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Our broken infrastructure

February 22, 2010

Our Broken Infrastructure On the morrow of her 1987 election triumph, Margaret Thatcher pledged that the Conservatives would devote themselves to transforming Britain’s inner cities. The urgent regeneration task for an incoming Conservative administration this year will involve transforming our increasingly shabby suburbs at a time of dire constraints on the public finances.

The regeneration of the centres of cities like Glasgow, Manchester, Liverpool and Manchester – to name but a few – has been one of the triumphs of the past twenty-five years. These areas have become attractive places to work and live. Even in my own central London seat I never cease to be amazed at the number of people in their fifties and sixties who choose to downsize from the Home Counties and move into a city centre apartment where they can benefit from an excellent retail, health, transport and entertainment offering. Alongside a more diverse and mobile younger population, they help provide a social glue that ensures many inner city areas now thrive.

Unfortunately the same cannot be said of our suburbs. One of my not-quite-so-secret pastimes is exploring the streets of suburban London on foot in an almost Betjeman-like way. Beyond the seven square miles of my constituency, I travel by tube or overground about once a month to a farflung suburb and wend my back home through areas of the capital that very few outsiders ever see. It is rare that anyone takes a leisure trip to the Barkings, Crayfords or Dollis Hills of this world, but the furthest tentacles of our tireless capital can tell the visitor so much about modern British life.

For one, the pace of demographic change since the turn of the century in London’s suburbs has been staggering. As life in the centre has become ever more expensive, it has been the outskirts of London that have absorbed those pushed further out and borne the brunt of the large waves of immigration over the past decade. While authorities such as Westminster City Council have a long history in dealing with some of the challenges of a hyperdiverse, hypermobile population – providing healthcare, schooling, language services and housing quickly to new arrivals in the area – local councils unaccustomed to an unstable and diverse mix of residents are finding their area’s fast-changing population difficult to cope with. On top of logistical challenges come huge financial pressures. With government grants to local authorities calculated according to inaccurate population estimates, councils often find themselves servicing large ‘hidden’ populations alongside registered residents.

My walks also reveal neglected, rather shabby surburban districts that appear to have been passed over by the glitzy visions of urban planners keen to revive more central areas of the capital. Potholed roads and pavements and tatty looking street furniture make way for scruffy high streets, where the credit crunch leaves many shop units empty.

This bleak picture will be exacerbated by the grim economic outlook revealed in December’s Pre-Budget Report. Following the General Election, any government will have to slam on the spending breaks. Nowhere will this be more profound than in infrastructure projects – yet this is precisely where a track record of patchy investment has left the public realm in some areas falling apart at the seams.

Limited investment in infrastructure in the 1980s and 1990s was understandably identified as a political opportunity by Labour in the run up to the 1997 election. However, their grand building projects since, notably of schools and hospitals, have proved desperately poor value to the taxpayer, present and future.

Gordon Brown’s diversionary tactic over the past thirteen years has been to use the mechanism of the Private Finance Initiative (PFI) to remove from the public balance sheet a proportion of the capital costs associated with the government’s much-vaunted public sector investment. As I have pointed out the cost the taxpayer will have to meet for PFI projects agreed over the past few years will amount to a huge ongoing additional burden on public expenditure typically over the next twenty-five years. Indeed the taxpayer is now firmly locked into making annual repayments for some 650 or so schools; hospital and other public sector programmes at a total liability so far stands at £262 billion, some of which will not be paid off until 2047.

Remember too that the capital value of these PFI contracts was only £55 billion – the vastly higher sum reflects the huge mark-up costs of lengthy long term contracts. Needless to say this comes at a time when public spending will already be under extreme constraint.

Yet the future political fallout of financial unravelling PFI schemes means that the room for manoeuvre open to any future Conservative government in the areas of public expenditure and taxation will be considerably limited – a fact acknowledged by Alistair Darling when in opposition he said of PFI, ‘apparent savings now could be countered by the formidable commitment on revenue expenditure in years to come’.

The Treasury’s response to concerns over PFI has always been robust and disingenuous – this means of long term funding was set up by the previous Conservative administration and the current government simply adopted the same rules but allegedly to tighter accounting standards. However, the principle underpinning PFI of private firms building schools, hospitals, prisons, bridges or roads has enabled the public sector to be charged often for decades ahead, leaving a generation-long legacy of debt. Broader public criticism has been muted because of the sheer number of private sector operators, contractors, consultants, lawyers and accountants who have all made hay over the past decade as advisers in a process that has proved extremely lucrative.

The true cost of accounting the future presents the sternest of challenges for Conservatives at a national level. But it will also fall to a group of relatively inexperienced senior Conservative council leaders to fight desperately to keep control of their districts at a time when infrastructure investment will by necessity have to be slashed.

Explaining to the public that this is a result of the extravagant costs and poor value of infrastructure projects already in the frame will be tough. Employ the acronyms PFI or PPP and the public switches off. It is the size of Sir Fred Goodwin’s pension and the moats and bell towers of MPs that capture the public’s imagination, not the couple of hundred billion pounds indiscriminately, incompetently splurged on PFI.

Conservatives face the challenge of reviving our suburbs and transport infrastructure amidst this depressing indifference to the true costs of Labour’s decade-long spending spree. The risk is further decline of these outer districts continuing alongside ballooning youth unemployment and increasingly fractious community relations. A serious situation risks being worsened by the systematic understating of population figures unless urgent attention is paid to the methodology of next year’s nationwide census.

So much of local government in England is now Conservative run that we confront the sternest challenge in the face of a populist Labour campaign in the years ahead. Our task will be to reverse the waste of the past decade and reassert values of both economy and community in our suburbs.