Hammond should be cautious about further borrowing for infrastructure - Daniel Mahoney for CapX

Daniel Mahoney wrote “Hammond should be cautious about further borrowing for infrastructure”, citing CPS bulletin “Infrastructure Can Be a Bad Investment, for CapX on 18 November 2016

There is no doubt that Britain’s infrastructure is in need of upgrading. Britain’s road, rail and air transport infrastructure scores 27th, 19th and 18th respectively out of 138 countries analysed by the World Economic Forum.

There are also well documented problems associated with broadband provision in the UK. According to the Ookla speedtest, the UK is only the 30th fastest average internet speed in the world.

The political class are responding to the need for infrastructure improvements and a boost to economic growth by pushing for greater borrowing – particularly as the cost of government borrowing continues to be relatively low.

But this is missing the point. The UK’s infrastructure investment gap – the amount of extra investment needed to support expected rates of growth – is a relatively modest 0.4 per cent of GDP.

Thus an improvement in the quality of infrastructure projects could yield much greater infrastructure improvements compared to a policy of simply seeking more public funds.

To read the full article, visit the CapX website

Date Added: Friday 18th November 2016