With the flood waters finally receding, the debate about how Britain copes with extreme weather in the long-term (the Met Office has just confirmed that this winter was the wettest since 1910) is beginning. Ed Balls has a notable piece in the Telegraph today committing the next Labour government to increased investment in flood defences (it “must and will be a priority,” he writes). Having warned in his 2012 conference speech that “we must decide how we are going to protect our country from rising sea levels and exceptional rainfall”, Balls, more than most, can claim to have seen this crisis coming.
In the piece, he makes the case for higher spending on flood protection (which, contrary to David Cameron’s claims, was cut by 17 per cent in real-terms in 2010) as part of a wider shift towards long-term preventative spending (which can result in significant savings). He writes:
[T]he damage from the flooding of recent weeks is not only to people’s lives and livelihoods, but the financial costs are expected to be over a billion pounds. Furthermore, the Committee on Climate Change warned last month that investment in flood defences is now £500 million below what’s needed and that this risks £3 billion in avoidable flood damage.
How can this make economic sense? Rather than the short-termist salami-slicing of budgets we have seen, we need instead to make long-term decisions now that can save money in the future.
Next month’s Budget must begin to set out that action, and I am also clear that investment in flood defences – preventative spending that can save money in the long-run – must and will be a priority for the next Labour government.
Balls is certainly right to argue for the long-term economic benefits of investment (alongside flood prevention, one could cite housing, childcare, transport and skills), which is why he has, crucially, left open the option of borrowing for this purpose, while achieving a current budget surplus.
In a recent Staggers piece, Julian Morgan, the chief economist of Green Alliance, made the case for running a capital deficit to pay for improved flood defences: “As flood defences provide protection for many years to come, it seems wholly appropriate to pay for them gradually with long-term borrowing by issuing 30 or even 50 year gilts, especially when the cost of financing is so low. This would mean that the burden would not only fall on the current generation of taxpayers, but would be spread across the current and future beneficiaries of the flood defences.”
The shadow chancellor and his aides state both publicly and privately that no decision will be taken on whether to do so until closer to the election, when the state of the economy is clearer. But few in the party believe it will be possible for Labour to achieve its priorities – a mass housebuilding programme, universal childcare, the integration of health and social care – without doing so. As one shadow cabinet minister recently told me: “We all know that a Labour government would invest more.” The question, rather is a tactical one: when and how does Labour make the case for “good borrowing”?
Owing to the Tories’ framing of the crash as the result of overspending by the last government, the party starts from a position of weakness. In private, Ed Miliband’s advisers argue that the voters are able to distinguish between borrowing to fund day-to-day spending and borrowing for investment, just as they distinguish between “borrowing to fund the weekly shop” and “borrowing for an asset like a house”. But the Labour leader is not yet prepared to make this case in public. Since an ill-fated interview last year on Radio 4’s The World at One, in which he refused eight times to admit that Labour would borrow more than the Conservatives, Miliband has focused deliberately on market reforms that would not cost government money: freezing energy prices, expanding use of the living wage and restructuring the banking system. When he has made promises that would require new funding, such as the construction of 200,000 homes a year by 2020, the question of borrowing has been deferred.
But sooner rather than later, the party will need to return to it. After the deluge of this winter, flood prevention would be a good place to start.