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Mind the gap: UK Infrastructure, investment and inequality How should the railways be funded?

The Analyst

Recently published data for Inequality Briefing found that the UK has nine in ten of the poorest regions in Northern Europe, as well as the richest region in Europe, Inner London.

In the 1970s, despite its economic problems the UK was spending more as a proportion of GDP on infrastructure than numerous countries across the world, including Japan and the US. By 2006, the UK was ranked 19th in the world for the quality of its infrastructure and by 2016 it had fallen to 24th.

Access to infrastructure and prosperity are intertwined. Moreover, as the UK has invested less in its infrastructure, so regional inequalities have grown.

While London makes a significant net contribution to the Chancellor’s coffers, it has also benefitted hugely from infrastructure spend. In 2017, London received more than 50% of the UK’s transport investment. There are, for instance, more connections, safety points, lighting and arrangements on the approaches to and leaving London Paddington Station, than in the whole of Northern Ireland.

However, even London has seen lower infrastructure spending in recent years and, while much of the attention on the impact of changing schedules for 55% of the rail network (and a million trains a year) has been elsewhere, London has been affected too.

Frustration with the quality and performance of UK infrastructure, combined with concern that privatised industries are more likely to act against consumer interests, have popularised re-nationalisation. In February 2018 ComRes found that 49% of the public supported renationalising the energy industry and 52% supported renationalising Britain’s railways.

Recent polling by ComRes for Anglian Water, Severn Trent, South West Water and United Utilities shows that over half of public support nationalisation of some NHS services (53% support prioritising these if the Government were to nationalise anything), and a slightly smaller proportion support prioritising nationalising National Rail services. Forty-one percent say the same of energy companies, 31% of water and sewage services, and 25% say the same of mail and postal services.

Only 13% say they do not think the UK should nationalise any of the industries mentioned. Furthermore, one in five adults say that the UK Government should specifically prioritise nationalising private companies in certain sectors (e.g. utilities, transport) over public expenditure on the NHS, police services, schools, welfare and benefits payments.

Given the practical challenges of renationalisation as well as ideological resistance to it, other solutions have been suggested: the German model of a publicly-owned National Investment Bank to fund public infrastructure projects is one. Another suggested approach is a structural overhaul that avoids incurring more national debt through re-nationalisation. In rail this might mean re-evaluating the franchising process and equitable risk-sharing between public and private bodies and organisations (e.g. Network Rail and TOCs).

No matter what the proposed solution to the infrastructure challenge, it will be expensive – at a time when total UK Government debt is still increasing towards the £2trillion mark. Some economists estimate that an investment of £20 billion every year will be required between 2017 and 2022 in order to bring UK infrastructure back up to scratch.

This Government has responded by creating the National Infrastructure Commission (referred to as the NICP, National Infrastructure Commission Pipeline) a year and a half ago, and putting £500 billion into UK infrastructure – around £200 billion of which will come from Government coffers. Only this month it was announced that £5 billion was to be put into new rolling stock, stations and big structural improvements on Wales and Borders routes. The Government has also created joint strategies between a number of big TOCs and Network Rail to promote better coordination.

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