Promise and compromise

With the general election due in less than a week, tension is building in the UK. Credit for this can hardly go to the one-month long campaign, which by most accounts hasn’t managed to electrify voters. What’s captivating observers and bookmakers alike, rather, is how hard to call the poll outcome remains: with a hung parliament a strong possibility, the eventual combination of parties tasked with ruling the UK beyond election day remains anyone’s guess.

In one area at least, more certainty exists. Conservative, Labour and Liberal Democrat leaders have all displayed a commitment to taking a longer-term view of infrastructure, making it clear that they will continue to support frameworks and projects designed to facilitate investment should they get to help form the next government. Favoured sectors vary across the spectrum: the Tories like roads, Labour prefers rail; the Lib Dems are outspoken supporters of renewables, while Conservative backbenchers are not so keen. But differences are small, and likely to be ironed out as coalitions are formed.

This is all made all the more likely by the economic data released this week. With GDP figures showing the country’s economy growing at its slowest pace since the final quarter of 2012, candidates will be eager to demonstrate that they have ideas to put the recovery back on track. Plans to build more and better infrastructure, seen as key to generating demand and increasing productivity, will climb up the agenda. And the main parties all concur that private capital should be granted more room to help with the task – even Labour, which sees private investment in capex as far less problematic than in public service delivery.

But beyond this unity of principle, doubts remain as to what the next government’s infrastructure policy will deliver in practice. “Even though parties have these professed aims and policies, they could change their plans if there is a hung parliament,” Dominic Church, managing director of London-based consultancy Westminster Advisors, told us this week.

Much of the uncertainty stems from the fragmented nature of UK politics today – an oddity with little historical precedent. The outgoing government may have been a coalition, but tight control was still being exercised from the centre, with a strong cabinet office, the treasury and the prime minister all working more or less seamlessly together. This has helped formulate a relatively coherent view of infrastructure at the top level – as exemplified by the National Infrastructure Plan – therefore providing clarity as to what the government was trying to achieve.

The picture, in a few weeks’ time, is likely to be rather different. Without enough seats to earn an outright majority, the winning party will have to rely on the support of a handful of smaller parties to form a government. This may prompt leaders to regularly “appease” their junior partners by hitting the brakes on a number of big projects, which despite a hefty cost for the nation as a whole can provide more benefit for certain constituencies and regions. For instance, would the Scottish National Party put its weight behind HS2, a £50 billion high-speed rail line linking London with the Midlands and the north of England? Equally some projects with a weak economic rationale but strong local appeal could be undertaken in a bid to please local populations.

Another unknown is the extent to which the UK’s main parties may be influenced by the efforts of vocal backbenchers. With little margin for losing support during crucial votes, the country’s next leader will be tempted to forge compromises with MPs further away from the political centre or more sensitive to local gripes. Should one of them feel strongly about a given project – and should this backbencher’s support be needed to pass a given bill – the Prime Minister may decide that more flexibility is needed to advance his broader cause.

Reactions to the report by Sir Howard Davies’s Airport Commission, due this summer, will give a hint of how long term the vision of a minority government can be. In the meantime, though, private investors still have reasons to cheer. They will likely be entitled to a bigger slice of the infrastructure cake after the 7th of May – even if its exact size and nature remain in question.