A new report claims that Scotland needs to boost investment in economic infrastructure by over £400 million per year if transport links and utilities are to be brought up to the standard of the world’s top advanced competitor economies, such as Switzerland, Singapore and Finland.
Failure to do so could have a significant negative impact on the Scottish economy.
The report, entitled Delivering Firm Foundations for the Future, comes from N-56, a business-led initiative, with the £400 million of investment giving an additional £1.1 billion boost to the Scottish economy, stimulating economic growth, maximising competitiveness and creating thousands of jobs, both directly and indirectly.
Current lower quality infrastructure compared with global competitors, as judged by the World Economic Forum, is due largely to low levels of infrastructure spending. This is acting as a brake on economic growth but required investment is difficult to achieve under current capital budgets, requiring innovative solutions such as a Scottish Infrastructure Bond.
While Scotland already has a wealthy and strong economy, the aim of N-56 is for Scotland to become one of the five wealthiest countries in the world and its infrastructure proposals are contained in its latest Scotland Means Business reports – Delivering Firm Foundations for the Future. The report has been put together by a team of leading international economists including BiGGAR Economics (Scotland), DAMVAD (Norway, Sweden and Denmark), Landfall Strategy Group (New Zealand and Singapore),Tulloch Energy (Scotland) and Capital Economics (London).
The report proposes a blueprint of initiatives looking at how Scotland can deliver high quality infrastructure, firm foundations for long-term economic growth. These measures include looking towards Ireland’s National Development Plan to deliver coherent infrastructure planning, rather than on case-by-case basis; looking at the delivery of hub airport and port services in Scotland; extending high-speed rail to Scotland and funding additional investment through a Scottish Infrastructure Bond.
The proposed £400m funding increase (from less than £800 million in 2014/15) would bring the overall annual economic infrastructure spend to £1.2 billion per annum (0.8% of GDP – the benchmark widely considered to be necessary to support an advanced economy) – equivalent to the new Forth Crossing (the biggest ever Scottish infrastructure project) every year.
The report cites data which shows that since 2003 investment in economic infrastructure – including transport networks; gas, electricity, water grids and sewerage systems – has fallen below the 0.8% of GDP benchmark, concluding that if investment is not taken back to this level it could lead to a loss to the Scottish economy of at least £7.5 billion per year by 2026 (against a UK loss of £90 billion). This is due to reduced economic growth and competitiveness when compared with global competitors.
Graeme Blackett, from BiGGAR Economics and lead author of the Delivering Firm Foundations for the Future report said, High quality infrastructure is vital to delivering economic growth while poor quality infrastructure can inhibit competitiveness and constrain growth. We have a wealthy and strong economy but invest less in infrastructure than other advanced economies, such as the Netherlands and Singapore, and have paid a high price for this.
“Under-investment in infrastructure makes our economy less competitive than it could be and in order to bring our infrastructure up to the standard of global competitors we need to pump over £400 million into infrastructure. However, by doing so we will reap the rewards, realising our full potential as a nation, which includes boosting the Scottish economy by over £1.1 billion. In terms of financing these requirements it seems unlikely that these can be funded in full under current capital budgets. However, investment in improving infrastructure need not be entirely funded from public sector sources and we should look towards other innovative models. One potential model would be Scottish Infrastructure Bonds, which could be offered to international bond markets and as domestic savings products, a model that has been adopted successfully in Singapore.”
