ED CONWAY
july 7 2017, 12:01am, the times
After austerity we must build for the future
ed conway
If we loosen the purse strings infrastructure has to be the priority, not pay caps and student fees
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The best place to build London’s new runway is not Heathrow Airport. It’s not Gatwick or Stansted, or a man-made island in the Thames Estuary. No: the best place for London’s new runway is Birmingham.
Granted, Birmingham International Airport, nestled in fields southeast of Britain’s second city, is more than 100 miles from the capital. But by the time HS2 is built it will take less than 40 minutes to get there from central London, and only a wee bit longer from Heathrow itself.
For those of us yet to be convinced about the wisdom of HS2, here at last is the justification for splurging billions on a new high-speed railway: London-Birmingham Airport. No more worries about room for expansion: Birmingham has oodles of that. No more complaints from west Londoners about flightpaths. And, to top it all off, Whitehall would finally come good on its promise to divert a bit more economic activity from London into the regions.
Before you assume this is all pie in the sky, London-Birmingham was being actively discussed in Downing Street not so long ago and championed, before his resignation, by Lord O’Neill who was one of the driving forces behind the Northern Powerhouse. But ministers didn’t allow the airports commission, chaired by Sir Howard Davies, to consider such an option before it concluded recently that expanding Heathrow was the only solution.
Beneath this saga lies a familiar problem: successive governments’ pusillanimity about big investment projects. Rather than think ahead, our ministers typically dawdle until the very last minute before panicking and lumping for the least difficult choice — which also happens to be the most expensive. You can see it with Heathrow, and indeed with the plans for a new nuclear reactor at Hinkley Point.
Speaking of which, why rely on French energy giants and Chinese capital to finance a hulking great plant when the future of nuclear energy is small modular reactors that can be mass-produced — or even 3D-printed locally — to generate power for neighbourhoods? As it happens, Britain is a world expert in the field. But such ideas are far too radical and interesting for our leaders.
It’s clear that we have no leaders capable of getting things done
And to what end? Well, consider Britain’s productivity performance. The amount of income generated by this country per hour worked is now lower than it was a decade ago. The last time we had a lost decade for productivity was more than two centuries ago. There are all sorts of explanations, from the financial crisis to levels of debt, but poor infrastructure investment is a prominent part of it. The more grit we scatter on the wheels of commerce — whether through poor transport links or weak broadband — the less dynamic this country will be.
Which is why the next few years are so critical. Before the EU referendum I said there was no reason Brexit could not be a success — but that hinged entirely on whether we would treat it as an opportunity. In other words, this isn’t just about getting the least-bad deal; it’s about overhauling
Britain’s economy.
It is about reforming the supply side and tearing down regulations that stand in the way of business. If EU rules are indeed holding back growth, now is the time to find out. It means keeping an open mind on immigration. It means taking unprecedented steps to lure in foreign investment. Up until now EU membership has prevented us from creating Dubai-style free zones in strategic locations, with tax and tariff breaks for those based inside them. Why not establish a couple now?
Reforms such as these are hard — much as building a new airport or power station, or abolishing planning restrictions is hard. They demand a bold political leader: one capable of listening to expertise, bringing their party with them and maybe even collaborating with the opposition to get things done. It is increasingly clear that we have no such leader.
On her first day in office Theresa May promised change. In her extraordinary speech outside No 10 she promised to govern for the forgotten majority. She acknowledged that Britons have tired of austerity. And yet she made no progress towards this goal in her first nine months. Instead, it was left to Labour to sketch out a vision of a post-austerity Britain in its manifesto.
In the wake of the election some Conservatives are attempting to plunder Labour’s platform for solutions — but they are plucking out precisely the wrong bits. Scrapping the public-sector pay cap and rethinking tuition fees might make some voters happy, but if you’re ditching austerity and borrowing, the very best way to do it is to invest in infrastructure.
The good news is that there are plenty of smart experts working on bright ideas for boosting productivity. But what are the chances of Mrs May even heeding their advice, let alone steering it through a hostile Conservative Party and House of Commons?
She could have avoided this mess, you know. In the hours after the election Mrs May could have called a grand coalition. Brexit and Britain’s productivity crisis are cross-party challenges that can only be addressed by a broad church of politicians. For tribal creatures such as Mrs May and Jeremy Corbyn, perhaps this would have been unconscionable. But for the rest of us, who just want to make a success of things, it may have been the last great hope.
Ed Conway is economics editor of Sky News
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