What do Boris Johnson’s ‘build, build, build’ promises add up to?

Analysis: Beyond the rhetoric, what are the government’s infrastructure investment plans? And how transformational are they really? Ben Chu investigates

The word ‘build’ featured 32 times in the PM’s speech (PA)

The words affixed to the prime minster’s podium as he delivered his speech in Dudley summed up his theme: “Build, build, build.” Boris Johnson presented public infrastructure investment – new roads, bridges, homes, rail lines etc – as one of the most important components of his post-Covid economic recovery plan.

The word “build” featured 32 times in the speech. “We will build, build, build,” proclaimed Johnson.

“Build back better, build back greener, build back faster.”

But beyond the rhetoric, what are the government’s building plans? And how transformational are they really?

What is the government planning?

The £5bn in capital investment plans for things like hospital maintenance and bridge repairs that No 10 briefed out before the speech is not new spending.

Instead it is spending that has already been announced by the government but which has, apparently, been “brought forward”.

It’s not clear from which period it has been brought forward, but if investment was pencilled in for 2021-22 but will now be spent in 2020-21, then that will boost GDP.

However, given £5bn is only a quarter of one per cent of GDP, the impact will not be transformative. The UK is projected to fall by more than 10 per cent this year.

But isn’t the prime minister promising an ‘infrastructure revolution’?

Indeed, though this was already promised before the Covid-19 pandemic.

The March Budget outlined plans for £640bn of gross capital investment in total by 2024-25.

Yet this includes things like dealing with wear and tear and should not be thought of as fresh infrastructure investment.

Public sector net investment (PSNI) – which excludes spending on repair and upkeep – is considered a much more meaningful measure of new infrastructure investment.

The government pencilled a rise of PSNI from £50bn in 2019-20 to £80bn in 2023-28. That was a genuinely sizeable increase on the previous capital investment plans.

It would take public investment as a share of GDP to 3 per cent, rather than 2 per cent – levels that have not been sustained in the UK since the 1970s.

In that era, a considerable share of UK industry, including the high-investing water and energy sectors, were under public ownership meaning that public investment was automatically higher.

That makes the government’s current plans arguably even more radical from a UK historic perspective.

Do we need all this new infrastructure?

The view of most economists is that there are plenty of public investment opportunities that would enhance the productive capacity of our economy.

This is partly because of a historic problem of under-investment. Researchers at the OECD found in 2015 that UK governments had spent less on infrastructure than comparable countries for three decades.

Low public investment has been linked to relatively low private sector investment.

Research by the Office for National Statistics found that total UK investment as a share of GDP was considerably lower in the UK between 2005 and 2017 than other peer economies.

From this point of view, higher public investment in the coming years is justified because it will help fill a historical backlog.

It should also provide some useful demand stimulus to the economy as it emerges from the Covid shock – a construction boom would be very useful in creating jobs.

So this is the right policy for the right time?

Concerns lie less with the policy itself than with the execution. This is not the first government to promise more infrastructure investment.

After cutting public investment drastically after 2010 as part of his austerity drive, a previous chancellor, George Osborne, became rather keen on increasing it.

He published a national infrastructure plan that identified almost £500bn of projects around the country that deserved funding in the view of the Treasury.

But he didn’t want to spend much public money on delivering it directly, seeking instead to encourage UK pension funds to invest in capital projects instead. This came to nothing.

Osborne’s successor Philip Hammond also talked up public infrastructure spending but was unable to deliver much of an increase.

The current chancellor Rishi Sunak has committed to spending public money directly over the next five years so the chances of a breakthrough now do look better, but politicians have a long history of under-delivering on infrastructure promises.

Observers of the UK public infrastructure saga will not be convinced until shovels hit the ground.