The Treasury portions out £100bn on new homes, railways and roads in the second part of the comprehensive spending review – but Labour dismisses the investment as “hot air”.
The biggest public housing programme for 20 years was the top line investment in the second part of the government’s spending review, announced today by Chief Secretary to the Treasury Danny Alexander. Mr Alexander also said more capital investment would be going into fixing potholes, widening roads and on the Birmingham to London high-speed rail link.
Mr Alexander’s annoucement of infrastructure investment over the next 10 years comes after the first half of the spending review yesterday, when Chancellor George Osborne announced cuts of £11.5bn in 2015/16. The government plans to invest £300bn on infrastructure in the next 10 years.
In his speech to parliament, Mr Alexander laid out how one-third – £100bn – of that would be spent. Some £3bn will be spent on building 165,000 new affordable homes between 2015 and 2018, he said. Mr Alexander also allocated £10bn for resurfacing and widening roads, money for new schools, flood protection and some more cash for regional growth funds.
Investment in Britain’s rail network continued, with Mr Alexander repeating last year’s announcement of the biggest investment in railways since the Victorian era.
More money than planned will be put into the high speed rail link, Britain’s flagship HS2 rail project planned between London and Birmingham, whose price has risen by £8bn, Mr Alexander said. Construction will now cost taxpayers £42.6bn rather than the £34.5bn promised in January.
Station upgrades and electrified tracks also were also getting some of the cash that Mr Alexander said he was putting into railways.
But the coalition’s capital investment plans were “hot air”, said Labour frontbencher Chris Leslie MP, the shadow financial secretary. Capital investment was not actually going up he said, adding that the headline projects were coming in too late to help the British economy from its current doldrums and that the Treasury minister was simply “reheating old announcements in his microwave statement”.
Pundits, including Channel 4 News Economics Editor Faisal Islam, have also questioned the Treasury’s top line of £300bn investment over the next 10 years.
In a Channel 4 News blog, he suggests that Mr Alexander’s use of a different way of measuring investment – gross rather than net – has made the figures seem higher than they are, and puts the actual figure for capital investment closer to £155bn.
The Institute of Fiscal Studies (IFS) think tank also took issue with the Treasury’s spending review, calling the speeches “woolly” and saying that the chancellor’s claim on investment was wrong in a briefing on Thursday. The coalition was investing proportionately less in infrastructure than Labour had, according to the IFS. Under Mr Osborne’s plans capital investment will be 1.7 per cent of GDP over the next 10 years; in the last decade it was 1.8 per cent of GDP.
Mr Osborne will also have to raise taxes by £6bn after the next election to fund his plans, the think tank predicted. IFS director Paul Johnson said there would have to be a “serious debate” on whether fiscal retrenchment on the scale planned by government could be achieved through more spending cuts alone or whether taxes would have to rise as well.