Thursday24 August 2017

One hard hat doesn’t make a recovery

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The stimulus package will need more than cash injections to make a lasting impact

BD led with news earlier this week that two British firms were on the shortlist for the stimulus-funded Union station development in Los Angeles; now Foster & Partners might also look forward to being stimulated at home.

The building sector is one of the few beneficiaries of the chancellor’s autumn statement, with £6.3 billion earmarked for infrastructure investment, and a faint promise of a Thames Estuary Airport. High-vis vests have been the preferred look for senior politicians in recent weeks — George Osborne might even have considered wearing one at the despatch box on Tuesday to underline his FDR moment.

Osborne doesn’t look any more comfortable in a hard hat than the prime minister does, but it remains a key accessory for a politician who wants to show they mean business.
With banks still sitting on their hands, the government has decided we need to build (and drive) our way out of this mess. £6.3 billion in infrastructure investment is good news. While there are questions over how soon any of this big infrastructure spending will produce jobs, and suspicions over pork-barrelling (Kettering gets its bypass, its brief career as a Labour marginal under Tony Blair a thing of the past), it is a fair bet that this public spending will have a more visible effect on many people’s lives than the billions that have disappeared into the Bank of England.

Some of this looks familiar — we’re now building (free) schools for the future. Some of it signals change: the chancellor wants to turn £6 billion into £30 billion by levering investment from the private sector (or, failing that, the Chinese Communist Party) without using PFI.

The context for all this is that construction has become a public-sector concern. After a brief bounce last year, jobs and output in the construction industry resumed their decline into 2011. The value of new orders from the private sector has plummeted since late 2007, while levels of public-sector construction have held up.

At the height of the boom, private orders were worth four times the value of public sector construction; now more than half the money going into new building is public money. Funding for capital investment will have to come from cuts elsewhere, but in this area of policy at least Osborne is a Keynesian.

Things, as someone once said, can only get better. The prime minister noted last week that the housing market has been “one of the biggest victims of the credit crunch”, neatly side-stepping the small matter that it was also one of the prime culprits in the credit bubble. The government strategy is to tackle the problem from all sides: with planning reform, land release, funding for developers, money for empty homes, and government-backed mortgages.

The missing piece, as it stands, is design. The long-term test for this stimulus will not be upward curves on output and employment graphs, or even another Foster airport design. It will be thousands of decent houses that people want to live in.


Readers' comments (1)

  • What a pity that none of this is new money... the chancellor took away billions with one hand, and now gives us a paltry few millions. I won't be tugging my forelock in thanks for this handful of change.

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