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Scottish government reports on economic rationale for infrastructure investment

The Scottish government has published a report highlighting the economic case for investing in infrastructure.

The paper, Exploring the Economic Rationale for Infrastructure Investment, summarises evidence on the link between infrastructure investment and economic growth. It also illustrates the potential economic benefit from the Scottish government’s National Infrastructure Mission to increase annual investment in infrastructure by £1.56bn by the end of the next parliament.

The report, by the office of the chief economic adviser of the Scottish government, concludes that there is a strong body of evidence which supports the link between infrastructure spending and improved economic growth. An increase in annual infrastructure investment of the scale envisaged in the National Infrastructure Mission could provide a permanent boost to Scotland’s economic growth, it says.

Overall, and in common with the OECD results, the economic modelling finds that an investment-led stimulus has both a short-term demand effect but also a longer-term supply effect by increasing the long term productive capacity of the economy. 

The report also says that the extent of economic benefits will be shaped by the efficiency of the individual public investment projects. Ultimately, the balance of investment between different types of activity, sectors and markets will determine the precise level of economic benefits realised from the infrastructure investment package.

Infrastructure is an enabler of sustainable and inclusive growth says the report and the main channels through which infrastructure enables inclusive and sustainable growth are through its role in supporting the foundations of economic activity, supply side economy impacts, market impacts and social and environmental impacts.

Exploring the Economic Rationale for Infrastructure Investment is a very useful document that highlights the economic case for investing in more infrastructure. Click here to download the report.