The Conservatives have clearly settled on their economic policy straplines and are drilling them out relentlessly. After an alleged “decade of recovery”, they want to launch a “decade of renewal”. But claims of “renewal” paper over three glaring contradictions at the heart of the Conservatives’ economic approach.
First, while Conservative ministers have talked up the prospects of a mutually beneficial trade deal with the US, they appear unwilling to publicly acknowledge the increasingly unpredictable approach to trade adopted by the US administration. Javid received a first taste of this a few days ago in Davos, when the US threatened to withdraw support for a deal if the UK persists with its relatively light-touch Digital Services Tax. But there has been little public acknowledgement of the potential trade-offs the UK may need to make as the price for any deal. Those who have called for parallel UK-EU and UK-US talks have also failed to acknowledge the EU and US’ clash of positions over the climate crisis and, by extension, the COP conference approaching fast this November.
The potential perils of concluding a US trade deal should have been evident to the Conservatives given the rocky recent history of US-China trading relations. Recent talks have suggested a cooling of the trade dispute between the US and China is in the offing – but the potential for major disruption remains. Apparently due to deference to the US, we have seen next to no reference to the US’ protectionist flirtations by Conservative Ministers. Nor indeed have we seen much acknowledgement of Chinese anti-competitive practices – indeed, last year the Conservatives stripped away from post-Brexit Britain the protections afforded to UK ceramics and steel that are currently available via the EU. Pinning the UK’s hopes on trade deals with countries willing and able to adopt protectionist positions appears highly naive.
Second, there is contradiction in the Conservative approach to investment. The need to boost private sector investment in the UK – still trailing well behind comparable nations – seems now to have been jettisoned as a goal of public policy. There can be few other interpretations of the Chancellor’s comments, and those of unnamed ‘senior ministers’ in the press, suggesting that advanced manufacturers should “put up or shut up” when it comes to the injection of additional, costly, friction in trade as we leave the EU. Vague references to recreating the Pentagon’s Advanced Research Projects Agency in the UK will fail to counteract the fall in confidence inspired by the Conservatives’ cavalier attitude to the realities of international manufacturing.
Instead of focusing on boosting private investment, Conservative ministers instead vaunt the possibility of an “infrastructure revolution”, as they adopt a new fiscal rule to privilege public capital investment. As they do so, however, they seem unwilling to face up to the key question of where this investment will be targeted, beyond suggesting that it will privilege the Midlands and North. Javid has attempted to justify his party’s screeching U-turn on investment targeting, by stating the prospect of continued low global interest rates means that lower-return projects can now be justified. Yet interest rates have been low for a significant period, and many such projects would already have been justified, if only a longer-term approach to calculating returns had been adopted.
Above all, his comments intimate that control over this investment will be firmly retained in Number 11. Time and again, attempts to boost investment in other countries have shown how local and regional buy-in is essential to the successful design of new infrastructure. This evidence was one reason for Labour’s proposals for regional development banks and regional management of Labour’s proposed ‘National Transformation Fund’. The best way to avoid accusations of pork barrel politics would be to decentralise and professionalise decisions about infrastructure investment. Instead, it seems that Ministers cannot resist the temptation to be able to publicly reward politically vulnerable new friends. A similarly centralised approach looks likely to be in the offing when it comes to the successor to Structural Funds, the promised ‘Shared Prosperity Fund’. On investment, therefore, the Conservatives seem to be hoarding control in London, rather than genuinely empowering the North and Midlands.
Finally, continuing Theresa May’s talk (we never got to see the walk) of an ‘end to austerity’, Johnson continues to promise additional spending on schools, the NHS and policing – but without acknowledging the preconditions for successful investment in these areas.
Prime Minister May of course argued that spending was now ‘possible’ following the reduction of the deficit. This obviously ignored the confidence-battering impact of the last decade of spending cuts, clearly visible in the contrast between the length of the UK’s recovery compared with those nations that took a counter-cyclical approach to spending. Some senior Brexiteer Conservatives now appear, however, to suggest that additional spending is necessary as a counter to any Brexit-related disruption, as might be surmised from John Redwood’s comments in December that Johnson’s “message of confidence and enthusiasm” post-Brexit requires “some cash”.
This rather cynical approach is echoed in the choice of areas of spend prioritised by the Conservatives. In every case, of course the Conservatives are still failing to match Labour’s commitments. Critically though, by cherry-picking those areas indicated by opinion polls as of most concern to voters, they ignore the interconnections between different areas of spending. For example, additional NHS spending will fail to achieve desired outcomes unless public health services can be rebuilt- and that requires more than effectively steady-state funding for local government. Again, additional policing funding, if not matched by improvements in criminal justice, will continue to bump up against astronomically long delays in the struggling court system.
So the Conservatives’ promised ‘decade of renewal’ looks set to misfire. From seeking trade deals with protectionists, to regional investment without regional control, to inadequate public spending plans – the wheels look set to come off the ‘renewal’ wagon sooner rather than later. Rather than a decade of renewal, without a radical change we appear set to face a decade of disappointment.
Anneliese Dodds is the Labour MP for Oxford East and a shadow Treasury minister