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Slashing Spending and Boosting Infrastructure in the U.K.

British Prime Minister David Cameron’s announcement last week of the U.K.’s plan to balance its books by slashing spending raised eyebrows across the globe. With an average drop of nearly 20 percent across all British agencies--from defense, to housing, to education--one commenter noted, “Little is spared.”

But not everything was cut. Recognizing the “difficult decisions” that Britain has deferred in recent years, the prime minister followed up last week’s budget announcement with a major speech yesterday to the Confederation of British Industry (Britain’s rough equivalent of the U.S. Chamber of Commerce) where he rolled out his National Infrastructure Plan 2010.

Like many of these infrastructure proposals we’re used to seeing in the United States, this one is dizzying in its ambition. The plan sets out a spending target of about $315 billion over the next five years on energy, transportation, broadband, and water infrastructure. Where all that will come from is still kind of TBD. The prime minister did say that the government will increase spending on transportation infrastructure to over $47 billion over four years. The other infrastructure investments are slated to come from partnerships with the private sector, especially on energy and broadband.

Just as important is the framework for how Cameron described and situates the need for an infrastructure plan. He cites the critical need to boost Britain’s exports, the imperative of low carbon, and the emphasis on social responsibility. To do that, the government has identified a new hierarchy for investments: “prioritizing the maintenance and smarter use of assets, followed by targeted action to tackle network stress points and network development and, finally, delivering transformational, large scale projects that are part of a clear, long term strategy.”

There is a call for the establishment of a type of national infrastructure bank to make merit-based, depoliticized decisions to stimulate investments in the green economy. The bank will take on risks the private sector is not yet willing to absorb and will be capitalized initially through the sale of unnamed government-owned assets. It will also augment new institutions such as a division within the Treasury Department—Infrastructure UK—to help support these public/private partnerships.

The plan even includes an emphasis on improving data and information. For those of us engaged in the infrastructure conversations in America, there’s a lot to like in here.

Nevertheless, one should be careful to avoid the desire to just scratch out “U.K.” and insert “U.S.” here since the systems of government in the two nations differ substantially. A Brookings report from earlier this year noted that the U.K. is one of the most highly centralized countries in the industrialized world and--especially when it comes to transportation and infrastructure--the U.S. system is far more disaggregated. This pertains both to how Washington operates and the relationship between the executive and legislative branches, as well as the federalist system and the relationship between the federal government and the states, not to mention local governments and over 300 metropolitan areas. This means our federal government has a difficult time developing broad-based policies that truly meet national interests, as opposed to those of individual states.

Still, the juxtaposition between Britain’s call for dramatic slashes in spending followed by the roll out of a major strategy to update and modernize infrastructure specifically so the nation can compete longterm, demands our attention. This is not merely a plan for improving infrastructure. It is a plan for improving the U.K. economy through the lens of infrastructure improvements. That’s an important distinction the US has been slow to embrace, but one we cannot afford to ignore.