 in London but a meagre £5 in the north-east and only £99 in the north-west. The cities were justified in claiming that they are being short-changed and resented their subservience to Westminster. My noble friend Lord Adonis has made a powerful case to give large metro regions the responsibility for regional infrastructure and devolved budgets to support their projects. The noble Lord, Lord Heseltine, holds similar views, as does the City Growth Commission—chaired by Jim O’Neill, who appeared before our committee—which has called for the power to approve projects and secure finance to be devolved to the regions.

It is interesting to speculate whether, if HS2’s £50 billion budget was available to promote growth and connectivity in the regions, the regional metro authorities would pursue what one economist described as the lowest common denominator solution, or a more focused series of transport initiatives. Only when the regions are freed from the grip of Westminster will we know the answer to that question.