Categories: Economy

ALEX BRUMMER: Don’t kill capital projects

Don’t kill capital projects: large infrastructure offers the opportunity to create a better and more productive economy, says ALEX BRUMMER

  • When Britain backs major infrastructure, it does so with confidence
  • Yet so many of these projects are vulnerable to cancellation
  • Leaks from the Treasury Suggest Next Generation Capital Projects Are At Risk
  • Since the Treasury abolishes government spending, it also includes committed capital expenditure

Anyone traveling on the Eurostar from London to Paris cannot fail to be impressed by the contrast of the magnificent restoration of St Pancras and the depressing gloom of the Gare du Nord.

When Britain supports major infrastructure, from the Elizabeth Line to New Bond Street Station, Thames Tideway and the redevelopment of the Battersea Power Station, it does so with confidence. Yes, it must be recognized that the costs of these projects often spiral out of control and there can be long delays in delivery. British planning rules, environmental standards and respect for the past are slowing down the process.

Once delivered, the nation has created something for future generations, enhanced overseas revenue capacity and boosted lagging productivity.

Impressive: When Britain backs major infrastructure, from the Elizabeth Line to the Thames Tideway and the redevelopment of the Battersea Power Station, it does so with confidence

Yet so many of these projects are vulnerable to cancellation. Without the intervention of John Prescott in the 1990s, Eurostar’s high-speed link, from London via Ashford to Dover, might never have been completed. In the 1970s, the ill-fated project to build a new London airport at Maplin, at the Thames Estuary, could have transformed Britain’s capacity into the bonded warehouse of the world. It was canceled due to budget cuts. The country pays heavily for short-termism and a lack of ‘can do’ mentality.

Judging by the latest leaks from the Treasury star chamber chaired by fiscally dry Rishi Sunak and Jeremy Hunt, the next generation of capital projects is in jeopardy. If Britain is to have a carbon neutral future, it needs not only renewables and insulation, but also reliable power generation.

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The UK’s nuclear power plants are aging and too often offline. Many plants have to retire. Hinkley Point in Somerset, one of the most complex pieces of engineering ever attempted, is intended to be the first of a new generation of nuclear reactors.

Sizewell C in Suffolk was intended to be next and Boris Johnson’s government was determined to make it happen, in conjunction with the French EDF, by providing funding to ensure the project got off the ground. It could be ended now.

Since the Treasury takes an ax on government spending, it cannot resist including committed capital expenditures. It could jeopardize not only Sizewell but the prospects for a new fleet of Rolls-Royce Small Modular Reactors (SMRs).

Not only will this threaten net zero in 2050, it will also make us more dependent on the kindness of strangers for energy supplies. The Treasury has a history of ignoring nuclear ambitions. Hitachi has been an enthusiastic financier of new UK nuclear investment in Anglesey. In 2020, the Japanese company withdrew from the project after former Chancellor Phil Hammond suspended a pledge of government aid. It seems that the same cycle of commitment, announcement and cancellation could be back.

Vital rail projects are also in the sights of the capital cost-cutters. Getting HS2, the high-speed link, was a huge task. Nimbyism and environmentalists have pushed the cost to an estimated £72 billion as tunnels and viaducts have been added. Despite spending £15bn, it’s an easy target for budget trimmers.

Cancellation would be disastrous and the leveling agenda would be sacrificed, along with private sector investment. Death from further cuts – Leeds’ leg is already a victim – should not be an option.

Every generation should strive to leave something to be proud of. Large infrastructure offers the opportunity to create a better and more productive economy. It must not be given up.

Jacky

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