We hear much today about how, whoever wins the election, there will be spending cuts. It is thought the Conservatives believe a 10% cut in education, defence, the Home Office and transport spending will be needed to have any chance of getting Britain back into the black if they take power next year.
It’s true that when challenged to commit to Crossrail, shadow chief secretary to the Treasury Philip Hammond, the man who might well wield the spending axe, said: “Every single programme, every single project will have to be reassessed and re-evaluated.”
Even Liberal Democrat leader Nick Clegg, who could be in a position to broker power, has said that “our shopping list of commitments will be far, far, far, far, far shorter”.
Austerity, it seems, has become the common currency of politics today and it is a mantra that is noticeably different from the build up to previous General Elections when the parties have often talked up how much they intend to splash out. It sounds like we are being softened up for something severe.
A funding hole
While the government did bring forward some transport spending to boost the economy, this will not last forever and may leave a funding hole in its wake.
Government borrowing is at an all-time high and we face a difficult future if it cannot be brought under control. But cutting spending will have a big impact and the incoming administration needs to be wary of what will happen if they hack away without due care and attention.
Some suggest that cutting Crossrail will save money, but any savings will not be without cost. An estimated 30,000 jobs will not be created if the project is put on hold again.
Some suggest that cutting Crossrail will save money, but any savings will not be without cost. An estimated 30,000 jobs will not be created if the project is put on hold again. The £2bn a year due to spent on the project will not enter the economy and the forecast growth in London’s population will mean an additional burden on public transport will go unrelieved, with a knock-on effect on quality of life.
Quality of life may be intangible, but it is a key determinant in investment decisions. If London is not a good place to live and work, companies with a choice about where they site themselves will choose to go where they can attract the brightest and the best. It is not just about how much office space London has available to rent.
Infrastructure has a high price tag and its benefits to the economy are seen as being slow. As such it is a sitting duck for the knife-sharpeners.
Missing what we haven’t got
The calculated risk is that we will not miss what we have not got, but this is myopic in the extreme. Not investing in transport means subjecting the travelling public to congested road and rail networks. Not investing in energy runs the risk of not being able to provide in times of intense demand − with a knock-on effect on price and, in extreme cases, blackouts.
Not investing in public health infrastructure, meanwhile, means polluted rivers and poor-quality drinking water. Not investing in flood defences means flooded homes. It all amounts to an ill-advised assault on the quality of life in communities up and down the country. But what else can be done?
Hacking away at investment in infrastructure is a false economy and the better place to look for savings is in the public sector − not necessarily in how much money they spend on their wage bill, but in how they do what they do.
The public debate is more sophisticated than simple calls for cutting projects. Reducing the size of the public sector salary bill is being seriously touted, and it is likely that efficiencies will be looked for in all available avenues, including construction projects. We cannot claim that we do everything at optimum efficiency, but the margins in this industry are already slight, and we have had years of clients demanding more and more for less and less, which has made us lean and efficient. It is time to take a serious look at public sector delivery agencies and how they work.
We can ask if TfL is really serving the capital’s needs as well as it could. It is already trying to save £2.4bn in operational costs, but how much can it cut without having to fundamentally change how it works? Look more widely at the way the public sector procures construction and you will find much wasted money − and I mean more than the £1bn the construction industry spends on jumping through duplicatory and time-consuming pre-qualification hoops. No doubt about it, some projects will be cut in the great 2010 search for savings.
But hacking away at investment in infrastructure is a false economy and the better place to look for savings is in the public sector − not necessarily in how much money they spend on their wage bill, but in how they do what they do. There is a lot of waste that can be cut out by having a public sector that performs efficiently − and this in turn will positively impact on industry, encouraging confidence, investment and innovation, all essential for economic recovery.
- Mike Carrol is chairman of CECA