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Infrastructure is the vascular system of the economy, its veins and arteries, allowing people and goods to move quickly from place to place, allowing trade to flourish and accelerating business activity.

Summary

International evidence shows that investing in infrastructure is essential to competing in the global economy and driving economic growth. Yet, for a highly developed country, the UK has underinvested in major infrastructure networks, and according to the World Economic Forum, is slipping down the world rankings in terms of infrastructure provision (WEF 2013).

As a result, the last two governments have begun to take infrastructure seriously again, culminating in the national infrastructure investment pipeline, which outlines current and future capital projects across the United Kingdom. Indeed, building infrastructure often demands government involvement to support investments where the market cannot – for example, by readying unviable sites to mobilise private investment, providing and assembling land for projects, or providing loan guarantees for developers. Equally, and often overlooked, public investment in infrastructure can help to redistribute costs of investment more fairly across society (NAO 2013) by allowing public spending to absorb the costs, rather than consumers through, for instance, higher utilities bills.

Yet, for all the value of public investment in infrastructure, the way the government spends money is out of balance. Despite OECD research showing that money wisely invested in weaker economic regions can deliver higher rates of return through economic growth than investing in areas that need it less (OECD 2012), London, with its dense infrastructure provision, is the overwhelming beneficiary of publicly leveraged investment.

Treasury figures project London’s per capita publicly supported infrastructure spending at around £5,426 per resident, while the north of the England receives much less. Investment in the North West region is projected at £1,248 per resident, much of that being channelled into Sellafield , while Yorkshire and the Humber sees £581 per resident and the North East, with few capital projects, only £223 spent per resident (HMT 2014).

In part, this imbalance is a reflection of the fact that current methods of infrastructure appraisal are skewed in favour of direct user benefits rather than their wider economic benefits. As such they often disadvantage areas of the North and need to be reformed to give stronger weight to economic development.

But another reason for such regional disparities lies in the location of large-scale transformational infrastructure projects. The combined cost of three of London’s major projects (Crossrail, Thameslink, and London Underground improvements) exceeds £34 billion. These three projects alone outstrip total investment in the whole of the north of England.

For this reason, we argue that the North needs to bring forward a range of projects that could genuinely transform the northern economy as it makes the journey from an industrial past to a more connected future. Such projects, alongside smaller investments, stand the greatest chance of rapidly enhancing northern productivity and economic growth, which will ultimately be to the benefit of the whole country.

To this end we make four key recommendations:

  1. Public and private stakeholders in the north of England should galvanise their efforts to develop and promote transformational infrastructure projects in the North, with a view to bringing them to a national audience.1
  2. Northern leaders should work together to bring forward a long-term Northern Infrastructure Strategy, including a small number of key transformational infrastructure priorities. This strategy should build on the ‘One North’ plan for transport connectivity and Rail North body to galvanise collaboration in relation to rail franchising in the North.
  3. An incoming government in 2015 should undertake a radical review of the national infrastructure pipeline in order to bring forward plans for a more balanced approach to infrastructure spending in the UK, with greater emphasis on transformational infrastructure projects in the north of England.
  4. The current government must move more quickly and decisively to overhaul the existing transport appraisal processes in order to place greater emphasis on the wider economic benefits that might be derived through public investment in key infrastructure projects and to progress transport devolution to combined authorities and other transport bodies.

1 IPPR North has launched a special competition to support this process; details are available at: www.greatnorthplan.com