George Osborne had a good thing going there, for a while…
He managed to convince voters that government spending was a bad idea.
What happened was that the 2008 crash shook everybody up a bit. People started to care about things like Standard & Poor’s AAA credit ratings, government debt and deficit ratios for the first time. After the shock in 2008 fiscal responsibility got a new urgency.
The Tories’ message, “it’s time to mend the roof while the sun is shining”, connected with voters. Prudence was in.
Poor old Ed
Now, this was a dream situation for a Tory Chancellor. It played to the Tories’ strengths as the party of sober responsibility and economic competence. And it robbed Labour of its strongest card: the giveaway budget.
Poor old Ed Miliband tied himself in knots trying to fight the general election having promised to cap welfare spending. He was forced to fight the election on Osborne’s terms.
But that was then and this is now. You might have missed it in all the carnage last week, but the AAA rating is gone. The government’s old plan to eliminate the deficit by 2020 was dropped last Friday.
In the pre-Brexit era, the Osborne era, a cut in Britain’s credit rating was headline news. It shocked the nation. And it reinforced the argument for more spending cuts.
But we’re not in that world any more. Austerity is out. Spending is in.
This week Stephen Crabb, an up-and-coming Tory who’s standing for the party leadership, has suggested a £100bn splurge on infrastructure spending. His plan is being backed by Sajid Javid, another Tory up and comer who had previously worked in the City.
£100bn is a lot of money! By comparison, the Cameron-Osborne Government cut capital spending from £57bn when they arrived in office to £42bn in 2014.
And Crabb and Javid aren’t cranks. They’re considered the next generation of Tory leaders.
This year’s leadership contest is probably too soon for Crabb. But by standing he’s putting down a marker and establishing his positions on the key issues. He thinks “fixing the roof” has lost its appeal. Prudence is out.
Okay, what’s my point?
My point is very simple: Britain has been starved of investment in its infrastructure for decades. This goes way beyond the Cameron government. It’s been going on for decades.
It’s only when you’re abroad do you realise how shabby a lot of Britain’s infrastructure is. I can now see it from my perch in Copenhagen, where gleaming fully-automated metro lines whisk people out to a big glassy efficient airport.
It’s becoming obvious to everyone, from international visitors to left wing politicians and now candidates to lead the Conservative Party, that Britain needs to catch up. It’s going to cost hundreds of billions.
And some companies are going to be on the receiving end of those contracts. It’s going to be a bonanza for a small number of construction and infrastructure businesses.
My long-time colleague David Stevenson, the editor of Strategic Intelligence, has been studying this sector for a long time now. He’s been working out what’s likely to be spent in what government departments – and who’s going to get the contracts.
On Thursday David’s going to publish his findings right here in Risk and Reward, and tomorrow I’m going to allow him to explain things in a bit more depth. Stay tuned.