The only area of public spending which was cut overall in the first two years of this government was capital projects. The Coalition inherited large forecast cuts in capital from Labour. They abated the cuts a bit, but carried on with the main thrust of them. It has been a bone of contention ever since. The construction industry is not happy. Business lobbies generally have complained about the poor state of our infrastructure. The public sector has made enquiries of Ministers to see if the cuts can be reduced more.
The government has responded to the pressures. It has not merely found a bit more public money for capital. It has also spoken up about the need to finance more of these items in the private sector. It is working on a scheme to promote more direct pension fund investment in UK infrastructure. It has itself put a lot of political capital into promoting high speed rail, though these plans do not entail any construction work before 2017 for HS2.
The truth is more privately financed infrastructure would be a good idea. The UK is short of capacity in energy, water, telecommunications, airports and roads. In each of these sectors more private investment is a distinct possibility. It would both act as an economic stimulus as the capital works were undertaken, and help UK competitiveness as better supplies at cheaper prices became available. So what more does the government need to do to bring these improvements about?
Energy: The government is deeply involved in the sector through its comprehensive regulation, its pursuit of green objectives, its role in the planning process and its overall responsibility for keeping the lights on. It needs to encourage more cheaper energy provision by granting sufficient licences for gas power stations, for oil, gas and shale gas exploration and production, and by reducing subsidies to less economic methods of electricity generation. Progress is being made with securing the construction of new electricity capacity. Changes to licences and the tax regime could foster a more active exploration and development phase for hydrocarbon.
Water The government and the Environment Agency regulate the water industry and take overall responsibility for ensuring water comes out of the taps. They could set new targets for availability and reserves, and foster the construction of additional reservoir capacity, additional stand by desalination plant if needed, better pipe networks so less is lost in transmission, and explore whether more can be done to transport water between water basins.
Telecommunications. The government is embarked on supporting the main telecoms companeies to ensure good broadband coverage for most people, with faster line speeds and better capacity.
Airports The government’s veto on new capacity at Heathrow is proving unpopular with business lobbies and growth promoters. Various schemes are being examined for additional runway capacity. An early and relatively quick way of expanding capacity would be to divert Northolt to civil use, whilst considering which longer term option to adopt.
Roads I will not repeat my ever popular private roads full scheme! The government could allow some private toll roads to add new capacity.