Within weeks or months, the UK will have its first “Brexit Budget”. While Westminster focuses slavishly on the question of who might deliver that Budget at the despatch box, it is the content that could shape our economy for decades – and determine whether the European transition we now face is a great success or an avoidable failure.
At the heart of this Budget lies a single choice.
Will the chancellor of the day follow through on George Osborne’s pre-referendum predictions of swingeing spending cuts and tax rises, or will they seek an alternative path – by tapping the markets to invest?
From the perspective of businesses facing uncertainty and upheaval on an enormous scale, if ever there was a time to rethink the Treasury’s fiscal rules and borrow to support specific growth-boosting measures, this is it.
Interest rates are at rock bottom, gilts are still in demand, and the markets are unlikely to penalise the UK in these circumstances – particularly since they have already castigated sterling, UK equities and our credit rating in the wake of the vote itself.
Osborne himself has already opened the door to a new approach, by admitting in a speech to Greater Manchester Chamber that the government would have to soften its long-cherished target of a budget surplus by 2020.
In these circumstances, any Brexit Budget should be unashamedly expansionary, not deflationary. It should have room both to reignite the animal spirits of British business and to protect taxpayers and families from some of the turbulence that accompanies major economic change.
At its heart should be a sweeping commitment to the modernisation of British infrastructure – emphatically and explicitly backed by the state.
This is not a time for the balance sheet artifice of public-private partnerships, but rather for direct investment in the transport, energy, housing and digital schemes that can have such a major impact on our communities. There can be no room for squeamishness about state intervention at a time when we are at the start of a new economic era.
A Brexit Budget focused on infrastructure should address both the short and the long term. Support for housebuilding and broadband enhancements can start almost immediately – and have an even bigger impact if planning processes are foreshortened. Many road and rail projects, which already have the green light, could be accelerated subject to the availability of materials and trained staff. And the big-ticket schemes – HS2, new nuclear and renewables projects – should be approved so that preparatory work can proceed in earnest.
The government failed its first test by opting to further delay a decision on a new runway in the South East of England. This is a cop-out, in the plainest possible terms – and must swiftly be reconsidered.
All this matters because infrastructure projects are so much more than the physical structures they create. Through supply chains, they generate contracts for thousands of small and medium-sized UK firms, and the jobs that go with them. Most provide permanent, high-quality jobs in the communities where they operate.
Crucially, they have an important impact on both productivity and business confidence, both locally and nationally. They “crowd in” spending by local firms and major corporates, on everything from training and equipment to footfall in local high streets.
Businesspeople across Britain have asked us, as their representatives, to find opportunity amid political uncertainty. Infrastructure projects, large and small, provide that opportunity.
We must not allow Westminster to repeat its past mistakes, where infrastructure programmes were delayed or sacrificed on the altar of political expediency whenever budgets got tight. Our infrastructure is sclerotic because, time and again, chancellors have poured money into current spending by stripping out investment. This time, with a bit of courage, things can – and must – be different.