Philip Hammond’s ambition to link infrastructure and productivity is worthy – but it must be more than rhetoric, says John Hicks, director and head of government & public sector at Aecom.
John Hicks
Chancellor Philip Hammond used his first and final Autumn Statement to announce a shift in the timing of the Budget, promising instead a Spring Statement from 2018. The new timetable underscores the change of style at Number 11.
During Osborne’s tenure the Autumn Statement became a spectacle. It is not surprising that Hammond, known for his measured, detail-orientated approach, is dropping the curtain on this piece of theatre.
While there were few surprises during Hammond’s speech – bar the scale of the deficit forecast –much having been declared by his boss when she spoke earlier in the week at the CBI’s annual conference, it did contain an ambition worthy of particular applause. The chancellor made explicit the link between major infrastructure projects and the country’s productivity.
Productivity is, once again, one of those words that rarely seems far from a minister’s lips, but it is unusual to hear infrastructure crop up in the same sentence. The new £23bn National Productivity Investment Fund is a welcome announcement and its connection to much-needed infrastructure is equally pleasing. Making the link – and making it stick – is a challenge that the UK and many other nations have spent decades trying to overcome.
Of course, a sizeable gulf lies between talk of new, modernised infrastructure to boost productivity and the reality of fresh tarmac and big-bandwidth telecoms. What was missing from the Autumn Statement was anything concrete, particularly around declaring a time-bound pipeline of projects on which our industry can plan and make that contribution to productivity.
The chancellor is keen to attract private sector investment in infrastructure, with pension funds and foreign wealth funds expectant and willing, if the conditions are right, to be drawn to long-term assets. But without a proper pipeline of confirmed, transparent and viable projects it is no surprise that such investments largely remain waiting to be deployed.
The government has a vital role to play in attracting investment by, for example, underwriting large but unlikely risks holding back specific infrastructure projects. We need more affirmative action in this vein.
Other countries are vying for investment from the same sources to fund their own infrastructure ambitions, with France and Germany facing long-term needs to refresh road and rail networks and president-elect Donald Trump having vocally expressed a desire to rebuild infrastructure in the US. Time for the UK to act may be running out.
The chancellor announced that he has written to the National Infrastructure Commission asking it to explore how new projects might contribute to productivity growth. While this is an admirable aim, it would be extremely unfortunate if this change of emphasis were to delay the vital business of turning bringing much-needed infrastructure projects of national importance to fruition.
As the government plans for post-Brexit scenarios, it is essential the UK becomes more outward-facing and better positioned to compete on the global stage. Chancellor Hammond laid out the importance of preparing our economy to be more resilient, to give the country the best chance of profiting from its looming departure. Tackling the productivity gap is a vital facet of this preparation.
Linking infrastructure with productivity is both bold and visionary, but it must become more than rhetoric. The chancellor, renowned for his attention to detail, must ensure that all the necessary dots are joined.
Only when big projects are given the green light can we hope to achieve the productivity gains we all want to see. Perhaps the Spring Statement – or, more likely, the 2017 Budget and Spending Review – will reveal the next stage in Hammond’s thinking. I hope we can wait that long.
