Fixing the UK’s infrastructure problems isn’t just about spending more, writes Gemma Tetlow – the government needs to spend well.
It’s clear for all to see that the UK’s public realm is in a poor state. From potholes to leaking hospitals and RAAC-infested schools, the country’s infrastructure is crumbling.
One cause is a lack of spending. For decades, the UK has spent a smaller share of GDP on capital than most similar countries.
But fixing the problems isn’t just about spending more. The government also needs to spend that money well.
And with the new government facing a tough economic climate, this is more important than ever.
Poor planning undermines success from the start
Our recent work at the Institute for Government has revealed various problems with how the UK government spends money on infrastructure.
These problems frequently lead to underspent budgets, with departments rushing out money in the last month of the financial year.
A recurring theme is the lack of credible, long-term plans for capital spending.
Public sector investment in the UK has historically been unpredictable, and budgets for major projects unrealistic in scale and timing.
These patterns make it difficult for the private sector to prepare appropriately.
Government departments and delivery bodies struggle to allocate money effectively.
And the success of many major projects is undermined from the start.
‘Maximum risk and compromise’
The funding allocated to the previous government’s New Hospital Programme provides a good example.
The Treasury provided the Department of Health and Social Care (DHSC) with the lower end of the funding it estimated it would need for the programme.
DHSC said this scenario meant “maximum risk and policy compromises”.
As the National Audit Office concluded: “This increased the risk that in later years many schemes would need to be under construction at once, meaning it could be harder to find construction companies willing or able to build them for a good price.”
Rachel Reeves has since announced a review of the programme.
Three-year spending reviews are a good start
More certainty and transparency about the money allocated to major, multi-year infrastructure projects would help the government get better value for money.
Currently, the government has only set out detailed spending plans up to March 2025.
Beyond that, government departments and delivery bodies don’t know how much money will be available to build new assets or maintain existing ones.
The government has said it will adopt a new rhythm for spending reviews, with plans covering at least three years, and reviews every two.
This is very welcome, though there’s a strong case for five-year plans – potentially longer for some capital programmes – to allow departments, delivery bodies, and their private sector partners to plan appropriately.
Opportunities for clearer commitments where parties agree
The biggest challenge in committing to longer-term spending is that it’s difficult – and often undesirable – for a government to tie the hands of their successors.
But there are areas where parties agree.
Demand for public services such as schools, for example, should be relatively predictable over the longer-term. And parties agree that they should continue to be provided in a broadly similar way.
These areas offer opportunities to commit to a steady stream of publicly funded works.
This has worked in the past, such as with the six-year flood defence and coastal erosion programme. But this approach could extend more widely.
For example, the UK could follow Germany’s cost-effective approach to rail electrification: a steady stream of work each year, rather than a boom-and-bust cycle of programmes.
Budgets for megaprojects should be fully transparent
The government should also be more transparent about what it allocates to the largest multi-year infrastructure projects.
Currently, Treasury documents (such as budgets and spending reviews) simply wrap these allocations in the relevant department’s overall funding.
The Treasury should instead provide annual figures for revenue and capital allocations for these programmes, ideally for the whole life of the project.
This was the approach taken for the London 2012 Games. Using it more widely would help people inside and outside government clearly understand – and challenge – changes to the size and timing of budgets.
Stable planning means better outcomes
Much of the UK’s public infrastructure needs repair and improvement.
This is true for social infrastructure, such as prisons and hospitals, and economic infrastructure, such as roads and railways.
While more spending will be part of the answer, there’s plenty of scope for the government to achieve more by spending better.
Setting more stable capital spending plans and providing more certainty about what work will be commissioned will help the government achieve better outcomes.
*PSNI was forecast to be negative in 2012/13 because of the planned sell-off of Royal Mail and the associated transfer of its pension fund assets to the private sector.
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