Theresa May announced last week that the age of austerity was over for the UK.
We can only hope she means it, because – as Lib Dem leader Sir Vince Cable put it to me – “we desperately need better infrastructure”.
Railways and roads are congested, we have major energy needs and internet that is slower than the EU average – and this is before we get to investing in emerging infrastructure requirements such as electric vehicle charging networks.
There is no shortage of investment cases, but we shouldn’t get our hopes up for a glut of capital investment just yet; there needs to be a change in thinking at the Treasury first.
Sir Vince mentioned that, during his time in the coalition government, the Treasury’s target shifted from balancing current government income and spending – ie over a 12-month period – to balancing the overall budget.
‘Balance the books’ and ‘living within our means’ became the mantras used to ward off any idea of higher infrastructure spending.
Trouble is, infrastructure spending isn’t like ordinary spending; it’s an investment.
By and large, putting £500m into a new road isn’t a case of the government recklessly spending taxpayers’ money; it’s an investment that will help people move goods and services around faster for years to come.
These yield productivity gains because more can be done with the same level of resources, which increases profits and enables further investment.
Simply put, this approach is the best driver of economic growth and leads to better living standards.
If we can be selfish here for a minute: what state would our industry be in if the government had spent a few billion more on infrastructure over the past few years? Especially as commercial spending and local government spending has tanked.
The Liberal Democrats have proposed setting up a £100bn sovereign wealth fund that draws on the proceeds from the sale of the government’s RBS stake, Crown Estate disposals and changes to capital gains tax – and Sir Vince told me he would earmark a chunk of this for infrastructure investment.
He also proposes putting this organisation at arms length from the government, run by professionals who can make long-term, cost-benefit analyses of infrastructure investment, without the political pressures that can produce short-term, poorly reasoned decisions.
“We have a low-productivity economy and one of the central ways of dealing with it is having better infrastructure,” he says, and there’s more than a little bit of evidence to back this up.
A good way for Mrs May to prove that austerity really is over would be to start revving up this country’s capital investment.
We can only hope the Treasury has changed its mantra from the days of coalition and remembers that, when it comes to infrastructure, you’re not simply spending taxpayers’ money; you’re investing it.