A road is not just a road: linking
social outcomes to infrastructure
spending: QCOSS Submission to the
Queensland Infrastructure Plan
July 2015
About QCOSS
The Queensland Council of Social Service (QCOSS) is the state-wide peak
body for individuals and organisations working in the social and community
service sector.
For more than 50 years, QCOSS has been a leading force for social change
to build social and economic wellbeing for all. With almost 600 members,
QCOSS supports a strong community service sector.
QCOSS, together with our members continues to play a crucial lobbying and
advocacy role in a broad number of areas including:

sector capacity building and support

homelessness and housing issues

early intervention and prevention

cost of living pressures including low income energy concessions and
improved consumer protections in the electricity, gas and water
markets

energy efficiency support for culturally and linguistically diverse people

early childhood support for Aboriginal and Torres Strait Islander and
culturally and linguistically diverse peoples.
QCOSS is part of the national network of Councils of Social Service lending
support and gaining essential insight to national and other state issues.
QCOSS is supported by the vice-regal patronage of His Excellency the
Honourable Paul de Jersey AC, Governor of Queensland.
Lend your voice and your organisation’s voice to this vision by joining
QCOSS. To join visit www.QCOSS.org.au.
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Linking social outcomes to infrastructure spending
Table of Contents
1. Introduction............................................................................................... 4
2. Better Governance and Independent Assessment of Infrastructure ......... 5
3. A road is not just a road, a hospital is not just a hospital .......................... 6
4. How to incorporate social considerations into the Infrastructure Plan ...... 7
4.1. Social Housing ................................................................................... 7
4.2. Local economic development ............................................................ 8
4.3. Measuring social infrastructure need and outcomes .......................... 9
4.4. Financing infrastructure and capturing value for public objectives ... 10
4.5. Partnering with the community sector .............................................. 13
5. Concluding comment .............................................................................. 14
6. Appendix 1: Infrastructure responsibilities by level of government ......... 15
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Linking social outcomes to infrastructure spending
1. Introduction
Government spending on infrastructure is a way of boosting productivity, and
cultivating longer-term economic growth and community wellbeing. Low
commodity prices and a generally slowing economy has seen infrastructure
spending drop in recent years, prompting a national debate about better ways
to finance infrastructure and target limited funds to get the most bang for our
buck.
The bulk of the infrastructure spend in 2014, in both the Federal and
Queensland budgets, went on roads. While efficient transport is important,
this should not be at the expense of other critical infrastructure that allows
cities, towns and small communities to work.
Decisions on infrastructure needs to factor in that judicious investment in
social and community infrastructure can deliver both social and economic
outcomes. Equally, well-chosen economic infrastructure provides
opportunities for industry while supporting communities that have a range of
incomes, backgrounds and demographic characteristics to access jobs and
other community resources in a fair and equitable way.1 These social
outcomes are important in and of themselves, but also because social
cohesion is linked to economic development, investment attractiveness and
business competitiveness. Furthermore, when communities are healthy, they
consume less of the welfare budget.
The Grattan Institute’s, John Daley, reminds us that “infrastructure only
increases productivity if it is the right infrastructure in the right place, provided
at the right price”.2 A failure to link infrastructure spending to broader social
goals will see Australia and Queensland spending its limited funds on the
wrong infrastructure, in the wrong places, potentially exacerbating rather than
alleviating existing needs.
QCOSS welcomes the opportunity to make a submission to the Queensland
Infrastructure Plan. On current trends the Australian population is forecasted
to be almost 40 million by 2055, it is important that planning for major long
lived infrastructure3 happens now. Particularly QCOSS is keen to ensure that
the likely billions of dollars spent by future governments as a result of the
Infrastructure Plan is more closely aligned with the broader socio-economic
objectives of community development and cohesion. This is vital as we need
1
Infrastructure Australia (2013) National Infrastructure Plan
2
Daley, J (2013) Is there still a budget emergency, speech to the National Press Club 9
October 2013
3
Distinctions have also been made between hard and soft social infrastructure. Hard
infrastructure being buildings and equipment and soft infrastructure being more intangible
contributions that enhance both individual and community well-being through equitable,
accessible and appropriate community services, skills, knowledge and abilities, local
networks, relationships and collaborative responses. 3 This paper is primarily concerned with
achieving a better result from the billions of dollars spent on hard infrastructure (both social
and economic) each year. But the soft infrastructure is also part of the story. It is the soft
infrastructure that makes the hard infrastructure work, and this needs to be considered in any
investment decision
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Linking social outcomes to infrastructure spending
to prepare for a more equitable future4. Well-chosen infrastructure
investments now can help alleviate future disadvantage caused by rising
poverty and income inequality in Australia. In this submission, QCOSS makes
a number of comments regarding the need for good governance and
independence of assessment, it then documents how social considerations
can be incorporated into the Infrastructure Plan.
2. Better Governance and Independent Assessment of
Infrastructure
Last year, concerns about costs, competitiveness and productivity in the
provision of infrastructure sparked a Productivity Commission Inquiry into
Public Infrastructure. The Inquiry identified poor project selection and
inadequate planning as major constraints on building infrastructure in
Australia. It suggested a range of reforms to overcome barriers to private
investment, ensure more efficient project selection, procurement and
prioritisation and improve funding and financing mechanisms.
There is also an independent national body which advises Australian
Governments on priorities for infrastructure spending, Infrastructure Australia.
Infrastructure Australia has just completed a process of undertaking an audit
of all the infrastructure needs in Australia to prepare a national 15 year plan.
Concerns have been expressed that Infrastructure Australia processes get
bypassed for political reasons. The 2014-15 budget provided funding for 36
major named infrastructure projects but only four had been assessed by
Infrastructure Australia, and only seven appear anywhere on their priority list. 5
New governance arrangements recommended by the Productivity
Commission may alleviate this problem.
QCOSS therefore welcomes the State Government’s process of developing a
new State Infrastructure Plan, due in February 2016. It also notes that a new
statutory body, Building Queensland, is being created to provide independent
advice to government on infrastructure priorities and will contribute to this
plan.
4
The OECD notes that poverty is on the rise in Australia with 14.4 per cent of the population
unable to make ends meet, compared with the OECD average of 11.3 per cent OECD (2014)
Society at a glance
5
Dossor, R. (2015) Infrastructure Expenditure. Parliamentary Library, Parliament of Australia.
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3. A road is not just a road, a hospital is not just a
hospital
The Productivity Commission Inquiry supports the community sector’s
observations on the link between social infrastructure and economic
outcomes. In its recent Inquiry, it noted that social infrastructure (such as
schools, hospitals and social housing) provide important direct benefits to
individuals and can also have broader economic implications. For example,
improved education and health outcomes can lead to increased workforce
participation and labour productivity. Conversely economic infrastructure
(such as communications and transport) can provide a direct impact on
business productivity, but also can contribute to a range of social outcomes
such as social connectivity and local community renewal. Economists
sometimes call these agglomeration spillovers. The Productivity Commission
gave the example of transport networks:
“Effective transportation networks deepen markets. They bring
consumers closer to more businesses, and they bring workers in
contact with more opportunities. These deeper markets and
connections promote competition. They promote greater specialisation
by both firms and workers. And they promote innovation and a more
dynamic economy”.6
Capturing these broader, often less obvious, effects is not easy but essential
to understanding the cost-benefit of various infrastructure choices. What is
needed is an holistic appreciation of the full range of impacts of an
infrastructure investment before decisions are made on the merits of a project.
In doing this, the relative values of different types of public infrastructure, for
example roads versus public transport, need to be weighed up, taking into
account long term objectives and broad societal impacts. Some countries do
this by ensuring that all infrastructure spends are rooted in the country’s
broader socioeconomic objectives. In Switzerland, for example, the national
infrastructure authority starts its planning with the overarching objectives
around economic, ecological and social sustainability and develops specific
strategies focused on these objectives.7
Taking a ‘networked’ approach - making decisions as part of a system and
considering potential network effects, will ensure effective project selection.
Planning authorities do attempt to do this. For example, there are regulations
on developers requiring economic and social impact assessments. But current
arrangements are clearly not working well. A recent study found that housing
was unaffordable for jobseekers in all 40 regions in Australia where they are
most likely to find employment.8 Long-term social objectives are not being
supported if affordable housing investments are not linked with economic
6
Productivity Commission (2014) Inquiry into Public Infrastructure
7
Dobbs, R. et al (2013) Infrastructure Productivity: how to save $1 trillion a year. McKinsey
Global Institute.
8
Australians for Affordable Housing (2013) Opening Doors to Employment: Is housing
affordability hindering job seekers.
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opportunities. Similarly, investment in schools, hospitals, community facilities
and other job-creating infrastructure, is not helpful without a complementary
investment in public transport.
Taking a networked approach can also lead to better use of existing
infrastructure. We often hear of white elephant investments - infrastructure
that operates below capacity. A networked approach is about looking at what
exists and what can go together with existing infrastructure to ensure the
maximum economic and social return on investment while minimising
environmental impacts
A suite of complementary initiatives, or a networked approach, can produce
greater returns to each individual investment. This requires a realistic
assessment of the full range of infrastructure that will be required to make a
difference, along with a commitment to providing both the capital and the
recurrent resources to manage the infrastructure. The example below
describes a situation where such an approach was not taken.
Case study: Macquarie Fields
An oft-cited example of a failure to take a networked approach is
the Macquarie Fields development in Sydney. When it was
developed in the 1970s and 80s some basic hard infrastructure
was provided such as roads, shops and affordable housing, but
other hard social infrastructure needs were omitted (such as a
community centre) and little consideration was given to ‘soft’
infrastructure requirements such as access to employment and
transport, demographic diversity and the establishment of local
services and strategies that develop community cohesion. For
many years this suburb was a crime hotspot with double the
national average unemployment. It was not until a 2006
Government Inquiry into riots in the suburb that adequate
investments were made in community infrastructure, along with an
investment in the coordination of that infrastructure.
(Adapted from Casey 2005, Establishing Standards for Social
Infrastructure)
4. How to incorporate social considerations into the
Infrastructure Plan
The following considerations encourage a networked approach to
infrastructure spending to ensure the widest range of opportunities and
impacts are considered.
4.1.
Social Housing
At the Commonwealth level, the infrastructure funding focus continues to be
on roads and freight rail, in line with their traditional responsibilities. The
Queensland Government also spends most of its infrastructure budget on
transport and roads - $5.4 billion in 2014-15. The last Queensland budget
also included about $2.2 billion for 10 new schools and
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development/redevelopment of hospitals and a little under half a billion in
other infrastructure improvements for the regions such as roads, bridges,
flood mitigation infrastructure and waste recycling.
A key issue for the community sector in the infrastructure debate is that social
and affordable housing, while clearly fitting the definition of public
infrastructure9, is not currently dealt with under infrastructure priorities at
Federal or State levels. ACOSS points out that if housing continues to be
viewed by governments as a welfare issue, rather than an infrastructure issue,
the existing problems in the Australian housing market will continue to impede
economic activity, participation and productivity, and the market will continue
to fail to provide adequate housing for all.10 This issue underlines the need for
a broader conception about the socio-economic value and cost of
infrastructure projects.
4.2.
Local economic development
Infrastructure spending within a local area opens up a range of opportunities
for local economic development. By promoting and supporting local
enterprise in project selection and procurement, communities experiencing
economic disadvantage can achieve more local circulation of money and
strengthen linkages in their local economies. Infrastructure investment can
thus create a positive multiplier effect.11
These economic development opportunities are particularly important in rural
and regional communities facing disadvantage and Indigenous communities
where infrastructure investments are planned to address historic neglect. The
North Australia Indigenous Experts Panel have pointed out that infrastructure
investments must directly address improvements in human and social capital
that include but go beyond the basics of health and education, to encourage
innovation in livelihoods based on ownership of land and use and management
of resources. They call for greater flexibility to match government programs of
all sorts to deeper understanding of local context and aspirations.12
Part of this is considering what makes the infrastructure viable after it has
been built. Community buildings are sometimes planned and built without due
consideration to whether it is what the community wants and whether the
community can finance the management and on-going operation of the
Mission Australia’s submission to the Productivity Inquiry into Public Infrastructure points out
“Housing is a central piece of a country’s economic infrastructure and productivity. A poorly
operating housing market creates drag on productivity and distorts the jobs market, as
people’s housing options impact their employment opportunities. Government has a primary
role and responsibility for decisions regarding the provision of social and affordable housing
decisions and is the primary funder of their provision. Consequently, social and affordable
housing meets the proposed elements required to be considered public infrastructure”
9
10 ACOSS
et al (2015) Affordable Housing Reform Agenda: Goals and recommendations, an
overview for reform.
11
For more on this concept see the New Economics Foundation’s Plugging the Leaks
Framework www.pluggingtheleaks.org
12
NAILSMA (2013) Indigenous futures and sustainable development in North Australia
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asset.13 Poorly timed, designed or placed developments put pressure on other
levels of government or portfolios to provide services 14, and represent a
missed opportunity for local economic development.
It is not just bricks and mortar assets that need to be considered. Mission
Australia suggests that infrastructure supporting online technology could a
significant role to play in transforming regional and remote communities and
that an assessment of the value of public investment in online infrastructure
would be informative. 15
For local communities to have genuine opportunities to benefit financially from
investments in their own communities, there needs to be a more level playing
field to allow local community service organisations and small and medium
enterprises to bid for contracts or participate in supply chains. This is an
important element of ‘sustainable procurement’.
QCOSS recommends that the Infrastructure Plan should investigate the policy
levers and other mechanisms to ensure local infrastructure investments
maximise the ongoing economic benefits for local communities. QCOSS also
recommends that a more level playing field be created to allow local players
to bid for infrastructure procurement contracts or sub-contracts through
consortia.
4.3.
Measuring social infrastructure need and outcomes
In the past decade, governments have begun to formulate indicators of wellbeing and progress, and communities themselves have begun to see this as
an important way to understand and monitor their regional issues. In
Queensland, for example, QCOSS has developed an Indicators of Poverty
and Disadvantage Framework and Community Indicators Queensland (CIQ)
has developed a framework to support the creation and use of local
community well-being indicators. Economic activity, employment, skills,
housing affordability, transport accessibility, community connectedness,
cultural and sporting activities can be assessed using surveys, demographic
data, qualitative tools and other information. QCOSS has successfully
modified this framework to assess community resilience in three pilot
communities.16 Such research can provide a starting point in understanding
gaps in infrastructure, based on socio-economic aspirations, as assessed by
the communities themselves. But there is still a way to go before we have a
widely-accepted mechanism for identifying and measuring the infrastructure
needs of the community. QCOSS recommends that the Infrastructure Plan
sets out what needs to be done to ensure that projects address clearly
defined community needs.
13
Casey S. (2005) Establishing standards for social infrastructure. University of Queensland.
Brisbane
14
Infrastructure Australia (2008) A report to the Council of Australian Governments
15
Mission Australia (2015) Mission Australian Submission to the PC Inquiry into Public
Infrastructure
16
QCOSS (2012) Resilience profiles project
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Cost–benefit analyses (CBA) are usually used to as a decision making
framework to identify potential preferred projects in a logical and consistent
way. CBA encourages decision makers to take into consideration all
economic costs and benefits of a project and uses economic efficiency criteria
to select and prioritise projects. The Productivity Commission notes that to
provide a reliable guide to what is in the overall interest of the community, a
cost−benefit framework needs to be broad, taking into account all relevant
economic, social and environmental outcomes.17
Evaluation methodologies such as Social Return on Investment provide tools
for measuring and accounting a broader concept of value, taking into account
social, economic and environmental factors. Use of these tools is providing
evidence that investment in public infrastructure can lead to long term savings
when the full impact of the investment is quantified (see example below).
The Infrastructure Plan and independent assessments by Building
Queensland must ensure that the cost-benefit framework goes beyond the
purely economic efficiency criteria and include also the long term social and
environmental outcomes.
Case study: Going Places Program
The Going Places program involved homeless outreach to move long-term
homeless people into sustainable housing. The investment from
government was $3.6 million over 4 years but the program delivered
quantified benefits to society of over $33 million over 4 years and avoided
further costs of $27.4 million over 4 years to government. For every $1
invested, the government saved $5.10 in public services no longer
required. The savings reflect reduced need for crisis accommodation,
incarceration, court proceedings, police time, diversionary services, time in
hospital, and participants being able to support their own children amongst
other tangible, quantifiable benefits.
(Mission Australia submission to the Productivity Commission Inquiry into
Public Infrastructure)
4.4.
Financing infrastructure and capturing value for public objectives
In these budget-constrained times, the major challenge for planning and
delivery infrastructure will be how to finance infrastructure.
Certainly in NSW financing infrastructure will be through asset sales or
leasing and the Commonwealth Government is encouraging this approach
through incentive payments for states that sell assets and redirect the funds
17
Productivity Commission (2014) Inquiry into Public Infrastructure
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into more productive infrastructure (asset recycling). The new Queensland
Government has a mandate not to sell assets so will not go down this path.
They are looking instead at merging state-owned assets though to create
efficiencies and savings.
Another way to fund a higher spend by governments is for the community to
pay higher taxes. Ken Henry noted in his comprehensive review of the tax
system, that public goods should generally be funded from broad-based taxes
on income, consumption or land.18 Given that Australians have the fifth
lowest tax burden of all 34 OECD countries,19 there is some scope for
financing infrastructure investments through the tax system, however
achieving tax increases is always a politically-charged task.
As the Commonwealth Government has the majority of tax raising powers, it
together with the States will need to make some hard choices and have a
genuine dialogue with the Australian people about what we want to achieve
through infrastructure investment and how to finance this expenditure. The
challenge is to convince the public to differentiate between short term
spending and long term investments that improve quality of life for all
Australians including intergenerational, and generate savings in the long term.
The Infrastructure Plan Directions Paper calls for innovative ways to fund and
finance infrastructure. There are levers which the States’ have in the planning
and development area and should be investigated further. For example, in the
UK there has been a greater emphasis on capturing ‘planning gain’ for public
objectives. Since the 1990s, the use of planning obligations has shifted away
from requiring developers to finance narrowly defined off-site infrastructure
(such as access roads), toward financing infrastructure and services that
provide broader community benefits - the most notable being affordable
housing.20
In Australia in 2009, the ACT, NSW and Victoria allowed contributions to be
levied from developers for a wide range of capital works associated with
economic and social infrastructure. At the time planning regulations in
Queensland and some other states were not as flexible. See Table 1 below.
18
Commonwealth of Australia (2011) Australia’s Future Tax System
Australian treasury (2013) “Australia’s tax system compared with the OECD” Pocket guide
to the Australian Tax System
19
20
Productivity Commission (2014) Inquiry into Public Infrastructure
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Table 1: Public infrastructure eligible for mandatory contributions (excluding
basic infrastructure)
NSW
Vic
Qld
WA
SA
Tas
ACT
NT
UK
Parks
Education
Trunk Roads
Childcare
centres
Community
centres
Recreation
facilities
Sports
grounds
Protection
Housing
(Reproduced from Chan (2009) “Public Infrastructure Financing: An international
perspective”. Please see original table on page 126 for notes on allowances and limitations)
The Productivity Commission points out that there are pros and cons in
relying on developer contributions for community infrastructure. They say
there can be costs to society if local planning authorities misuse planning
permission as a bargaining, rather than compliance, tool. Also, when
increased costs get passed on to home buyers, this can effect housing
affordability for owners and renters.
Betterment levies are another way of capturing the value from the
beneficiaries of development. Research at Curtin University has shown that
up to 60 per cent of the cost of a light rail project could be funded by putting
aside the windfall tax revenues received as a result of building the rail due to
increases in land values (stamp duty, capital gains taxes, rates). The
underlying logic is that the benefits from local infrastructure are reflected in
higher property values and business activity, and a betterment levy provides a
means of readily capturing part of those benefits to fund the infrastructure.21
Such innovative funding approaches are yet to be tried in Australia, and in a
21
Productivity Commission (2014) Inquiry into Public Infrastructure
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budget constrained climate, its feasibility should be explored as a viable
funding mechanism.22
Public infrastructure funded through user pays mechanisms often have
distributional impacts whereby low income households face greater financial
impacts than higher income ones. Therefore, QCOSS encourages the
Infrastructure Plan to investigate innovative and equitable ways of financing
public infrastructure.
4.5.
Partnering with the community sector
The community sector is uniquely positioned to participate in infrastructure
planning and delivery. Community organisations can leverage resources,
including volunteer and ethical investor contributions, to address community
interests and meet needs to which markets do not respond or are not
designed to serve, and they usually have a deep understanding of the
challenges that face their community.
In the community housing sector for example the not for profit sector has been
shown to be able to deliver a higher level of operational efficiency and service
quality compared to their public sector counterparts, and tenants rate
community housing as superior to public housing in meeting their needs.23
Work has begun around the country on transferring responsibility for social
housing dwellings to community housing providers (CHPs) as a way of
diversifying social housing, improving efficiency and promoting community
renewal. In Queensland transfers have been confined to management
outsourcing, rather than asset handovers. Asset ownership would give CHPs
greater scope to grow and innovate, but there are a range of technical barriers
to any large-scale handover and concerns that this would have a major impact
on the state government’s fiscal position.24
Social impact investing is another way the community sector can access
capital to invest in social infrastructure and other community needs. Social
impact investment is finance provided to social sector organisations by
investors that expect to both get their money back and create social impact.
Depending on the arrangement, investors may also expect a financial return
on their investment.
Social impact bonds involve ethical investors (philanthropists and commercial
lenders) providing the funds to finance a program delivered by the community
service sector. The Government then repays the investors based on the
achievement of agreed outcomes in areas such as health, education and
employment. Social impact bonds are being used successfully in the
22
Green, J. (2014) Mass transit infrastructure spend missing from budget. Curtain university
23
Infrastructure Partnerships Australia (2014) Submission to NSW Inquiry into Social, Public
and Affordable Housing
24
Pawson, H., Milligan, V & Hulse, K., (2013) Public housing transfers: past, present and
prospective. AHURI. A range of other benefits and barriers to public housing transfers are
also discussed in this report.
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provision of social services, but they are yet to be applied in the purchasing of
infrastructure.
There are also opportunities for the community sector to work with private
sector providers to deliver social benefits as an integral part of infrastructure
being procured. Infrastructure Australia suggests that governments could
combine contracts for providing whole-of-life infrastructure outcomes with
contracts for social, health and education outcomes. Such arrangements
would involve establishing strong and long-lasting partnerships between
community sector and private sector organisations.
5. Concluding comment
This paper provides a starting point for discussions and exploration of ways to
get a better link between public expenditure on infrastructure and social
outcomes and collaborative partnerships between governments, the private
sector and the community sector to maximise the benefits of their contribution.
The best and most useful social and economic infrastructure investments will
be based on a networked approach, with deep consideration of broad social
impacts and uses, and complementary investments that improve the return to
each individual investment. Having well-accepted measures for establishing
needs and outcomes will be critical to making a case. Involving the not-forprofit sector in selection and delivery of infrastructure will ensure more
efficient operations, and assets that are rooted in community needs and
aspirations.
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6. Appendix 1: Infrastructure responsibilities by level
of government
Level of government
Economic infrastructure
Social infrastructure
Commonwealth
Aviation services (air
navigation etc.)
Tertiary education
Telecommunications
Postal services
National roads (shared)
Public housing
(shared)
Health facilities
(shared)
Local roads (shared)
Railways (shared)
State
Roads (urban, rural, local)
(shared)
Railways (shared)
Educational institutions
(primary, secondary
and technical) (shared)
Ports and sea navigation
Childcare facilities
Community health
services (base
hospitals, small district
Electricity supply
hospitals, and nursing
Dams, water and sewerage homes) (shared)
systems
Public housing
Public transport (train, bus) (shared)
Sport, recreation and
cultural facilities
Aviation (some regional
airports)
Libraries
Public order and safety
(courts, police stations,
traffic signals etc.)
Local
Roads ( local) (shared)
Childcare centres
Sewerage treatment, water
and drainage supply
Libraries
Aviation (local airports)
Electricity supply
Public transport (bus)
15 / 1 July 2015
Community centres
and nursing homes
Recreation facilities,
parks and open
spaces
Linking social outcomes to infrastructure spending