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Public Spending: Infrastructure

Volume 715: debated on Wednesday 9 December 2009


Asked By

To ask Her Majesty’s Government which major projects have benefited from an acceleration of public spending on infrastructure in the current and previous financial years.

My Lords, £365 million of the £3 billion capital fiscal stimulus accelerated to 2008-09 was spent as planned on housing repairs, insulation and college refurbishments, including £110 million to accelerate investment in modernising facilities in further education colleges. In 2009-10, accelerated spend includes £969 million for DCSF to spend on capital projects in schools, £275 million for BIS to spend on higher education and research infrastructure and £525 million for CLG to spend on housing and regeneration. As reported in the Pre-Budget Report, including projected 2009-10 spending, it is estimated that £1.7 billion of the £3 billion total has now been spent.

My Lords, I thank the Minister for his reply and for the Government’s recommitment to Thameslink and Crossrail in the Pre-Budget Report. But short-term spending commitments are not a substitute for sustained investment, especially as the OECD notes that in Britain infrastructure projects are,

“typically the first victim of fiscal consolidation efforts, while other less productive but politically sensitive projects survive”.

Will he commit all parts of government properly to consider and publish comparable cost-benefit analysis of major spending proposals, whether these proceed or not?

First, I congratulate the noble Baroness on getting her response to the Pre-Budget Report onto her website even before the Chancellor of the Exchequer had finished speaking. That is absolutely the speed out of the starting blocks that we expect from London First. I am delighted to hear that she welcomes the support to Thameslink and Crossrail. Progress on both has already commenced, as is the case for other major infrastructure expenditure. The OECD’s observation about infrastructure and capital expenditure being placed at risk during a recession is tested by the fact that we brought forward capital expenditure. Of course we indicate that it will decline going forward to 2013-14. In fact, it will fall from 3.3 per cent of GDP to about 1.25 per cent. But before we get too alarmed about that, I remind noble Lords that that represents three times the proportion of GDP for 1997 and twice the level in real terms. As far as cost-benefit analysis is concerned, that is at the heart of all our decisions.

My Lords, we welcome the announcement in the Pre-Budget Report of the establishment of Infrastructure UK. But is not the real problem how to get more funds into infrastructure investment? Will the Government give further consideration to the establishment of a national infrastructure bank that can take funds from institutional investors and private savers?

The establishment of Infrastructure UK, which will absorb the Infrastructure Financial Unit in HMT and Partnerships UK, to be a focal point for infrastructure development, is an important step. The appointment of Mr Paul Skinner as chairman is to be welcomed. I am not persuaded that an infrastructure bank in itself would offer anything over and above the efforts we will make to channel long-term funds into infrastructure investment. I agree with the noble Lord—or at least with the thesis behind his question—that in the past our major pension funds have not invested in infrastructure projects, which, of course, have many features which would match the liabilities that they are seeking to finance.

My Lords, one of the most important infrastructure decisions that remains to be made relates to the additional runway at Heathrow. Can the Minister confirm that, despite reports in the press today, the Government will not seek to make a binding decision in relation to that runway before the next election?

I have not seen the reports to which the noble Baroness refers and I am not briefed to answer the question. I shall no doubt establish, and indeed shall ensure, that my colleagues are aware of the reports, but I am unaware of any decisions having been taken in respect of Heathrow in recent days. I am clear that we are committed to investing in Heathrow as a major transport hub to support the UK economy and the integration of London with the regions—something that the party opposite is clearly unwilling to do.

My Lords, how will we be able to afford the major roadworks and rail improvements outlined in the Pre-Budget Report?

We are continuing with PSNI—public sector net investment—at a significantly higher level of GDP than was the case before this Government came into office. That is entirely fundable and can be financed in accordance with the Chancellor of the Exchequer’s plans, as outlined today in the Pre-Budget Report.