Our problem is no longer unwillingness to spend on infrastructure, it's inability

Outsourcing government policy since 2010

As my colleague George Eaton wrote this morning, the political top-line from the government's announcement of a £50bn infrastructure program is that it signals a gruff acceptance of Keynesian economics:

The delusion that the coalition's spending cuts would increase consumer confidence and produce a self-sustaining private-sector-led recovery has been abandoned after Osborne's "expansionary fiscal contraction" turned out to be, well, contractionary.

But getting wonkish about it, there is something interesting buried in all this about how the government has chosen to execute this volte-face. Rather than simply borrow the money – at interest rates so low that it would basically be paid to do so – it has announced that it will guarantee the private loans of any company which fulfils certain requirements.

Doubtless part of the reason is political. This way, the government can confidently state that they aren't adding anything to the deficit, even though this way of borrowing is functionally identical to doing it the standard, on-the-books way. But part of it will be because infrastructure investment is really hard.

According to the FT:

To qualify for the new guarantees, projects must be ready to start in the 12 months from the offer being made and Treasury officials say they will be monitored to ensure they would not have gone ahead in any case.

The thing is, there just aren't that many shovel-ready projects simply lying around the place, and certainly not big flashy ones. Although the government is proclaiming that the Thames tunnel, the Mersey Gateway toll bridge and the A14 road widening in Cambridge could all be helped with the money, it's usually more mundane things which are the easiest use of infrastructure spending. Forget high-speed rail and airport islands, and focus on sewers and road resurfacing.

Unfortunately, its relatively tricky to spend £50bn on sewers in a year. Thames Water is replacing all the Victorian Water mains in London, but its taking 5 years and costing £5bn. To do it any faster would risk chaos in the streets. And noteably, they had already started that program without the governments money. That's going to be true of a lot of the low-level infrastructure investments that would otherwise be ripe for targeted spending.

So the government needs ideas. And what better way to get them than to offload the generating of them to the private sector? It's no longer just a government outsourcing based on ideology. It's now a government outsourcing because it has literally no idea how to enact policy it desperately wants to.

Osborne knows what it means to be Keynesian, but doesn't know how to do it. If you think you do, why not bid for his money?

The Thames tunnel, one of the proposed uses of the infrastructure money. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

How Jim Murphy's mistake cost Labour - and helped make Ruth Davidson

Scottish Labour's former leader's great mistake was to run away from Labour's Scottish referendum, not on it.

The strange revival of Conservative Scotland? Another poll from north of the border, this time from the Times and YouGov, shows the Tories experiencing a revival in Scotland, up to 28 per cent of the vote, enough to net seven extra seats from the SNP.

Adding to the Nationalists’ misery, according to the same poll, they would lose East Dunbartonshire to the Liberal Democrats, reducing their strength in the Commons to a still-formidable 47 seats.

It could be worse than the polls suggest, however. In the elections to the Scottish Parliament last year, parties which backed a No vote in the referendum did better in the first-past-the-post seats than the polls would have suggested – thanks to tactical voting by No voters, who backed whichever party had the best chance of beating the SNP.

The strategic insight of Ruth Davidson, the Conservative leader in Scotland, was to to recast her party as the loudest defender of the Union between Scotland and the rest of the United Kingdom. She has absorbed large chunks of that vote from the Liberal Democrats and Labour, but, paradoxically, at the Holyrood elections at least, the “Unionist coalition” she assembled helped those parties even though it cost the vote share.

The big thing to watch is not just where the parties of the Union make gains, but where they successfully form strong second-places against whoever the strongest pro-Union party is.

Davidson’s popularity and eye for a good photo opportunity – which came first is an interesting question – mean that the natural benefactor in most places will likely be the Tories.

But it could have been very different. The first politician to hit successfully upon the “last defender of the Union” routine was Ian Murray, the last Labour MP in Scotland, who squeezed both the  Liberal Democrat and Conservative vote in his seat of Edinburgh South.

His then-leader in Scotland, Jim Murphy, had a different idea. He fought the election in 2015 to the SNP’s left, with the slogan of “Whether you’re Yes, or No, the Tories have got to go”.  There were a couple of problems with that approach, as one  former staffer put it: “Firstly, the SNP weren’t going to put the Tories in, and everyone knew it. Secondly, no-one but us wanted to move on [from the referendum]”.

Then again under different leadership, this time under Kezia Dugdale, Scottish Labour once again fought a campaign explicitly to the left of the SNP, promising to increase taxation to blunt cuts devolved from Westminster, and an agnostic position on the referendum. Dugdale said she’d be open to voting to leave the United Kingdom if Britain left the European Union. Senior Scottish Labour figures flirted with the idea that the party might be neutral in a forthcoming election. Once again, the party tried to move on – but no-one else wanted to move on.

How different things might be if instead of running away from their referendum campaign, Jim Murphy had run towards it in 2015. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.

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