Talk of a ‘double dip’ notwithstanding, the economic outlook appears somewhat rosier in the opening weeks of 2010 than it did throughout most of 2009. But while the word “crisis” may have fallen out of fashion, the dramatic events of the last couple of years have left a painful legacy in the form of the substantial public sector deficits apparent in many developed countries.
As politicians increasingly turn their thoughts to areas of spending that can be cut back, those with a vested interest in securing long-term commitments to infrastructure projects might be feeling a little nervous. After all, while pleasant noises are frequently made about the potential for new and refurbished infrastructure to drive long-term economic prosperity, such assurances can seem a little hollow when the coffers are empty.
The UK is one country where this issue is particularly pertinent. With ambitious projects such as Crossrail, Thames Tideway and a new nuclear energy programme underway ¬- and plans afoot for plenty more – the prospect of national debt hitting 75 percent of GDP by 2013 (this would be the highest level of recorded debt in the country’s history) can hardly be welcome.
So far, those with an interest in seeing UK infrastructure projects proceed at pace appear to have little to worry about. The recent launch of an Infrastructure Planning Commission was designed to help overcome planning glitches and speed important projects towards the finish line. If this was a sign of political goodwill in the present, however, the future is a little more uncertain. Infrastructure projects can outlive terms of office and possibly also outlive their perceived usefulness in the event of the levers of power changing hands – a relevant consideration in the UK where a general election looms within months.
For all this, the current pressure on public finance should in theory open the way for private capital to step into the funding gap. This much is recognised in the launch of a new manifesto by the UK’s Institute of Civil Engineers. It calls for the creation of a new National Infrastructure Investment Bank, among other measures designed to, in its words, “attract the large volumes of private capital which will be needed to fund essential infrastructure investment”.
A country deep in debt may find it hard to look to the future with confidence. As a consequence, providers of private capital can do just that. Or at least, that’s the theory. Readers might recall that in October last year President Obama’s proposal for an infrastructure bank in the US was omitted from a package of transportation infrastructure spending going through Congress. Even the best-laid plans won’t necessarily be hatched.