Contrary to what has become a standard view in policy circles, the British state does not invest far less than its peer countries. British public investment (as a share of GDP) is on par with the OECD average and higher than it is Germany, Italy and Spain. Indeed, when it comes to transport, we spend more: about 22% more than the OECD average. 

Britain’s broken system of infrastructure investment has limited the number of projects delivered by the Government, dragging down Britain’s living standards. Britain differs from peer nations in that, while we spend as much or more than other countries, we get less back for it. For the same amount of money, other OECD countries manage to build more: whether it’s miles of railway track, tramlines, or nuclear power stations. To put it another way, Britain suffers from an infrastructure investment cost premium, which is downstream of our dwindling state capacity: we pay more for the same thing.

We find that Britain faces an infrastructure premium of between 23% and 93%, depending on the type of project.

Infrastructure Type	Cost Premium relative to average of Germany, Italy, Spain, France, South Korea and Canada
Road	23%
Rail and Tram	93%
Nuclear	53%

On average, the UK pays 65% more per unit of infrastructure than comparable countries. This translates into £8.3 billion a year wasted, or £122 per person, due to spending failing to deliver equivalent infrastructure. Costs are consistently higher across all modes.

If our infrastructure cost premium is tackled, a new wave of public investment could unlock life-changing infrastructure without requiring higher taxes or borrowing. Lower delivery costs would mean more tramlines, rail upgrades, roads, clean energy projects and local infrastructure for the same money, raising living standards for ordinary people and boosting British growth. A new approach could also push power down and out of Whitehall. Our cost premium means that projects that could otherwise be funded by existing local taxes, such as the Workplace Parking Levy which funded Nottingham's tram network, or partnerships between business and local government, as proposed for HS2’s Northern Leg, can only be funded with support from the HM Treasury. Instead of a system where decisions on what gets built must go through the Treasury, more responsibility would sit with the places that know what they need and have a direct stake in delivery. That would mean more construction jobs, more skilled engineering work, stronger local supply chains and less public money absorbed by lawyers, consultants and paper exercises in Westminster. The result would be a state that micro-manages less and delivers more.

Why does Britain get less for more? 

We find that our planning and regulatory regime, combined with associated legal risks, significantly raise the cost of building. Public money gets spent on lawyers and consultants, as well as complex, often unique design specifications to meet bespoke requirements, rather than on actual infrastructure. This is a vicious cycle: more requirements increase the surface area for legal challenge, and more delay increases the cost of financing projects. 

Britain is also far more centralised, with far weaker fiscal devolution, than most comparable countries, and this directly undermines the ability of cities and regions to build infrastructure on their own initiative. This exacerbates the issue. Local and combined authorities have limited power to approve or fund new transport infrastructure. Permission must be sought from the Department of Transport, and funding granted by the Treasury. Comparable countries let the places that gain from infrastructure raise the revenue to pay for infrastructure, but in Britain, the system leaves a range of bodies to impose requirements on a project, without any bearing of the cost of this to the taxpayer or residents who miss out from infrastructure. This separation between who pays, who benefits, and who approves creates a systematic misalignment of incentives which has left Britain worse off.

Perhaps counterintuitively, Britain’s infrastructure premium is good news. It implies that, without spending an extra penny, Britain could vastly improve its public infrastructure by adopting the same processes as those of France, Germany or Spain. Planning, regulatory and legal constraints, and our centralised system, are all within the Government’s control. In times of constrained public finances, it is surely welcome news that we can vastly improve infrastructure without demanding more of taxpayers. 

The parallel implication is a warning: we should not expect as much benefit, relative to other countries, from spending more on public infrastructure, because of Britain’s cost premium. Until we fix the underlying causes of Britain’s high infrastructure cost, spending more money on infrastructure will lead to more delays, overruns and broken dreams. 

People increasingly do not trust their political leaders, and do not believe that the state can deliver. Our research shows that, at least when it comes to infrastructure investment, this sentiment is not unjustified. Politicians promise new infrastructure, and spend lots of money on it, but rarely deliver it on time or within budget – and sometimes, not at all. 

At its core, Britain’s cost premium is a failure of state capacity. Until we can identify and arrest the constraints and mechanisms that prevent us from building well, the state remains impotent, unable to deliver the infrastructure we need, against a tide of public anger and discontent. This report aims to find a way out of these binds, which is the first step to creating a state that can deliver.