The scene: Liverpool. The date: 15 September 1830. The occasion: the opening of the Liverpool and Manchester Railway. The Duke of Wellington, the then prime minister, was on hand to watch as inventor and entrepreneur George Stephenson drove the first of a procession of steam-hauled trains along the world’s first inter-city railway line. It was the dawn of the railway age, and the first northern hub.
Infrastructure has always mattered. The industrial revolution was not just the story of cotton mills and iron foundries. It was about canals, railways and tarmacadam roads. Big changes to the way people and goods could move around the country boosted growth and transformed the economy.
The north led the way: this was the one period in Britain’s history when its economic centre of gravity lay above a line drawn from the Wash to the Severn estuary.
Today the entire country is suffering from decades of under-investment in infrastructure. A study produced by Standard & Poor’s ratings services last week showed that total investment in new infrastructure has been on a downward trend since the mid-1980s, dropping from 1% of GDP in 1980 to 0.6% in 2008.
There was an increase to 0.95% of GDP in 2011 as the government undertook projects to counteract the recession and built the infrastructure needed for the 2012 London Olympics, but this was a temporary boost.
This has meant improvements to the country’s transport network have been mothballed and work on new infrastructure projects has been delayed. Investment has been concentrated on the programmes that look set to offer the greatest benefits to the national economy. And in the scramble for resources, the north has lost out to London and the south-east.
George Osborne has announced ambitious plans to use infrastructure spending to restore the north to its former glory. Investment in transport links will, the chancellor says, generate a real economic return and help rescue people from the trap of poverty.
For this to happen, though, a number of conditions have to be met. First, public money has to be made available to tackle the UK’s infrastructure deficit, estimated by S&P to be in excess of £60bn.
Although this will not be easy to find at a time when the public finances are £100bn in the red, ministers need to make the case for long-term capital spending that will generate benefits for generations to come. Studies show that every pound spent on infrastructure generates much more than a pound of additional economic activity.
Second, there needs to be cross-party agreement that infrastructure projects will not be the first to be axed when times get tough. This has been the tendency of governments of both left and right in recent decades, but any short-term benefits have been offset by increased costs of congestion.
Third, a proper list of strategic priorities should be announced that would prevent all available resources being gobbled up by the south-east. Regeneration in other areas would be a high-ranking priority.
Finally, there needs to be a recognition that the investment that matters is not always on prestige projects. As Stephenson proved 184 years ago, it is sometimes the local schemes that make the difference.
