There’s a lot more wrong with UK public investment than HS2. I see that as a governor of a small primary school relying on parents to support new playground and IT equipment, and, rather less personally but just as clearly, in our Resolution Foundation research. There are four related problems.
First, the UK state simply invests too little: the average OECD advanced economy has invested 50% more (relative to GDP) than the UK this century. The results are everywhere, from Raac-infested schools to potholed roads. Our politicians have strong incentives to cut public investment for tomorrow (it’s easier than firing nurses or raising taxes today). And our fiscal rules focus narrowly on net debt, ignoring the value of assets on the public sector balance sheet.
Second, public investment is too volatile. Departments’ investment spending changes are six times more volatile than day-to-day spending, preventing long-term planning and guaranteeing poor value for money. When we do want to invest, trying to increase spending quickly means paying through the nose or failing to get the money spent (the government fails to spend £1 in every £6 of investment planned).
Then there are the immediate cuts. Public investment levels now are higher than we have seen for some time. But the government has pencilled in significant cuts (from 2.5% of GDP to 2.2% in 2027-28). That is mad when Britain needs to be investing more, not less, not least for the net zero transition.
Lastly, how we invest is plagued with problems. HS2 spells out the madness of opaque political decision-taking, stop-start project approvals and chronic cost overruns.
There is no plausible path out of current stagnation that doesn’t include us becoming a higher – and better – investing nation. Time to invest for the future and stop living off our past.
• Torsten Bell is chief executive of the Resolution Foundation. Read more at resolutionfoundation.org
