Greater Manchester exemplifies the benefits of a new, more connected way of evaluating infrastructure investment
Cities are the engine of economic growth – and infrastructure development is the fuel for that engine.
But it is notoriously difficult to measure the economic benefits of such development, mainly because it tends to be approached in terms of very simple equationsresponding to specific challenges, such as the need to move people and goods faster and more reliably, and using specific methods to underpin the case for investment, such as the value of time saved by road users versus the net cost to taxpayers of road building.
Viewing infrastructure investment on such a project-by-project basis may do more to hinder economic growth than support it. For instance, a new road that connects an industrial development to a new port would be hard to justify measured simply by time saved in traffic. But take a wider view of increased productivity, exports and jobs, and it becomes clear that such a road actually provides exceptional value.
It's clear that we need a new model for UK infrastructure investment that focuses on wider economic benefits, such as increased tax revenue, new jobs and enhanced GDP, as well as the value of improved connectivity.
The Greater Manchester region has led the charge, starting with civic leaders thinking about which transport programme would deliver the most growth for every pound spent and quickly broadening to includeregeneration programmes to improve business connectivity and housing programmes to improve labour markets. Rather than simply building transport networks to reduce commuter travel times, leaders began to think more clearly about how housing, planning and transport could be improved, not just to boost labour markets, but also to help communities that were less connected.
The field has been thrown open to also include civic planning, business promotion, urban regeneration and a host of other approaches and investments that may deliver a bigger bang for the investment buck and – as a result – greater economic development.
Greater Manchester has established a £2bn fund with the objective of maximising growth, subject to improving social exclusion and carbon emissions. Moreover, the region has backed its judgment about which programme would have the greatest impact on jobs and productivity with its own money: £1.2bn of the programme is being paid for locally, with the bill being split across the 10 districts of Greater Manchester.
This combination of self-help and economic prioritisation means the fund is contributing to national as well as local economic growth. In turn, it is contributing to increased tax revenues and paving the way for the Greater Manchester Earnback deal with the Treasury, announced as part of the first wave of City Deals.
As part of the groundbreaking deal, Greater Manchester has committed to reinvest all the money it earns in further growth focused investment. The aim is to create a genuinely self-sustaining proposition for economic growth and development.
This type of arrangement is now being considered by other Wave 1 cities, and no doubt some of the 20 cities being considered for the second wave.
The scale of the challenge in terms of local and national leadership should not be underestimated, but after years of trying to get Whitehall to break down its silos and think strategically about the economic value of investment, the Treasury may finally have found a model that can work at city level.
James Stewart is chair of global infrastructure at KPMG
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