Osborne’s infrastructure boost ‘won’t be felt for years’

28 Nov 11
The government has been warned that its proposals to increase spending on infrastructure will not boost economic growth for years.
By Richard Johnstone | 28 November 2011

The government has been warned that its proposals to increase spending on infrastructure will not boost economic growth for years.

Chancellor George Osborne is expected to announce plans for a multibillion pound investment in infrastructure in his Autumn Statement tomorrow.

This will include encouraging UK pension funds to invest in capital projects such as road improvements and rail upgrades.

However, Tony Poulter, head of PricewaterhouseCooper’s UK capital projects & infrastructure group, warned that any developments would ‘have an impact in years rather than months’.

He told Public Finance that ‘a year is not a long time in the life of some of these projects’, and that it would also take between two or three years for investment from pension funds to be realised.

However, this could provide billions of pounds for projects, Poulter added, once the funds concerned have built up an understanding of infrastructure investment.

‘These projects are good long-term investments, but it’s been in the “too difficult” box [for pension funds]’, he said. ‘What the government has said is it is looking at three or four institutions to do this together and that will get past that problem.’

Poulter also said that Osborne could announce some road improvements as early targets for additional funds, paid for by road tolling.

However, transport pressure group Campaign for Better Transport warned that there would be a number of risks in letting private pension schemes invest in tolled roads in the UK.

In a briefing today, CBT said there were ‘some important problems’, including risks associated with getting planning approval in light of local opposition. There was also evidence that forecasts for traffic on existing toll roads were over-optimistic.

The campaign group called for the government to encourage any money into public transport projects, which it said were a ‘far more promising prospect for private investment than toll roads’.

Also today, think-tank Centre Forum followed the CBI and the Institute for Public Policy Research in calling for the chancellor to boost investment in infrastructure.

Publishing its five-point plan to boost demand and growth, the liberal think-tank has also said that the Bank of England should be given a broader remit, including setting policies to target gross domestic product growth rather than inflation.

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