John Humphrys asks: are projects such as big infrastructures and high-rail speed rail the key to economic recovery? Or could they create new problems of their own?
Figures released last week show that the British economy is still in the dumps. Current estimates for the last quarter of 2012 indicate that it actually shrank by 0.3%. If the first quarter of this year comes in negative too, we shall technically have entered a triple-dip recession. Even if we avoid that, it’s clear that the economy is stuck. Some are suggesting that the answer lies in promoting big infrastructure projects and, sure enough, the government announced this week details of the second stage of the high-speed rail link to the north of England. Are such projects the key to economic recovery? Or could they create new problems of their own?
After the bounce in economic activity in the third quarter of last year the latest GDP figures were a cold dose of reality. It now seems likely that the earlier good news was the temporary consequence of the Olympics. Very temporary. To some people the gloomy new figures were evidence that the government’s ‘austerity’ policy is simply not working. Ed Balls, the shadow chancellor, accused the government of “complacency” and urged a temporary cut in VAT so that people would have more money to spend, giving demand in the economy the boost he says it needs.
Boris Johnson, the Tory Mayor of London, said we needed to “junk talk of austerity”. He didn’t, though, back Mr Balls’ call for the government to junk its policy to reduce the deficit. Rather, he called for greater investment in infrastructure projects in transport and housing. This approach was backed by the deputy Prime Minister, Nick Clegg, who suggested that the cuts had gone too far and that the focus now should be on protecting and promoting capital spending projects.
It seems that, faced with a stubbornly non-growing economy, this is exactly what the government now intends to do. The idea is not that it should relax its policy of keeping a tight rein on spending and borrowing in order to stimulate current spending (as Mr Balls wants) but rather that it should take advantage of the currently very low interest rates the government has to pay when it borrows in order to finance major investment projects.
Many commentators expect that in his March Budget the Chancellor will bring forward as many such projects as he can – on the basis that the earlier they begin, the sooner they can have a stimulating effect on the overall economy. But even before the Budget has arrived the government has been keen to show it means business. This week it unveiled its plans for the second stage of the controversial High Speed Rail Two project (HR2) linking London to the north of England.
It announced the first stage last year. This involves building a new rail track from Euston, in London, through the Chilterns up to Birmingham. Opposition to the plan, not least from Tory MPs whose rural constituencies will have the new rail line run through them, led some observers to believe that the government might be about to shelve the whole plan, but this week’s news puts paid to any such idea. Stage two will take the new track off in two directions beyond Birmingham, to Manchester in the north west and to Leeds in Yorkshire. Eventually it’s planned to take the tracks further up to Scotland.
The overall cost is estimated to be not far short of £33bn (though it’s anyone’s guess what the final cost will be). The project is justified on several grounds. First, as the name implies, it will cut journey times – by as much as an hour on the trip from London to Manchester. Secondly, that the new line is needed because the capacity of existing lines has now been exhausted and demand for rail travel is still growing. Faster speeds between London and northern cities will help, it’s hoped, to reduce the north/south divide and offer the chance of economic revival in the parts of the Midlands and northern England that have been falling behind the south-east. Many business people in these areas are among the main champions of the project. And finally, although the new lines won’t be finished for many years, the very business of embarking on the project will create jobs in the short term and so help get us out of our current economic dumps, it’s claimed.
Unsurprisingly, though, many of the objections to the first stage of HR2 are being repeated now. Some are environmental. That’s because although planners have sought to keep the new track close to existing transport arteries such as the motorway network, some invasion of virgin countryside is inevitable. The clamour of protest we heard from the Chilterns last year is now certain to be echoed elsewhere, including in Cheshire where the Chancellor himself has his constituency.
But it is also objected that the economic case does not stack up. The whole notion of the value of faster trains has been derided as simply providing the opportunity for businessmen on expense accounts to charge round the country at higher speeds, overlooking the fact that many of them benefit from slower journeys on a train when they can actually use the time to do some work. It has also been argued (not least by the political commentator and chairman of the National Trust, Sir Simon Jenkins) that far from stimulating greater economic activity in the northern regions, HR2 will simply turn such regions into suburbs of London which people will use as dormitories while they commute to the capital to work. In general it’s argued that Britain is too small a place to benefit from high-speed train connections between far-flung centres in the way that countries such as France benefit. There are many better ways to spend £33billion.
The broader political accusation is that governments are tempted by such projects precisely because they cost so much money. The ‘glamour’ attached to large-scale infrastructure projects is irresistible to them, it’s argued. They allow politicians to pose as visionary Victorians, transforming the nation by their far-sighted plans, in just the same way as the pioneers of Empire turned the atlas pink. Only lesser minds cavil over the expense.
But sceptics of such grand projects tend to talk less about visions and more about white elephants. They also think there’s a risk that government will confuse two distinct things. On one hand there’s the straightforward issue that arises with any major investment project: is the benefit worth the outlay? On the other, there’s the issue of how to get an economy growing again. Confuse the two and you end up wasting scarce money on something that doesn’t give the best return.
Is the government guilty of making that confusion? Or is HR2 the right policy in itself?
What’s your view?
- Do you think the fact that the economy is still in the doldrums is the direct result of government policy or do you think no government could have made an appreciable difference?
- Do you support or not Labour’s policy of a temporary cut in VAT to stimulate the economy?
- Do you agree or not with the government that bringing forward major capital investment projects is the best way to get the economy moving?
- Do you think that in promoting projects such as HR2 the government is guilty of confusing the wish to stimulate the economy with the quite separate issue of whether or not it is a good investment?
- What do you make of the arguments for and against HR2 in its own terms?
- And if the government is to announce other capital projects in the Budget, what would you like them to prioritise?
