What is the point of a Conservative majority? The answer might once have been to implement Conservative policies. But now it’s not so clear. Budgets are normally the way to judge a government, but we didn’t have one last year. On 11 March, we will learn how Sajid Javid intends to govern the public finances and just how far the Tory government is able to take advantage of the unprecedented political opportunity. It will become clear whether the government sees this moment as a time for boldness, or caution.
Leaving the European Union is a radical act, but its effect is mainly political. It will remove a constraint, but will not — in and of itself — make much of a difference. Whether Britain dives or thrives will depend on the decisions made in Downing Street. The Chancellor told us to expect up to £100 billion of new infrastructure spending over the next few years, financed by low rates. The goal of balancing the books, so crucial to the Cameron/Osborne years, is being abandoned.
But covering the north of England in cranes and hi-vis jackets will not do much for those who need more immediate help. House prices are far too high, and will rise even higher unless planning rules can be reformed. Politicians of all parties have known this for years, but during the era of minority politics no one felt bold enough to take decisive action. If no one does so now, probably no one ever will — and younger generations will grow more disenchanted than ever about the prospect of capitalism without capital.
Another scandal in Britain is the cost of childcare: it is this, not gender discrimination in the workplace, that holds back women’s careers. With some of the highest rates for childcare in the developed world, too many women find that if they do return to work, their salary barely covers the cost of a nursery. The economy is now losing the skills of far too many women who would like to return to work but find that it makes no economic sense. Relaxing some regulations on nursery care (especially the ratio of staff to children) would send costs downwards and relieve a painfully unnecessary financial burden placed on families — particularly women.
Boris Johnson is quite within his rights to treat this as a new government, having just won his own mandate with a majority far larger than David Cameron ever managed. Moreover, it is quite right that he should seek to boost the fortunes of constituencies in the Midlands and the north, but he will best manage this by implementing reforms that improve schools and create more better-paid jobs. This would mean recognising the successes of the Cameron years (in which more jobs were created than at any other time in history) and building on them.
The Prime Minister and his Chancellor should also be careful in rejecting what Cameron and Osborne’s opponents always liked to call ‘austerity’. It is not hard to imagine circumstances in which borrowing could spin out of control. It is salutary to remember that even with interest rates at 400-year lows, the government is spending £40 billion this tax year simply on servicing its own debts. That is more than it spends on defence, and about two-thirds of what it spends on education. If interest rates rise, or if tax receipts fall as a result of recession, the cost of debt could all too easily become overwhelming.
During the election campaign, the Conservatives were protected against attacks on their borrowing plans by their opponents’ far more reckless proposals. Tory plans for more spending were also constrained by the rule that the national debt should not grow faster than the economy over the course of the parliament. As Jon Cruddas’s long-forgotten inquiry into Labour’s 2015 election defeat concluded, ‘austerity’ — or fiscal prudence as others might call it — had proved unexpectedly popular at the ballot box. Voters who spend much of their time fretting over their household budgets tend not to be impressed by governments which spend like there is no tomorrow.
While the right infrastructure spending can earn the country and the government a genuine financial return, it doesn’t follow that any old road, bridge or railway line will do. HS2 is a case in point. This week, Lord Berkeley, the Labour peer appointed as vice chairman of the government’s review into the project, estimated that it could provide as little as 60 pence in economic benefits for every pound of public money spent. It is therefore not an ‘investment’, because the taxpayer will lose. It is £100 billion worth of extravagance — a vanity project.
The future of that project now hangs in the balance. It is time to ditch the Notting Hill assumption that the best thing one can do for northerners is to let them come to London a little bit faster. Far better if HS2 is folded into a project for improving transport links between (and within) cities in the north of England, and other areas crying out for the investment.
Those involved in the New Labour project later admitted that one of their biggest regrets was not making better use of the first two years of the landslide victory — of not doing more to choose nettles to grasp. The Prime Minister and the Chancellor will perhaps never have a better time in which to take unpopular but necessary decisions, to abandon bad ideas from the last decade and to implement the one-nation Conservative agenda that they both promised during the party leadership campaign. It would be sensible of them to start with the Budget.
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