The National Infrastructure Commission (NIC) has released a paper looking at economic growth as a driver for future infrastructure in the UK.
The paper – Economic growth and demand for infrastructure services – is part of a series which will look at the drivers of future infrastructure supply and demand in the UK, the NIC said. The conclusions of the report are designed to help it assemble plausible scenarios for infrastructure development up to 2050.
The eventual aim, the NIC said, is to outline a strategic vision over a 30-year time horizon and set out recommendations for how identified needs should begin to be met. Themes covered will be transport, digital, energy, water and wastewater, flood risk and solid waste, assessing the infrastructure system as a whole and identifying important interdependencies.
The paper says that economic growth is a key driver of infrastructure service demand – in effect how the financial situation of consumers reflects their ability and willingness to pay for infrastructure, and how this results in the overall demand for trains, aircraft and other transport. In addition, it says investment in infrastructure has positive effects on economic growth. But the report says there is an inherent uncertainty in forecasting long term growth rates, so that ”relatively small differences in annual growth rates compounded to substantial differences in incomes by 2050”.
It said that in the period to 2050, significant changes in household incomes could be expected and understanding these changes would help the Commission to develop scenarios reflecting the range of possible futures.
However, the report goes on to say that even though demand for most infrastructure services appears to rise less than proportionately with income, there would be a tangible impact of changes in economic growth on demand in many sectors.
“Where – as with air travel – demand appears to rise more than proportionately with income, the effect is larger still and hence more sensitive to the possible path of future incomes,” the report said.
“Infrastructure choices in turn can affect the rate of economic growth.”
It said that it would now consider this feedback loop when deciding on policy options.