LAST week I was invited to attend the Institute of Civil Engineering question time debate to discuss the role of infrastructure in the Northern Ireland economy. Mixing with a room full of engineers at 8am in the morning might be considered by some to be a strange way to spend breakfast, but as the old saying goes ‘every day is a school day’, and I learnt a lot.
I had the privilege of meeting with the very people who build our bridges, design our roads, ensure we have steady flow of energy and water and also make sure we don’t find ourselves up to our necks in garbage. Many of these fundamental things that we often just take for granted in life don’t just happen - civil engineers make them happen.
Joining me on the panel were Sir John Armitt, president of the Institute of Civil Engineering; Kevin McShane who owns a local engineering company and is a past chairman of the NI Institute of Civil Engineering; Nigel Smyth of CBI NI and Employment & Learning Minister Dr Stephen Farry.
The benefits of investing in local infrastructure are very straightforward. The public benefit when they have access to modern hospitals and school buildings and when they are not caught on congested roads. The economy benefits too as goods and services can be delivered in a more efficient and timely way and disruptions to the working day from energy black-outs or flooding are minimised.
We only have to look at scale of the chaos and the cost of the recent closure of the Forth Bridge in Scotland. Although the full economic impact of the closure cannot yet be determined, Forth Bridge management have previously estimated that even a one lane closure costs the Scottish economy around £650,000 a day.
In Northern Ireland, too, the recent floods have caused devastation for some households in the run up to Christmas and numerous businesses have had their stock destroyed, causing trading to come to a halt. Insurance companies will now be under further financial pressure as they start to assess damage and pay out on claims and insurance premiums will invariably rise next year as a result. Essentially, everyone is impacted when public infrastructure is not fit for purpose.
One of the questions posed to me at the civil engineering debate was: “What makes an economy’s infrastructure fit for purpose?” I'm not an engineer, but from an economics perspective the answer is very clear to me. The provision of good infrastructure for transport, energy, communications, water and waste in any country requires three things: good planning and co-ordination, sufficient funding and the right skills.
If we look at the first requirement, ‘good planning’, it is easy to see why things can sometimes fall below expectations. Long-term planning which takes into consideration things such as population growth and extreme weather events is essential. A short-term focus proves to be a waste of money when it comes to infrastructure. In addition, without a long-term plan for our infrastructure needs, the public sector will be unable to attract private partnerships into joint investments.
However, political decisions around where public money will be spent can often over-rule long-term plans. Just think of the Chancellor’s initial determination during the financial crisis to cut government capital budgets by 40 per cent. Furthermore, infrastructure planning for the economy requires a very high level of skills which are sometimes absent at a strategic level.
For example, it is very worrying that in 2015 an NI Audit Office report entitled “DRD: The effectiveness of public transport in Northern Ireland” found that “DRD does not have the skills needed to effectively manage public transport”. Having a sufficient number of public transport planners within government is crucial for success.
Funding is the second most important issue for both new public infrastructure works and for maintenance. Standard & Poor’s, the rating agency which assesses the economic outlook in countries right across the globe, estimates that increasing the government spend on infrastructure by one per cent of GDP in the UK leaves the economy 2.5 per cent bigger.
But, as noted earlier, infrastructure funding is often considered by politicians as an easy target when budgets are tight because the damage done through lack of investment will not show up for many years (ie when the politicians are no longer in office). Indeed, the civil engineers at the ICE debate pointed out that for every pound that we fail to spend on maintenance, we end up spending £1.26 at a later date.
Cuts to capital budgets prevent new projects from getting the go-ahead and cuts to departmental resource budgets put a stop to crucial maintenance work.
On the point of funding, there is a job to be done in Northern Ireland around educating the public about revenue streams. While all of us want to see modern hospitals and investment in water and energy systems, we do not like paying taxes. Until we accept the relationship between revenue raising taxes and great public services and infrastructure, Northern Ireland will struggle to deliver on this front.
Finally, skills. Not only does good infrastructure require a high level of planning skills, but we also require a steady flow of civil engineers to build the infrastructure so that it is ‘fit for purpose’. Unfortunately the recent Skills Barometer published by DEL identified this to be one of the areas in which Northern Ireland had a skills gap. The Institute of Civil Engineering in Northern Ireland is working hard to correct this skills deficit through support for apprenticeships and dissemination of information.
But it is possible. Clearly there is a lot to be done in Northern Ireland if we are to deliver infrastructure fit for the 21st century. But all not lost, there has been a recent uplift of 12 per cent in Northern Ireland’s capital budget, we have Fresh Start Agreement that recognises the importance of infrastructure as a driver of economic growth and we live in a region that is small enough to ensure the necessary changes to planning and skills are perfectly achievable.
Good collaboration between government and industry will ensure Northern Ireland can become synonymous with ‘world-class infrastructure’.
:: Angela McGowan is chief economist at Danske Bank in Northern Ireland.
