Keynes is back, or so it seems. Often justified in terms of being “affordable” in a world where the current cost of government borrowing is extraordinarily low, advocating high levels of infrastructure spending is firmly in fashion. In the US, Donald Trump is proposing to “invest” $550 billion on building the “roads, highways, bridges, tunnels, airports, and railways of tomorrow”, exactly doubling Hillary Clinton’s pitch in the presidential election to spend $275 billion in direct spending on infrastructure (plus another $225 billion in loans). In the UK, the Shadow Chancellor John McDonnell MP has proposed an even more lavish £500 billion infrastructure programme (equivalent to 27% of annual UK GDP, compared to Trump’s planned 3% equivalent of US GDP). Although more modest in scale, the Chancellor, Philip Hammond MP, has also announced his intention for more spending on infrastructure.
But is this race to spend more and more on infrastructure sensible? And would it not be better to focus on the quality of infrastructure spending, as opposed to the quantity?
To ask these questions is not to suggest that today’s UK infrastructure is ideal. Much needs to be done in areas such as, for example, broadband, energy, (some) rail improvements, airport expansion and seaport development. The right questions to ask are how these projects should be prioritised; how they should be funded; and what should be the role of the private sector in bringing sensible projects to fruition.