Some bold sweeteners on infrastructure investment tempered the Spending Review’s cuts. But Danny Alexander’s statement should not be read as a prophetic vision of things to come – some bold actions are needed
Last week, the chancellor offset £11.5bn worth of cuts with a major sweetener – £100bn of infrastructure investment. The details were fleshed out the following day in a statement by Chief Secretary to the Treasury Danny Alexander.
Announcing that the government was putting ‘long term priorities before short term political pressures’, he unveiled grand spending plans for Britain’s railways, roads, communications and energy infrastructure, and affordable homes. However, as both the Labour frontbench and the British Chambers of Commerce have said, these are long-term priorities with the emphasis on long.
Half of the £100bn announced is for projects beginning in 2015/16, with the rest for the years up to 2020/21. There are many uncertainties to consider in this time period, including the state of Britain’s economy, which party or parties will be in government post-2015, whether we will still be in the European Union and even whether we will still be living in a united kingdom. We also do not know exactly where the sources of state funding will come from in the future; it is difficult to see the Treasury giving up its fuel duty revenues any time soon. It would therefore be imprudent to read Danny Alexander’s statement as a prophetic vision of things to come.
Take High Speed 2, for which Danny Alexander announced over £16bn to cover costs between 2015/16 and 2020/21. The Spending Review revealed that the construction costs for HS2 will be over £42bn, plus rolling stock costs of £7.5bn. This is considerably more than the £30bn cost quoted originally, and added ammunition for HS2’s vociferous critics. The Bill giving parliamentary authorisation for spending on the new line has only just had its first reading this week, and while the Tory-led opposition to it was a small group of 37, its ranks may swell due to these revised cost estimates and potentially higher estimates to come. This is besides the growing HS2 opponents outside of Parliament, which include campaign group StopHS2 and the Institute of Economic Affairs.
While the other £16bn announced for railway funding may be for projects with little or no political opposition, such as electrification and a new Bedford-to-Oxford rail link, let us not forget that British governments have a habit of big promises with little delivery on rail. If this were the 1970s, you would be forgiven for thinking that by the 1980s we would all be zipping between cities on the West Coast Mainline at 155mph, courtesy of the tilting Advanced Passenger Train. The government funding was committed, the boffins were at work building and testing prototype trains, and you can now see the final result of this promising capital spending project at the Crewe Railway Heritage Centre.
A similar sense of caution should accompany the announcement of £28bn for road improvements, a headline project of which is the widening of the A14, which links the Midlands to Felixstowe port. Danny Alexander announced that construction will be brought forward to 2016, but for more than a decade, local authorities, business leaders, and MPs campaigned for an upgrade to this road, only to see proposals vetoed in Parliament on cost grounds. The A14 project will likely face new opposition on cost grounds, this time from motorists, as a key part of the financing plan is the introduction of tolls.
The announcement of £250m for super-fast broadband comes just days after a legal challenge from BT and Virgin Media forced the government to back down on a £150m scheme to build superfast internet connections to homes and businesses not served by the two companies’ existing networks. Part of this infrastructure scheme, repeatedly proclaimed in George Osborne’s budget statements, has now been converted into a voucher scheme to help small businesses pay for their own installation of faster broadband.
The announcement of £20m for improving air links to London comes amid uncertainty over where the capital’s future air hub will be located. Heathrow is pushing hard for investment to expand to accommodate future air capacity, whilst Boris Johnson pulls in the other direction for a new £20bn airport in the Thames Estuary. We will not know which side will win until the Airports Commission reports in 2015.
Finally, the Treasury’s plan makes bold assumptions about the Highway’s Agency. It believes that transforming it into a publicly owned corporation with long term funding, similar to Network Rail, will improve its work. The CBI is supportive of this, seeing the change as offering freedom from the short-term whims of politicians and certainty to plan for long-term projects. However, this assumes that highways can be funded in the same way as railways, and the Treasury’s plan provides few details to demonstrate why this would work.
As I wrote on this blog last December, following the publishing of the National Infrastructure Plan, success will be judged by how many projects get off the ground. In response to Danny Alexander’s statement, Shadow Treasury Minister Chris Leslie pointed out that only seven of the Treasury’s pipeline projects have been delivered so far. And according to www.cameronsdashboard.co.uk, Insight Public Affairs’ online audit of the government’s progress on its stated goals, only 25% of the Coalition Agreement transport pledges have been achieved thus far.
George Osborne has said that we don’t need ‘stop-start on infrastructure’, yet in three years, the government has published the National Infrastructure Plan, two infrastructure reviews, and now this latest strategy: Investing in Britain's Future. However, strategy documents written in Whitehall don’t translate into shovels in the ground.
Bold sweeteners have been offered in accompaniment of this week’s cuts, sweeteners with real potential to drive economic growth. The government’s challenge remains to follow through on its words with bold actions.
John Lehal is managing director of Insight Public Affairs. He tweets at @JohnLehal
