Yahoo News What voters really want for Christmas is honesty about spending not expensively wrapped lies
It should have occurred to Boris Johnson’s election planners that an unnecessary general election in the middle of December might cause attention to shift from Brexit to the more cheerful subject of what Santa Claus is offering for Christmas.
The political parties are doing a good job impersonating the generous man with the white beard. We are told that Labour is offering more than £1 trillion in presents. The Tories are offering a bit less: a few hundred billion. My Lib Dem friend Ed Davey is playing Scrooge with a mere £50bn. The Green Party, however, has got into the seasonal spirit, treating a trillion as small change. The race for the first quadrillion-pound offer is on.
I exaggerate, but not by much. We should be having a serious debate about how a country with a stagnant economy, faced with the costs and upheaval of Brexit, can best reconcile the yearning for better services (the end of austerity) with a reluctance to pay more out of incomes that have barely risen, if at all, for a decade. The debate calls for honesty and humility. Instead, the public are being treated as silly, gullible, children dreaming about an expenses-paid trip to raid Santa’s grotto in Lapland.
When the so-called costed manifesto pledges emerge, critical voters should ask about three issues: how will all the proposed capital investment actually be delivered? How can the (apparent) promises of a balanced current budget be reconciled with the end of austerity? And how will Brexit (or not) affect the plans?
There is now a broad consensus that the next government can and should splash out on capital spending, taking advantage of historically low interest rates. We should have done so earlier in the decade during the coalition but it was less clear then than it is now that, in a world awash with surplus savings, it is safe to borrow more without pushing up the cost of borrowing (the yield on government bonds). There is, however, still a limited appetite in the market for sovereign bonds issued by a country only slightly more credible at present than Argentina.
The big problem is much less to do with money than getting the investment done – obtaining EU state-aid approval (still a condition even under Johnson’s withdrawal agreement for four more years), drawing up the plans, acquiring land where necessary, assembling a good project team, appraising the technical risks, and then meeting the engineering and construction challenges in a country chronically short of building workers and engineers.
I oversaw the then Green Investment Bank in the coalition. It was considered a big success. We got £2bn out of the door to co-finance £10bn of private money in good “green” projects. Without a financial ceiling we could have done more but not a great deal. The Regional Growth Fund for mainly industrial projects in “left behind” areas, vetted by a team led by Michael Heseltine, operated on a similar scale and struggled to do much more. The idea that any government could sensibly invest 10, let alone 100, times that amount on similar activities is fanciful and dishonest.
A good place to start, when looking for potentially useful new capital projects, is the railways. But experience shows that it takes more than political will and optimistic announcements to dig tunnels and manage complex projects. Crossrail was regarded a great British success story until it fell seriously behind schedule because of tricky software problems, and became massively over budget. HS2 is still being fought over.
The next British government would do well to get started on any new rail projects, like HS3, in the north of England. That is always assuming that Network Rail can sort out its shambolic management and the industry can avoid being paralysed by pointless arguments over nationalisation.
Another priority should be social housing. Again, easier said than done. Most councils have dismantled their building departments and will have to rely on already overstretched private builders who are struggling to find site managers, bricklayers and other tradespeople. Land is often inordinately expensive and the next government will have to reform the compensation system to avoid being skinned by landowners.
Then it will have to use compulsory purchase to acquire the sites – all of which will be fought in the courts and take time. And when the houses are built – hopefully to better, greener, standards than in the past – social rents then have to be subsidised, which raises the question of how to pay for current spending.
The most important commitment made by all the parties so far is to honour the “golden rule” (originally formulated by Gordon Brown) to balance the government’s books. Current government spending has to be matched by taxation over an economic cycle. So where do we get the money for free personal care, abolishing tuition fees, more public sector pay, more teachers, doctors and police officers, benefit uprating, guaranteed free childcare and more?
Apart from the Lib Dems (with a modest penny in the pound income tax rise), no one is warning of higher income tax, VAT or property tax. There is a plausible case for putting corporation tax back up a bit and getting a little more from the super-rich without driving investors and entrepreneurs away. But this will cover only a small fraction of what the voters are being promised.
Then there is the cost of Brexit – if it happens. Brexit would cause a, more or less, rapid, slowdown in the economy and tax revenue losses to be set against the eventual savings from the EU budget. I have no idea what Brexit would eventually cost the budget though I suspect the Lib Dems are being very optimistic with an estimate of only £50bn over five years.
What I do know is that the electorate is being lied to on an epic scale. When the voters rip away the expensive, seasonal paper, they will find nothing inside their presents.
Sir Vince Cable is the former leader of the Liberal Democrats
