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The Coalition has left it too late to benefit from infrastructure

June 28th, 2013

Henry G Manson on the week’s big political news

This week Chief Secretary to the Treasury Danny Alexander trumpeted a raft of infrastructure investments totalling £100bn. There are some reasons to question with the overall figure. As the Independent says ‘some of the projects, in the best tradition of political spin, had already been announced. Others, it turned out, may never be built at all. But a few could, with a fair wind, perhaps transform Britain’s ageing roads, railways and power stations for the 21st century.’ Either way, the gusto with which the Coalition (and Lib Dems in particular) celebrate this £100bn of ‘spending’ is politically significant for the Coalition.

Three years ago Danny Alexander made much of his cancellation of just £2bn of government projects including new schools, the building of a new hospital, new libraries, a loan to Sheffield Forgemasters and extension of the Future Jobs Fund. He added described it as “pre-election spending spree in the full knowledge that the government had long since run out of money”. Long since run out of money? Really? What’s changed since then?

The government now seems to increasingly accept that public investment has a role to play in economic growth and that cuts alone are not the cure. We may not now have had a double-dip recession, but economic growth has been miserable. While Labour is being pulled in all directions over welfare, the Coalition’s move towards infrastructure is a victory of sorts for the Opposition and one they really should exploit. Liam Byrne’s notorious note aside (which by itself should have been a sacking offence from the Labour front bench on the grounds of political and economic stupidity) the Labour view at the time was that the Coalition’s decision to cut capital spending would cost jobs, undermine key sectors and slow down growth. And they were right.

Vince Cable in particular knows the importance of infrastructure investment. In March this year he argued “the more controversial question is whether the government should not switch but should borrow more, at current very low interest rates, in order to finance more capital spending: building of schools and colleges; small road and rail projects; more prudential borrowing by councils for house building. This last is crucial to reviving an area which led economic recovery in the 1930s but is now severely depressed.” However this comes almost 3 years into the government in which he is a senior Cabinet minister of. Has he had to watch Osborne’s austerity fail before he could intervene and make his case publicly?

This government’s press release this week explains how there will be ‘an additional £18 billion of investment over the next parliament.’ We hear that ‘by 2020 to 2021 the government plans to triple the money spent on roads compared to 2013’. In addition ‘superfast broadband provision will be expanded so 95 per cent of UK premises will have access to superfast broadband by 2017.’

    What do they all have in common? They’re after the next election. With less than two years to go, there are relatively few projects that will be up and running by the time the Conservative and Liberal Democrats go to the electorate. How will they benefit from something that has yet to happen?

Finally doesn’t this all confuse the Coalition’s core political message? We either have ‘no money left’ or we have £100bn for public works schemes. Borrowing is cheap and the returns make sense. Yet voters (and some MPs) can be forgiven for being increasingly perplexed as to why ministers can find an extra £10bn for HS2 while £11.5bn is cut from local public services. Incidentally Labour might be in favour of HS2 but it shouldn’t be in favour of a blank cheques. They should get after the government right away on this issue alone.

The Coalition’s investment in infrastructure is significant and the right thing to do. But publicity with hard hats won’t be enough to ensure they’ll politically benefit from it in 2015. Labour frontbenchers should also take note.

Henry G Manson