The end of a golden age?

For the first time in Britain we know that the next General Election is going to be held in less than a year’s time on 7 May 2015. This is the first opportunity our political parties have had to plan, with certainty, their programmes and priorities for the next Parliament.

The questions that previously dominated the agenda about what if, when and why don’t they call it now, have been replaced by a steadier process. Manifestos are being developed by policy wonks assisted by professional pollsters and the parties are building their narratives about they stand for. It is into this mix that the infrastructure sector finds itself competing for recognition. 

The sector is coming from an almost unparalleled position of strength. Like manufacturing, infrastructure is a sector in the political ascendency. There are no dissenting voices, infrastructure investment is a great thing, it creates the right kind of jobs and literally builds us the foundations for a more productive and stronger economic future.

Without a new and compelling narrative for the industry, we could be in danger of being left with the bare minimum, plus a couple of grand ideas never quite leaving the drawing board.

The emphasis from the Government and Opposition may be different, as infrastructure: ‘has been our way out of austerity and recession’; or ‘will boost living standards to end the cost of living crisis’, but the central tenet remains fixed. Infrastructure has been a critical part of the solution to the great recession. 

The question is, what happens when the great recession is at an end?

Britain’s economy has finally returned to pre-crisis levels of production and we are now predicted to get richer. Yes, the debt has to be paid down; yes, we have more people than ever; yes, the supply of Government funding will remain restricted for years. But, the return to growth changes the political imperative. The hegemony of securing the recovery through investment in infrastructure is over. 

But surely though, with more money comes more opportunity and there is certainly a logic to this. To coin a phrase, however, when ‘we are all in it together’ and we know times are tough for everyone, we are all willing to make sacrifices.  When things improve a little and are set to continue to improve, those sacrifices are no longer palatable.

Experience tells us there will be operational inflationary spending pressures on whoever forms the next Government. And, in the infrastructure world when opex spending increases, what is the consequence for capex?

Education, the NHS, social care, police, debt payments, public sector pay, defence, local government - all of these spending priorities have suffered, and as they see the tap turn back on they are going to want their share. Experience tells us there will be operational inflationary spending pressures on whoever forms the next Government. And, in the infrastructure world when opex spending increases, what is the consequence for capex? 

This is the fight the sector faces in a new economic phase. When the call comes to pay our nurses more, or to invest in our children, what will the story be for the infrastructure sector? Are we confident that we have a powerful new narrative that can compete for funds and win?  PPPs and PFI funded the last time of plenty, next time it won’t even be plenty and those funding models are now politically unacceptable. 

Politicians understand the need to invest in the more mundane, however, they are pushed and pulled in all directions. Without a new and compelling narrative for the industry, we could be in danger of being left with the bare minimum, plus a couple of grand ideas never quite leaving the drawing board – HS2 and airport capacity in the South East.  Times change and we have to change with them. Otherwise, given the track record of government investment, we may look back on this as a missed opportunity for infrastructure in what was a golden age. 

George Hutchinson is a partner at consultant Stockwell Communications.