Talk is cheap: why the gap between rhetoric and reality in the coalition’s infrastructure policy matters

Ministers should not be under any illusion that public spending on high carbon projects offers a quick economic fix.

Amid all the headlines about the biggest programme of road building for 40 years and announcements of new support for fracking, you would be forgiven for thinking that the recent Comprehensive Spending Review meant an abandonment of plans to decarbonise Britain’s economy. Thankfully, that’s not what our analysis of the Treasury’s own numbers shows as the plans for upgrading Britain’s infrastructure still remain focussed on public transport and renewable energy. However, there are major contradictions at the heart of the government’s policy, which risk deterring the very private sector investors who are needed to implement many of these projects.

There is a marked contrast between the government’s approaches to its fiscal and environmental responsibilities. They happen to be compatible principles but they need to be seen in perspective. Our children will care more about the state of the physical world they will occupy as adults than whether they inherit government debt of 80 rather than 90 per cent of GDP. Yet the government appears to focus all its visible efforts on the fiscal front, like a first world war general celebrating every tiny advance, irrespective of the huge sacrifices made. Meanwhile, on the environmental front, quiet progress has been made with decarbonising our energy system in recent years. Further huge strides can be made by pressing ahead with long standing plans for renewables and public transport.

There is also a contradiction in the promotion of private rather than public sector activities. When it comes to jobs, the government champions the ability of Britain’s private sector to create new jobs to offset those lost in the public sector and trusts in its ability to carry on doing this. Yet when it comes to infrastructure, it celebrates public spending on roads planned for the next parliament more than ongoing private investment in renewable energy.

The disconnection between rhetoric and reality can be seen clearly when you look at the plans for both public and private investment. The Comprehensive Spending Review heralded £20bn of public money for roads between 2015-2020, yet that is only about half of the planned spending on the railways of £38bn. The contrast for private sector investments in energy is even more striking. According to data gathered by the Treasury for its infrastructure pipeline, there are plans for around £10bn of gas related projects between 2015-2020. By contrast, there are plans for four times this investment in offshore wind, which could see an injection of £39bn by the private sector.

Some might think it doesn’t matter what politicians say, as long as the right plans are in place, but this overlooks the role of political leadership in shaping private sector expectations. As most of our low-carbon infrastructure will be delivered by the private sector, investor confidence is vital if these projects are to go ahead. However, confidence in the UK’s low carbon direction has fallen dramatically because of the perception that the coalition is divided on decarbonisation. As a result, investors have been delaying financial decisions, or expecting higher returns on their investments to cover risks. Indeed, the 50 per cent fall in new orders for infrastructure in the first quarter of this year serves as an early warning of the danger that the ambitious plans might not come to fruition.

This uncertainty is unnecessary and damaging. It comes at a time when Britain desperately needs sustained economic growth, supported by productive infrastructure that helps to rebalance the economy away from consumption.  This is the only way the government will be able to make good on its promise to restore the public finances.  The sheer scale of existing plans for low carbon infrastructure projects, means that they offer the fastest route to boosting growth. Conversely, cancelling these projects would leave a major hole in our investment plans and risk knocking us back into recession.

Some ministers have a tendency talk up high carbon infrastructure, perhaps hoping to protect themselves against criticism from climate sceptics or other opponents of renewable energy policy. But they should not be under any illusion that public spending on high carbon projects offers a quick economic fix. The government’s own numbers show the opposite as the majority of the UK’s infrastructure activity is clean and low carbon. Boasting about spending public money on roads, whilst sounding lukewarm on private investment in renewables, endangers both our economic recovery and our low-carbon future.

Julian Morgan is the chief economist for Green Alliance

George Osborne. Photograph: Getty Images
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In Kezia Dugdale, Scottish Labour has picked an unlikely winner

The party leader is making gains internally at least. 

Kezia Dugdale did not become the leader of Scottish Labour in the most auspicious of circumstances. She succeeded Jim Murphy, who lasted just six months in the job before losing his Westminster seat in the 2015 general election. She herself has survived one year, but not without rumours of a coup.

And so far, she has had little reward. Labour lost 14 seats in the 2016 Scottish parliament elections, and not just to the auld enemy, the SNP, but a seemingly decrepit one, the Tories. She backed the losing candidate in the recent Labour leadership contest, Owen Smith. 

Yet Dugdale has firm fans within Scottish Labour, who believe she could be the one to transform the party into a vote-winning force once more. Why?

First, by the dismal standards of Scottish Labour, Dugdale is something of a winner. Through the national executive committee, she has secured the internal party changes demanded by every leader since 2011. Scottish Labour is now responsible for choosing its own Westminster candidates, and creating its own policy. 

And then there’s the NEC seat itself. The decision-making body is the main check on the Labour leadership’s power, and Dugdale secured an extra seat for Scottish Labour. Next, she appointed herself to it. As a counterweight to Jeremy Corbyn’s supporters, Dugdale now has influence within the party that extends far outside Holyrood. The Dundee-based Courier’s take on her NEC victories was: “Kezia Dugdale completes 7-0 Labour conference victory over Jeremy Corbyn.”

As this suggests, Dugdale’s main challengers in Scotland are likely to come from the Corbyn camp. Alex Rowley, her deputy leader, backed Corbyn. But Labour activists, at least, are battle weary after two referendums, a general election and a Scottish parliament election within the space of two years. One well-connected source told me: “I think it's possible we haven't hit rock bottom in Scotland yet, so the scale of the challenge is enormous.” 

Polls are also harder to ignore in a country where there is just one Labour MP, Ian Murray, who resigned from the shadow cabinet in June. A YouGov exit poll of the leadership election found Smith beating Corbyn in Scotland by 18 points (in every other part of Britain, members opted for Corbyn). Observers of Scottish politics note that the most impressive party leaders, Nicola Sturgeon and Ruth Davidson, were given time and space to grow. 

In policy terms, Dugdale does not stray too far from Corbyn. She is anti-austerity, and has tried to portray both the SNP and the Tories as enemies of public service. She has attacked the same parties for using the Scottish referendum and the EU referendum to create division in turn. In her speech to conference, she declared: “Don’t let Ruth Davidson ever tell you again that the Union is safe in Tory hands.”

So long as Labour looks divided, a promise of unity will always fall flat. But if the party does manage to come together in the autumn, Dugdale will have the power to reshape it north of the border, and consolidate her grip on Scottish Labour.