Over the summer we learned that our economy has entered the longest double-dip recession since the war. Long-term youth unemployment remains at record levels and with borrowing up by a quarter, we’re not even getting the deficit down.
The Tory-led Government has responded with yet another relaunch, promising to kick-start growth with new policies, of which there are so far few details, to boost investment in housebuilding and other essential infrastructure. The Prime Minister promised to “cut through the dither” while the Chancellor, George Osborne, said “we have to do more and we have to do it faster”.
The Government is right that we urgently need to get growth going again and that investment in infrastructure is one of the best ways of creating jobs now at the same time as strengthening our economy for the future.
Yet a year on, business leaders like John Cridland, head of the CBI, are asking: “Where are the diggers?” The director-general of the British Chambers of Commerce, John Longworth, complains of “indecision and equivocation”. All parties agree on the need for infrastructure investment but where is all the delivery that minister after minister has promised?
The contraction in the construction sector is one of the major reasons the economy fell back into recession this year. Public investment has been cut back sharply, and ministers’ predictions that the void would be filled by the private sector now look a distant prospect. The Government admits that pension funds will invest just a fraction of the money promised by ministers, and only from next year.
But ministers only have themselves to blame. The Chancellor’s disastrous decision to raise taxes and cut spending too far and too fast resulted in a collapse in business confidence as growth stalled and the economic outlook deteriorated. Investors are also being put off by the policy uncertainty the Government has created in key sectors, such as energy, transport and communications.In many important areas the Government is failing to show leadership — for example, it is stuck in a political tussle over green energy subsidies, it U-turned on opposition to toll roads, and delayed by three years Labour’s pledge to roll out broadband for all by the end of this year.
The slump in infrastructure investment is a dramatic demonstration of how the failure of this Government’s plan isn’t just causing hardship and insecurity today — it is doing permanent damage to our longer-term economic potential, undermining our future ability to compete and pay our way in the world. Businesses, working families and taxpayers will pay the price for decades.
So what needs to happen? We urgently need to get infrastructure projects moving and to give investors certainty and stability. Labour’s Plan for Jobs would bring forward long-term infrastructure projects, as we did in the aftermath of the global financial crisis, to help create jobs now and provide a clear pipeline that investors can plan for. Our plan includes repeating the bankers’ bonus tax to raise £1.2 billion to fund the construction of more than 25,000 new affordable homes. And we would introduce a one-year cut in VAT on home improvements to five per cent.
To help give investors confidence to invest for the long term, Labour believes an active government approach is required, including support for key sectors. These measures are about providing help now to forge a stronger and more diverse economy.
With major new EU regulation currently in the pipeline set to impact on the pensions industry and the way it makes infrastructure investment, we are concerned that the Government’s semi-detached approach to Europe is putting investment at risk.
But we also recognise that an improved long-term infrastructure must be a shared endeavour of all parties. Projects don’t fit neatly within political cycles but are long-term enterprises. They are damaged by chopping and changing and uncertainty. The challenge for politicians is to understand this and build it into policy-making. That’s why Maria Eagle, Labour’s shadow transport secretary, has offered to work on a cross-party basis with the Government to develop a long-term solution to our aviation needs, a key concern of British business. Sadly, the Government has not agreed to this sensible approach so we are left with the usual political to-ing and fro-ing.
The fact that the Government has not met its own pledges, and that infrastructure projects are not under way, as was claimed, provides an opportunity for ministers to think again and adopt the more collaborative approach people are looking for. There will always be areas where we disagree. However, where we can reach consensus on the long-term improvements which must be delivered and do what many of our global competitors are getting right, we should do so.
What better example is there than the Olympics — begun under Labour, established with a cross-party agreement, and completed under the current Government with broad political consensus. It led to a world-class Games, delivered on time and to budget. We need more of this if we are to reach the gold standard in infrastructure too.
Joint article with Rachel Reeves MP