The hidden giants of infrastructure
This post first appeared on BusinessGreen.
Industrial strategy hasn’t been fashionable for a long time. Anyone romantic enough to have spent February 14th watching Harold Wilson Night on BBC Parliament will have seen the last moment when industrial strategy took the limelight. This was a moment when ministers decided which industries to help and which to leave to squalor, over a hearty dinner at the CBI – a time when growth was determined purely by how many motorways, airports and gas stations we could cram into our small island. It didn’t end well. In fact, it kicked off the unbalancing tendency of our economy to be carried by consumption over investment which we still haven’t shaken.
Ever since, government has gone the other way and grown fearful of long term planning and strategy – something our reluctance to commit to a decarbonisation target shows we still suffer from today.
Big industrial strategy, however, did make a bit of a comeback with the Olympics. The Prime Minister championed the Olympian construction work as “on time and under budget”. While the budget part is arguable, it did create a new media trope of the Olympic legacy being as much about construction as medals.
Small is big
Since then we’ve been inundated with the need for Olympics-style vision from every trade association, junior minister and jobbing columnist who fancies they know how to fix this mess. Infrastructure is referred to ubiquitously as “aging”. But no one seems to stop to ask what kind of infrastructure we actually need, both for the best economic stimulus in 2013 and for our nation’s future.
When we build, we must do it for tomorrow, not yesterday. But part of the problem is that what we need now is smaller scale projects, though in larger numbers, than what we used to need – a school of sardines, not just a hulking blue whale. It is telling that the Treasury’s infrastructure pipeline is arranged by single projects of a certain size. However, no single projects, however impressive in scale, will be as important as the thousands of similar smaller ones.
Seeing infrastructure differently
As the ICT revolution showed, it isn’t scale that makes a notable economic impact, but depth. This country has colossal potential for new kinds of infrastructure to be developed, that aren’t recognised by current government measurements such as the National Infrastructure Plan or HMT’s Infrastructure Pipeline.
For instance, instead of seeing energy efficiency as thousands of individual jobs, upgrading boilers or filling cavity walls, government would more effectively see it as a regional negawattage to be reduced. According to McKinsey’s data, we could affordably save £10.85 billion in electricity with simple efficiency measures. Meanwhile, according to Econometrics, carrying out that efficiency work would generate a fifth more jobs than general infrastructure spend.
More jobs, more resilient and less carbon
It’s the same with upgrading our transport, rather than building new roads. As Obama recognised, announcing his Fix-it-First policy in this year’s State of the Union address, his stimulus bill had greater economic impact upgrading transport, rather than building new freeways. Every dollar he spent on public transport produced 70 per cent more job hours than the same dollar spent on new roads.
Our fourth biggest infrastructure spend for the next year is the thousands of digital communication upgrades we are implementing to make our businesses and our services faster, more resilient and lower carbon. Yes, there are still big projects to be undertaken, and it’s telling that, also according to the Treasury’s pipeline, there is 12 times more money going into low carbon projects this year than into high carbon. But that’s just the start. Until we recognise the sardine shoals in the background, small measures adding up to hidden giants, we’re only getting half the picture.
Follow Alastair on Twitter