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Danny Alexander: capital catch-up Danny Alexander: capital catch-up
(3 months later)
When one politician says something is momentous and their opponent says it is all rubbish, the truth almost always lies somewhere in between. Yesterday provided a good example with the statement to MPs about infrastructure investment by the Treasury secretary. Danny Alexander's statement outlining £100bn worth of such spending between now and 2020 contained many good things. But it was nowhere near as imposing as he pretended.When one politician says something is momentous and their opponent says it is all rubbish, the truth almost always lies somewhere in between. Yesterday provided a good example with the statement to MPs about infrastructure investment by the Treasury secretary. Danny Alexander's statement outlining £100bn worth of such spending between now and 2020 contained many good things. But it was nowhere near as imposing as he pretended.
The good news is that, without admitting it openly, the coalition has learned a lesson about the importance of government spending in stimulating recovery. In 2010 the Treasury slashed capital spending across Whitehall, cutting off at the knees a range of projects that might have helped to support a return to growth. Belatedly, and often at the urgings of the business secretary, Vince Cable, the Treasury has now been forced to restore some of the capital funding that it scrapped three years ago. Even so, this week's much trumpeted £50.4bn of extra capital spending for 2015-16 announced by George Osborne on Wednesday actually amounts to a real-terms cut compared with 2014-15. And much of the capital programme that Mr Alexander announced yesterday will only be affordable if current spending is cut still further to pay for it.The good news is that, without admitting it openly, the coalition has learned a lesson about the importance of government spending in stimulating recovery. In 2010 the Treasury slashed capital spending across Whitehall, cutting off at the knees a range of projects that might have helped to support a return to growth. Belatedly, and often at the urgings of the business secretary, Vince Cable, the Treasury has now been forced to restore some of the capital funding that it scrapped three years ago. Even so, this week's much trumpeted £50.4bn of extra capital spending for 2015-16 announced by George Osborne on Wednesday actually amounts to a real-terms cut compared with 2014-15. And much of the capital programme that Mr Alexander announced yesterday will only be affordable if current spending is cut still further to pay for it.
Even more strikingly, most of what Mr Alexander announced will not actually begin to bear any sort of fruit for three years at the earliest. It therefore makes no economic impact today. Even after yesterday's revised figures for UK growth in 2011-12 revealed a marginally less unhealthy picture than before – and thus no double dip recession – the economy is still essentially flat. Most families face two more years of falling real living standards that might have been mitigated if the programmes that Mr Alexander unveiled with such hyperbole had not been ditched in the first place. That does not justify Labour's contempt for the announcement as pure hot air. But it comes close. This was an announcement about future spending, not the spending itself.Even more strikingly, most of what Mr Alexander announced will not actually begin to bear any sort of fruit for three years at the earliest. It therefore makes no economic impact today. Even after yesterday's revised figures for UK growth in 2011-12 revealed a marginally less unhealthy picture than before – and thus no double dip recession – the economy is still essentially flat. Most families face two more years of falling real living standards that might have been mitigated if the programmes that Mr Alexander unveiled with such hyperbole had not been ditched in the first place. That does not justify Labour's contempt for the announcement as pure hot air. But it comes close. This was an announcement about future spending, not the spending itself.
That said, most of what Mr Alexander announced was welcome, or will be when it actually comes, and not the opposite. More housing is needed. So are new school buildings. The same with high-speed broadband. And investment in rail and transport more generally. Further clout for the green investment bank matters too. Bring it all on. But don't pretend that this is much more than a welcome catch-up necessitated by the fact that ministers fell for their own propaganda that the consolidation would be working by 2013. Mr Alexander's announcements are better than what came immediately before, but his pretence that this was some sort of Roosevelt-style New Deal for Britain was a spin too far and an insult to the intelligence.That said, most of what Mr Alexander announced was welcome, or will be when it actually comes, and not the opposite. More housing is needed. So are new school buildings. The same with high-speed broadband. And investment in rail and transport more generally. Further clout for the green investment bank matters too. Bring it all on. But don't pretend that this is much more than a welcome catch-up necessitated by the fact that ministers fell for their own propaganda that the consolidation would be working by 2013. Mr Alexander's announcements are better than what came immediately before, but his pretence that this was some sort of Roosevelt-style New Deal for Britain was a spin too far and an insult to the intelligence.
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