All the signs are that the chancellor George Osborne really does believe in creating a northern powerhouse. November’s Autumn Statement and spending settlement give him the chance to put his money where his mouth is
After a relatively quiet summer, Whitehall is buzzing, and not just courtesy of a new leader of the opposition who seems determined to break with some of the dusty traditions of the establishment. The real excitement though revolves around 25 November, when we get not just an Autumn Statement but a three-year spending settlement – the Treasury equivalent of triple-rollover on the lottery. And like any lottery there will only be a few big winners.
The lobbying is intense for the chancellor to favour particular major infrastructure projects in the country’s long queue of such projects. It has been apparent for a while that George Osborne has a French penchant for “grands projets” – and although Treasury mandarins choke on the very concept, even those most versed in the dark arts of Yes Minister had to admit defeat as Osborne reappeared on the doorstep of No 11 on 8 May.
I have long argued that investment in our infrastructure should not be a zero sum game – where one project only gets supported at the expense of another. Investing in infrastructure creates economic growth. We can invest in London and at the same time invest in the Midlands and the North, Wales and the South-west. But London is nervous that after a good run of attracting an arguably disproportionate share of public capital, its next big thing – Crossrail 2 – might be put on the slow line, because Osborne has found a new toy, a new ambition, a new legacy. It is the “northern powerhouse”, and London is right to be nervous.
Size really does matter and the North will be in the premier league of global economies only if it looks, feels, operates and believes it is one economy
I’m not one of those that reads the pausing of trans-Pennine electrification works, a result of Network Rail’s difficulties on delivering major projects, as a sign Osborne has lost enthusiasm for his northern vision. Judge a politician’s intentions not by what they say but what they do. Where is Osborne this week? He is in China. What is he doing in China? Promoting the northern powerhouse. Flanked by Jim O’Neill, the minister for infrastructure whose central interest is devolution, and a large number of representatives of the North, it is perfectly clear this is something Osborne is doing by choice and not just for diplomacy. And this is not the first such trip. Less than two months ago the prime minister was in Singapore and Malaysia, and the theme of the trip was again the northern powerhouse. I was there, opening the presentations to local investors.
The chancellor’s vision, unusual in our politicians, is something I applaud. And as he has maintained a consistency in his sense of priority, appearing in Manchester to reconfirm his commitment to the northern powerhouse less than a week after the general election, so he has whipped up across the North a real sense that there is an opportunity to be grasped.
I should know. I live there. And while many are sceptical, I agree with the chancellor’s contention that the North can be great again. Each of the regions and major cities which make up the North retain huge economic strength but, in our changing world, size really does matter and the North will be in the premier league of global economies only if it looks, feels, operates and believes it is one economy.
Although the North has many strengths, it is still failing to achieve its full potential. Productivity is lower than the national average, its skills base is weaker, and growth over the last 10 years has been slower than in any European Union country except Greece. Strongly contributing to this weakness has been a legacy of underinvestment, particularly in the transport infrastructure between the major cities of the region.
The chancellor of the exchequer has said all the right things. His challenge in the spending review is to follow through with hard cash
So Transport for the North has been created. It will become a statutory authority, and a search is under way for a high-profile chair and an interim chief executive. A programme of investment is being drawn up. Highways England is looking into the feasibility of major new road connections and Network Rail is considering what HS3 might actually mean.
The bill for this investment will not be cheap. Institute for Public Policy Research North’s most recent report on the northern powerhouse, Rhetoric to Reality, concluded that if the North was to match London in terms of per capita transport infrastructure spending, an extra £33bn would have to be allocated to the region.
The chancellor has said all the right things. His challenge in the spending review is to follow through with hard cash – either directly from the Treasury or through a much more radical fiscal devolution. It is hard to see, from a personal as well as a political perspective, that he would want to take the reputational hit of being accused on 25 November of giving the North nothing but hot air. He is in a similar position on the Heathrow decision, which is convulsing Whitehall. But that deserves another column in its own right.
So, 25 November is when rhetoric must turn to reality, and the North will discover if it is holding a winning ticket.
Richard Threlfall is head of infrastructure, building and construction at KPMG