Published by Rt Hon Hugo Swire MP on 25 March 2015
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Click here to download the transcript produced following the event.
Please find here the presentation slides which accompanied the presentations on the day.
Key themes of the conference:
The conference highlighted the importance of building confidence in infrastructure, but most crucially the challenges in doing so. Infrastructure can play an important part in lifting the long run growth potential of the economy but this depends on selecting the right projects and funding arrangements. There was also debate around the potential role of infrastructure investment as a short term stimulus to the economy.
Challenges created by the current planning process were noted, as were the challenges of financing. An important theme of the discussion related to the use of institutional investors (both domestic and overseas) to fund British infrastructure. But as Professor Helm noted, whether the funds are borrowed domestically or internationally, one thing remains the same. If the country is going to deliver more infrastructure spending we “have to save to create the space to pay the bills, to provide the savings, to go into the investment.” There is no such thing as a free lunch.
As Rt Hon Dr Vince Cable MP, Secretary of State for Business, Innovation and Skills said:
“…if you’re really trying to get jobs going in the short run, you build houses rather than big infrastructure projects.”
“We are trying to rebalance our economy away from the kind of pattern of development that got us into so much trouble, where we had a decade of what seemed like boom at the time, but it was based on domestic consumption fuelled by credit and government spending. There was a turning away from export markets and trade, and we’re now having to correct that. And if you want to be serious about exports and particularly emerging markets, connectivity is key.”
As Professor Dieter Helm CBE, Official Fellow in Economics, New College, University of Oxford said:
“Austerity at the moment means borrowing 8 to 9 per cent of GDP, a Keynesian injection which is unimaginable in any previous historical period, and running interest rates at about minus 3 per cent. That’s the stimulus we’ve got at the moment. But if you want to provide the room to make the investment, then we have to lower our standard of living in order for that to happen.”
“What would the savings ratio have to be to meet the requirements to fund our pensions and therefore the pensions of the savings that go through to the investment to be able to pay for the infrastructure we want? Well I wrote something in the FT in about 2007 in which I suggested that the savings ratio would have to be well north of 10 per cent, and this implied that the standard of living in Britain would have to fall about 25 per cent if you took into account the debts that we’d run up through the great Brown boom.”
The conference was kindly sponsored by the Association of British Insurers, Angel Trains, CH2M Hill and Oxera.