The UK government has made a firm commitment to improving the nation’s infrastructure. Earlier this year, George Osborne, Chancellor of the Exchequer, earmarked £100 billion (€120 billion; $161 billion) of spending for projects until the end of the current decade.
Moreover, we have seen high-profile rail infrastructure projects already taking shape, such as Thameslink, Crossrail and, more recently, High-Speed Two (HS2) – a high-speed rail link between London, Birmingham, Manchester and Leeds. However, to make a real difference in reducing overcrowding on the UK transport network, we must first address the root cause – the need to effectively address the lack of available and affordable housing in the locations where jobs are being created
Ultimately, if the economy is to continue to grow, then sustained investment in infrastructure will be required. In many countries around the world, governments invest to support growth, rather than invest because of growth.
In the UK, we seem to only invest after there is pressure from multiple stakeholders – users, local authorities and the media, for example. And then there is often a long delay because of the length of time needed to make the investment. In any sensible world, the preferred sequence of events would
include making necessary investments before the crisis hits.
Indeed, the relationship between good infrastructure and economic activity is
well established and can, in essence, be seen as a “reinforcing loop”. Good infrastructure leads to increased economic activity; increased economic activity leads to increased pressure on infrastructure; this leads (eventually) to investment in better infrastructure; and so the loop continues. However, where should the investment in infrastructure be focused?
Problems such as this are often approached logically, but with overly “linear thinking”. For example, with transport infrastructure, there is often a discrepancy between the goal of being able to travel with ease, where and when one would like to go and what can be achieved in practice. So, the solution is to invest in more transport infrastructure – which is done at great expense.
Although attempts have been made to moderate demand (through fares policy), there is often not enough thought given to who is travelling, why are they travelling and what is causing the rate of growth for demand to exceed that of the population growth. This is where the problem lies.
Transport economists frequently maintain that there are three main drivers for demand for travel: fares policy; employment in city centres; and economic activity, as represented by gross domestic product (GDP). And while this is true, it is not clear that the last two are independent of each other. With fares on the railways largely limited to the rate of inflation, the biggest driver for the rise in demand is the creation of jobs in cities.
This has two direct effects. People seeking work who live outside of the cities start to commute and, in the absence of available housing in cities, house prices increase. In October, figures from estate agent Rightmove showed that although house prices across the country were rising at 2.8 percent month-on-month, within London it was 10 percent. As a result of this, people are moving further from their place of work, leading to an increase in congestion on road and rail.
According to Transport Statistics*, between 1995 and 2010, the average number of trips on the national rail network rose by 61 percent and the average distance travelled rose by 58 percent. And in the same period, the average distance travelled on London Underground rose by 23 percent**. Over half (56 percent) of people working in London now commute for more than 30 minutes to get to work, every day***.
If one takes a step back, it is clear that a root cause of all this is the lack of available and affordable housing in the locations where jobs are being created. Of course, people will always need to travel for economic reasons, but the growth rate (and, therefore, the rate at which investment in transport infrastructure is required) can be slowed.
There are two specific interventions which need to be considered. Firstly, the encouragement for businesses to set up or expand away from cities; and secondly the facilitation of house building in the places where jobs are currently being created.
There needs to be more focus on developing effective ways for national and local governments to support the necessary investment in housing. Investment will come from the private sector to build new houses, because there is huge demand. What house builders need is suitable land and planning permission to build new homes.
Much of this is within the control of local authorities. However, if the government wishes to expedite the process, then recoverable seed money in identifying and preparing land for disposal would be useful.
A total £3 billion has been set aside by the government for 165,000 affordable homes – which is a good start, but imagine what could be done with, say, £30 billion! And what would this do to the demand for investment in transport infrastructure? If we want to find real solutions to our infrastructure problems, then first we must fully understand what is really causing them.
Iain Coucher is a managing director with Alvarez
& Marsal Corporate Solutions in London. He was
previously chief executive officer of Network Rail,
the owner and manager of the UK rail network.
*Transport Statistics Great Britain, 2004
** National Travel Survey, 2011
*** ONS, Commuting to Work, 2011