It’s vital to invest in cities
Author: Kieran LarkinDate: 10/06/2010
Publication: Local Government Chronicle
Spending cuts now loom large. Cities are particularly concerned about the impact that cuts will have on capital investment - and many are concerned that promises made by the previous government will be reneged upon.
The fiscal crisis means almost all areas of public expenditure are going to be under pressure - the fiscal deficit for 2009-10 was £156bn. Spending on capital investment often gets crunched during spending squeezes, partly because a lot of the benefits accrue to future voters, so there are no complaints when spending is cut in the present.
Under Labour’s plans, capital investment was scheduled to nearly halve from £45.2bn in 2009-10 to £23bn in 2014-15, although this partly reflects the bringing forward of capital projects during the recession. Even so, at 1.3% of GDP in 2014-15, net investment will be the lowest it has been at any point in time since 2001-02.
Investment expenditure is vital because it can help promote economic growth. It is essential that, in the medium term, public investment is brought back up to an appropriate level. But it’s also true that different types of investment are more conducive to supporting growth than others. For example, transport investment is more important to economic growth than investment in housing.
The government needs to make sure that its smaller investment budget now works as hard as it can. There is money left to be spent and it needs to be spent well. This means making the investments that provide the biggest boost to the economy and prioritising strategic capital investment in the areas where expenditure is likely to have the biggest economic impact.
The truth of the matter is that an even larger share of the transport budget will need to be spent in London and other cities with buoyant private sectors - like Brighton and Reading. These cities tend to be the most constrained by congestion. Projects such as Crossrail, critical to London’s economic future, should be safeguarded.
There are going to be tough times ahead for UK cities. But while addressing the immediate political priorities, a responsible government also needs to ensure that it invests to secure the future economic growth of UK cities and the country.
A version of this article first appeared on LGC
