We reported last week that George Osborne and Vince Cable were pushing for a new toll road scheme on the heavily congested A14 near Cambridge. Today, the Sunday Times suggests that road tolling will play a central role in the government’s growth review on November 29.
The paper says Osborne and Cable want £50bn from the private sector, mainly pension funds and insurance companies, to fund new infrastructure, including roads, homes and power stations. In return they will get a share of tolls, rents and energy bills.
The problem is that ministers can’t force private companies to spend their money on such schemes: all they can do is put the incentives in place for them to do so. But these carry their own risks.
The first is a potential backlash from voters – at a time when fuel bills are already high, drivers are not likely to welcome being asked to pay for new roads.
The second is whether these new incentives actually add up to much. Energy companies already factor the cost of new infrastructure into their bills – what could government offer that would encourage outside investors to back such schemes if energy companies themselves are not doing so?
The root of this dilemma is that the coalition is not willing to undermine its most important foundation: the fiscal plan (Plan A) that would see the structural deficit eliminated by the end of the parliament. This means there is almost no money for ministers to spend.
While there might be some underspend in certain departments that can be bundled together into eye-catching growth schemes, this will not add up to £50bn, or anything sufficiently large to jumpstart the economy. So ministers are left hoping the private sector will step in where they can’t (or won’t), and trying to draw up plans to encourage them to do so, which will not in turn hit voters too hard.
Another thing they can do is deregulate. The Conservative half of the coalition is particularly keen on this part of the equation: it costs nothing and if successful, could allow companies to create more jobs.
Adrian Beecroft, the Tory donor, has been working on a radical deregulation plan at the request of Steve Hilton, the No 10 policy adviser, but his suggestions, such as ending the right of workers to claim unfair dismissal, have created more arguments than they have solved.
Nick Clegg is particularly unhappy at some of his proposals, which Lib Dems say have been backed up with almost no evidence as to whether they would achieve their aims of spurring a glut of new jobs. In return, damaging briefings have come the Lib Dems’ way, such as that in the Sunday Telegraph today, which quotes a “senior Whitehall source” as saying: “Every time we try to put something in, the Liberal Democrats say we should take it out.”
So as November 29 approaches, this is where we are: Cable and Osborne are scratching their heads to find ways to encourage companies to spend money on infrastructure schemes, while Nick Clegg earns the wrath of his Tory colleagues for blocking deregulation.
If nothing more happens between now and then, the growth review could turn out to be a disappointing anti-climax.
Jim Pickard
Kiran Stacey