Opinion

George the Builder

Julian Francis

George Osborne rose before the House on Wednesday to give his third budget statement this year, a rare treat for a Chancellor who usually only get two bites at that particular cherry. He was, therefore, determined to make the most of it and reinforce his message to the electorate.

Being first and foremost a political animal, Osborne understands better than most the truth of Jacob Lew's statement that "the budget is not just a collection of numbers, but an expression of our values and aspirations." Knowing this, you can begin to decode what was really being said in the Commons.

His speech began with an expression of values around economic and national security that would lead to long term objectives such as creating a low welfare, high wage economy, rebalancing the economy between north and south, and fixing the roof while the sun is shining. 

"The difference between past governmental performances and the new pledge highlights how constrained Osborne is, fiscally, politically, and ideologically."

He added, however, a new concept to his arsenal this week and that was building. His speech was littered with comments on building the country, the economy, defense and society ending with his statement that the Conservatives "are the builders" compared to Labour, who, we are left to infer, are the destroyers.

Give this, it is not surprising then that George the Builder would place infrastructure spending at the heart of his pitch to the nation.

Aiming at an increasing section of the population that is struggling to buy a home, he announced a doubling of the housing budget to £2 billion a year to deliver 400,000 new homes by 2020. Loans will be given to builders and purchasers to help them deliver this increase and the planning regime will be streamlined to make it easier to build.

This pledge may well seem impressive at first but when one looks at the housing shortage we can see how far it is from meeting the needs of the nation. It is also rather meek when put in a historical context as Osborne's predecessors achieved much grander targets. Neville Chamberlain delivered 930,000 home over a four year period between 1924 and 1929, while Harold Macmillan managed to achieve the target of 300,000 homes in 1953 alone! 

The difference between past governmental performances and the new pledge highlights how constrained Osborne is, fiscally, politically, and ideologically.

"So across the country we will see increases in capital budgets to fund new infrastructure projects that will help grow the UK economy."

In addition, these proposed new homes will need to be connected to the rest of the country and this will call for the development of new infrastructure.

So across the country we will see increases in capital budgets to fund new infrastructure projects that will help grow the UK economy. Under devolution settlements Northern Ireland will see its capital budget rise by 12% or £600 million to 2020, Scotland's will rise by 14% or £1.9 billion,and Wales will get a rise of 16% or £900 million over the same period. All of which means more resources for those devolved governments to invest in new projects. 

England will also benefit with the Department for Transport getting a 50% increase in capital spending of £61 billion which will go to fund HS2, the road investment programme, the electrification of the Trans-Pennine, Midland Main Line and Great Western Line. 

The new Transport for the North will be funded to meet the objectives of the Northern Powerhouse and there will be a £13 billion overall investment in the area. London too will see an £11 billion of investment in Crossrail 2, and the underground, bus, and rail networks.

On top of this devolved areas in England that elect a Mayor will be able to keep all the revenue generated from business rates and will be able to raise those rates to fund specific infrastructure projects.

So far so good but there is a sting in the tail as you might expect. All this investment in capital budgets comes at the expense of the departmental operating budgets. DfT and DECC will see their operating budgets cut by 37% and 22% respectively while TfL will lose the £700 million block grant. Similar savings will have to be found in the devolved nations as well, but that will be left to regional ministers to decide. 

"Our industry must, however, continue to engage with devolved governments to help them improve their own development plans so that investors, industry, and the public can have greater confidence in the economic outlook of those areas."

This runs the danger of the Chancellor robbing Peter to pay Paul as the government might find itself unable to operate and maintain effectively the new infrastructure it is building, which could make it very expensive in the long run.

That said, the Chancellor's announcement is good news for the industry and builds on past announcements to create a more certain economic outlook. It remains to be seen what the new National Infrastructure Commission will recommend and how this will be incorporated into the new NIP but broadly the outline is there. 

Our industry must, however, continue to engage with devolved governments to help them improve their own development plans so that investors, industry, and the public can have greater confidence in the economic outlook of those areas.

We also need to realize that the government has laid down a challenge to our industry as they have delivered greater certainty and supply so it now falls to us to deliver these projects on time and in budget.

That said things have never looked so good for UK infrastructure investment and delivery than they do right now. 

So let's show George who the real builders are!

Julian Francis is director of public affairs at the ACE