Build decent infrastructure and end Britain's transport misery
Ministers must decide, but the National Infrastructure Commission can hold them to account if they duck or delay
The article is by Andrew Adonis (Lord Adonis) who has left Labour's ranks to head the new National Infrastructure Commission for the Conservatives. What he seems to have done is borrow one of Jeremy Corbyn's key ideas - for a National Investment Bank - whilst heading fore the exit.
As Andrew says of the NIC:
[T]he commission can give ministers the evidence [on the need for infrastructure that] they need, and hold them to account if they duck or delay.
In saying that he effectively takes, lock, stock and barrel a key function of Corbyn's National Investment Bank which would be given the same job as the new Tory NIC of assessing infrastructure need.
But such a National Investment Bank, which I have long argued for, would be more powerful. Structured rather like the Bank of England but with a fiscal rather than a monetary mandate it would have the job of delivery as well, and the right to issue its own bonds to make sure that the work was funded. Of course this would require close integration with the Treasury and other ministries, but make no mistake, just as the Bank of England is supposedly better at its job by having a degree of autonomy in delivery so too would the National Investment Bank be improved in that way. And that, plus the use of People's Quantitative Easing to ensure that this Bank is funded in the event of an economic downturn, is something that the Conservatives have not adopted as yet. They need to: those elements are what make the plan work.
One of the puzzling aspects of infrastructure investment is that much/most/all? has some sort of return. Looking at the problematic Hinkley nuclear station, this has been estimated at 11%. Given the cost to a government of issuing gilts/bonds etc (1%? 0.5%) a gov’ investment in the likes of Hinkley (or one supposes other infrastructure assets) would result in a net gain to the gov’ & thus citizens. What is not to like? unless you are Osborne.
Indeed
One reason is the “tennis club” accounts that governments use which lump current spending and capital expenditure together and run the total against receipts to generate the general government balance – with a deficit financed by borrowing which increases the national debt. Some attempt to generate income and funds flow statements and balance sheets for government would inform the policy debate and might prompt sensible behaviour by bond market participants.
This leads to a second reason. If predatory bond market participants deem the debt to GDP ratio is too high or the composition of public expenditure is not to their liking or government policies threaten to restrict their capture of economic rents, these predators can engineer market panics to drive up secondary market yields and profit handsomely from the outcome. In the extreme they can force governments out of the bond market. A third reason is linked to this. Since Lawson’s income tax cuts in ’80s there is a deep-seated popular unwilligness to pay sufficient taxation to fund the public services the majority of citizens demand. And this shortfall is massively increased by tax evasion and aggressive avoidance by corporations and high wealth individuals. This persistent shortfall greatly empowers the bond market predators.
When you combine all this with the deep-seated ideological obsession of a Whiggish Chancellor of the Excheuqer to shrink the state you will get seriously inadequate provision of vitally necessary utility and infrastructure investment with it being financed off the government’s books via privatised enterprises, PPPs and other sorts of gloriously inefficient and excessively expensive boondoggles.
There are Who of Government Accounts, bizarrely on an IFRS basis
Without the ability to organise the money there will be no chance of the Infrastructure Commission holding anyone to account. Though it’s a start and, should Osborne undergo a Damascene conversion, he could build on it.
The Damascene conversion of George Osborne would be two step. First to recognise that all money creation is based on debt and therefore by definition deficit spending is the natural order. Second to make the effort to ascertain exactly which agencies need to deficit spend and in what circumstances to keep the whole show on the road.
Adonis seems to be a bit of an idiot, from what I can see, based on that FT article.
This FT article is the first official “plan” for the infrastructure commission. there seems to be no appreciation for any cost/benefit analysis in this commission at all.
His first challenge is to link York and Liverpool, (or other Northern cities). Why, who wants to go from York to Liverpool?
And who will be helped if the journey of 1:45 by train (101 miles) is cut? That average speed of 58 mph seems to be pretty good for a cross country line. If anybody thinks saving 20 minutes off that journey, costing billions of pounds, would make a difference to the North of England, needs their head examined.
Second challenge. London infrastructure investment, beyond cross rail. Probably the same arguments could be applied as for improvements between York and Liverpool. Although more people will use London infrastructure, but any improvements in London will cost a lot more.
Third, power generation. Not to give an even cursory acknowledgement to the fact that long-term multi-billion pound infrastructure investments, if financed by government debt, will be by definition only half the cost, or only one third, because of the cheaper borrowing, is a complete failure of understanding basic project financing principles. If Adonis wants to be taken seriously and not just seen as a politcal lap dog for Osborne, he should of course attack the Hinkley C deal with all the vigour he can master.
That is what Adonis says:
“And we will look overseas to see what best practice we can promote in the UK – asking why infrastructure costs are so much higher in Britain than in France and Italy.”
Any school child which learns how to use a mortgage calculator can tell you that the financing costs are key. We do not need a review. We should borrow, or use PQE for infrastructure. It would cut the cost of any long term project in half. Or (PQE) make it free to the public.
And, (social) housing and adequate hospitals and schools are, of course, also, infrastructure, but Adonis does not see it that way, it seems. And HS2 is not mentioned either. What kind of infrastructure commission is that?
Waste of space, Mr Adonis, in my view. If that what passes as intellectuals to lead the country’s infrastructure investment, we are doomed.
So that just shows that even though there are elements of a National Infrastructure Bank visible here, it seems that if you stuff that Infrastructure Commission with people who cannot add up, or use a calculator, or think the main priority is a quicker railway between York and Liverpool, we might as well not have it.
The only ‘rational’ explanation to the fixation with shaving rail journey times between Northern Cities would be based on private corporate industry lobbying.
Anyone who has worked for an length of time in any company which is part of the corporatocracy (which includes many former public sector ethos organisations like utilities, mutual, LA privatised ‘partnerships’ etc) will have experienced the three to five yearly cycle of constant ongoing empire building known as reorganisation.
In every iteration certain key elements remain unchanged. One of these is always without fail a centralisation of certain tasks and functions which involves not only a reduction in staffing levels but also relocation.
An organisation with a function based in a building in let’s say Sheffield, might decide in one of these regular exerses in stupidity to relocate to Leeds, Manchester, or even Birmingham. Those working in Sheffield, many of whom would have been centralised into Sheffield during previous bouts of empire building and management by excel spreadsheet, may well be reluctant to travel further afield. Leeds, for example is a little over 30 miles but the direct rail link is for the most part a nightmare, more often than not taking at least an hour, unless you go via Doncaster, because the directb train link is like travelling on one of the old milk trains which stop at every hamlet. And the parking in Leeds, never mind getting into and out of at the beginning and end of the working day, is not that good and can add hours onto each end of the working day.
People who live and used to work in say Chesterfield, Worksop, Hope Valley etc who were previously centralised into Sheffield are reluctant to move, incurring all sorts of extra costs to Corporate profits. Any reduction in rail journey times certainly does not make much sense from a social perspective but from the view of the bottom line of the corporate excel spreadsheet lobbying Government to achieve reduced journey times helps current and future merrygorounds of management centralisation, cuts, reorganisation and empire building.
NB. It might not make much sense from the point of view of those of us laymen achieved the bottom of the food chain but there was no specification in the comment on this point achieved out cutting rail journey times that it should make sense.
Oh so familiar
Reorganisation is what accountants advise when they can’t find any tax wheezes because they have no clue how to add value