Alexander Jan: Government’s ‘build, build, build’ story needs another layer

Alexander Jan: Government’s ‘build, build, build’ story needs another layer

Yesterday’s speech by Boris Johnson, Prime Minister and, lest we forget, twice Mayor of London, was the usual mix and match of political resolve, resolution and a promise of revolution (although not the Marxist kind) that we have come to expect from our national politicians. It was trailed as being about rebuilding Britain and a Roosevelt-style programme of public works to re-energise the British economy. The speech managed to cover everything from Covid to coking works and a promise to pursue the quest for “jet-zero” (net-zero) air travel. Somehow, Brexit and Captain Tom Moore’s back garden also got mentions.

But what about building things? In advance of the Chancellor’s announcement on spending next week, it was perhaps inevitable that the PM’s announcement on infrastructure spending would be modest in scale. In total, it totted up to around £5 billion of largely-existing money. If any London projects were included – and I don’t think they were – you would need to dig pretty deep to find them. The focus was primarily around speeding up schemes that are already in the public sector pipeline for the rest of the country.

Wanting to pick up the pace of delivery is in itself not a bad thing. Nor is the case for investing more. Many economists and indeed politicians probably agree that both public and private capital investment in the UK is too low. We have lagged behind many of our EU and OECD peers for decades. World Bank data for 2018 show that for all types of investment (as a percentage of GDP) we ranked 128 out of 150 countries. Many would argue too that investment is key to providing better public services and improving labour productivity as well as delivering on wider objectives such as dealing with environmental challenges. It is right that these things should be top of any British government’s agenda.

The PM is clearly keen to deploy public money to help the country build itself out of the economic crisis of corona. His desire to invest in those parts of the country that have struggled is part of a persistent narrative around “levelling up” that is also a reasonable policy proposition, and one that governments have been trying to implement for decades. Having said that, if London and the south east are left at the back of the queue, that will surely limit their ability to contribute to repairing the government’s public finances that have been ravaged by the economic impact of the pandemic.

Money alone does not deliver new projects. Research by the Institute for Government shows that when Whitehall capital budgets are expanded, departments often struggle to spend them. Even in times of austerity, capital can go unused. So the problems with government machinery – something Johnson’s special adviser has in his sights – is, for sure, also part of the reason why successive governments have struggled to get things built.

There was a sort of reference to that in yesterday’s speech, with a side swipe at England’s apparently sclerotic planning system and a promise that radical reform is on its way. But it is here that this government, as has been the case with so many of its predecessors, is likely to miss the open goal that should have been placed front and centre of the PM’s speech – namely, to embark on a massive programme to push power, tax-raising powers and accountability to regional and local government institutions that could be so helpful with delivering his wider policy aspirations.

Time and time again national politicians have vented their frustration with the machinery of government. In the words of Jonathan Powell, head of Number Ten under Tony Blair’s administration, “a new Prime Minister pulls on the levers of power and nothing happens.” The problem is that the temptation is then to pursue precisely the policies which make the problem worse – namely to demand more command and control through more powerful Whitehall ministries, with ministers leading the charge.

Some might say that the re-creation of London-wide government plus the combined authorities for England (which represents more than four-fifths of the UK population) are exceptions to this narrative. But the weakness of these institutions, with their anaemic fiscal powers and inability to do much beyond the realms of transport, demonstrates that their creation was a concession to the status quo rather than part of a revolution in how England governs herself.

From an infrastructure perspective, there is a big economic advantage in doing things locally – particularly at a time where there is slack in the economy. Sir Rod Eddington, a transport expert commissioned by the government in the 1990s, concluded that one of the best ways to boost the economy was to target expenditure on local projects. These help people get to work more easily, open up land for housing and can expand labour markets, which in turn boosts people’s productivity. By tying projects into the future growth of a local tax base, incentives for authorities to go for growth can be provided. It is surely easier for local politicians to be able to explain why development is necessary to their citizens if one of the major benefits is help with funding local public services they and their families will get to use.

If the polls in the aftermath of Brexit are to be believed, the decision of many Leave voters was fuelled by a sense of disempowerment and the remoteness of government: a belief, as Professor Tony Travers of the LSE has put it, that “nothing can ever be done [to change things]” Reinvigorating local government institutions would not only pay dividends in economic terms, it could pave the way to fix the fractured relationship between government in the widest sense and its citizens, and genuinely help Whitehall to “get things done.”

The Prime Minister holds Sir Winston Churchill in great esteem. In the 1920s, Churchill argued that the British system of government was “top-heavy” and that there was “a storey missing” in its structure. If the Prime Minister wants to make a lasting impression on sorting out England’s infrastructure, he can and should start by adding a middle-tier to the machinery of government. He would be forgiven if he did not ask for planning permission to do it.

Alexander Jan is Chief Economist at Arup and non-executive chair of the Midtown Business Improvement District covering Holborn, Clerkenwell and Farringdon. Follow him on Twitter.

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