Wednesday 18 July 2012

UK Infrastructure spending is the beginning of a very long journey

As the first nation in the world to industrialise, the UK also has a legacy of needing to upgrade infrastrcuture that is in place. It's much cheaper when you start again. The German example of post-war building and China to day show what you can do when you start with modern methods in a fresh start.

The UK has also historically always underspent on infrastructure and under-planned its requirements. The political system enables all hard decisions to be put off. For years here we have written about non-decisions on nuclear power, new runways or a Servern barrier. Governments of whatever colour can easily decide on a a review that handily will not report until after the next election.

And when big decisions are made like the channel tunnel or HS2 planning laws, NIMBYism and apathy mean it is all very contentious and takes an age( mind you the Channel Tunnel did go bust o maybe the naysayers had a point...). Smalller projects fair better, enabling schools and hospitals to be replaced, albeit at eye-watering cost via PFI.

So the Government's decision to try and pump some more money into infrastrcuture spending is a good idea whose time came about a year or two ago, still better late than never. Although, as the Government has no money they are trying to be it by selling an soververign gaurantee insurance rather than direct spend. Whether this will entice private comapnies determined to hang onto any cash we will see.

Plus of course, so much of Government spending is not this type of capital investment. Billions go on social welfare, including the crazed tax credits, billions more on pensions and also the NHS. In effect the Governemnt has become a huge mechansim for redistributing wealth, not a mechansim for delivering a dynamic economy that grows and offers opportunities to all. Education, Infrastructure and Law and Order are the key components of a growth focused economy, but they are not the focus of Government spending.

Until this is remedied Britain is going to remain stuck as a low growth country; enduring a steady decline in living standards and economic prospects.


lilith said...

Off topic, but shouldn't Mr Drew be here?

Anonymous said...

German post-war success had more to do with the American writing off their debts in the 1950s and propping up the country to make it the shining star of capitalism for the East Germans to gaze in envy at. Britain helped Germany re-industrialize but carried its debts for years thus allowing Germany to expdand into the space previously occupied by British industry. We got screwed by post-war Germany aided by the Yanks. So much for the special relationship. Still, the krauts can't go on making cars forever so they will meet their nemesis eventually. The yanks won't bail them out when the EZ crisis drags them down.

China growth has nothing to do with infrastrucure. In fact the amusing thing is that at £1 / hour the Chinese made themselves cheaper than robots. Thus they were able to compete with robot intense manufacturing in Europe and the US. Now wages are pushing up in China and industry is moving back to the robot factories in the West. That's why Chinese businessmen are now investing the cash they have accumulated in Western businesses because they know it is game over in China.

hovis said...

For starters dismantle the NHS and replace with an insurance system a la France.

It is the totem of welfareism.
The mindset that means your health is down to "them", and they will fix it, oh and you just must be compliant and do what you are told...the slave mentality that benefits also produce.

It is also completly producer captured and is corporatism / corporate welfare (public (doctors) and private (pharma & supplies)) embodied, but dressed in socialist clothes.

Unbeleivably it is 'loved' as untouchable by many people no matter how crap it is.

Welfare benefits are as much a problem but not as easiliy solveable.

interesting points anon 10.56

Anonymous said...

Anon: "German post-war success had more to do with the American writing off their debts in the 1950s .. "

Don't forget either West Germany was a protectorate of the allies post WW2.

Thus it's defense spending was a fraction of what the UK for example spent. Consequently it could devote much of the resources not otherwise committed to competing with it's allies.

Bill Quango MP said...

We've said it before many times on this blog.
The US loans that sunk the UK post war are almost a myth.

The UK received almost as much foreign aid money from the US as France and Germany COMBINED.

This was free, gratis, no need to pay us back, cash from the Marshall Plan.
We took our 1/4 share of ALL the available US money for the whole of Europe and spent it.

The defence point, however, is well made.
UK continued defence spending at 9% GDP for a long while after WW2. West Germany was spending less than 1%.

A good deal of that Marshall aid was spent on defence.

Sebastian Weetabix said...

Regarding robots... wage inflation in China is such an issue now that it is no longer a low cost country (at least not in the coastal areas). In the electronics industry, Terry Gou (the founder of Foxconn) has just announced that he is putting 1 million robots into his Chinese factories. He's not moving west, that's for sure.

As for Marshall aid; we spent ours on making the NHS and the welfare state. The Germans used it to rebuild and provide cheap loans to business. Good lesson there I think - we were the authors of our own downfall vis-a-vis resurgent German industry.

Nick Drew said...

shouldn't Mr Drew be here?

why thank you kind lady but I fear I'm not invited there

never mind, the truth will out eventually

in the real world they are quietly planning gas-fired power stations

Electro-Kevin said...

Protecting the NHS is the Labour Party's raison d'etre.

Protecting the Labour party is the NHS's raison d'etre.

So long as we have the NHS we shall be a socialist state - in all but name anyway.

andrew said...

I may be confused at this late hour but in the private sector, spending just enough on expensive plant (capital spending) so that things basically work but do get stretched / fully utilised is seen a a fairly sensible thing to do.
In the public sector the rules seem to be different.

Roll on the severn barrage - I want my boating lake.

James Higham said...

Yes, very much so and that's why many are looking askance at these Olympics and whether the infrastructure the public doesn't see will hold up. Should be interesting.

lilith said...

"in the real world they are quietly planning gas-fired power stations"

Thank goodness for that! not as stupid as they sound then.