It hasn’t taken long for Danny Alexander’s claims to fall apart. He was supposed to have announced the most comprehensive, ambitious and long-lasting capital investment plans ever. Instead, it turns out that the plans will keep capital investment at its present level, at best.
The IFS led the way by pointing out that at least until 2017/18 there will be no increase in investment levels following the latest spending review. Public Sector Net Investment will be broadly flat for four years, which means as a proportion of GDP it will actually fall. Colin Talbot added up several decades’ worth of figures to compare the decade from 2010 with previous ones. He shows that, as a proportion of GDP, investment in the current decade is expected to average 1.7% whereas in the decade before 2010 it averaged 1.8%. In the 1970s, we were investing a staggering 4.5% of GDP, but presumably this is too far back to be included in Alexander’s definition of ‘ever’.
Mark Hellowell, in Public Finance, has added up investment over the two decades and concludes that, for the ten years from 2010/11, the government will spend £450 billion in total; in contrast, in the ten years up to 2009/10 the previous government spent £530 billion if PFI projects are included (as they should be). Looked at in terms of proportions of government expenditure, the respective figures are 6.2% for the current decade and 7.6% for the previous one.
Turning to housing, the cards are similarly stacked against Alexander. He made various boasts, including his promise of the ‘biggest public housing programme for over twenty years’ and that the 165,000 target for the three years from 2015/16 would be ‘a higher number of houses than Labour ever managed in 13 years in power’.
Let’s compare the figures. According to the statistics bible, the UK Housing Review 2013, the previous government’s National Affordable Housing Programme (NAHP), over its three-year life from 2008/09, averaged just under 58,000 new units per year. The current government’s Affordable Homes Programme, over the four years 2011/12-2014/15, will produce less than half this, at under 23,000.
If the Alexander programme that follows on for the three years from 2015/16 delivers as promised (surely a big ‘if’), it will produce 55,000 units per year. While that level of output would be very welcome, it will still be rather less than what Labour’s programme achieved. (Alexander will quibble that most of the last year of the NAHP was after the 2010 election, but surely even he couldn’t argue that the coalition government built houses in schemes that were on site when they took power, could he?).
Of course, his new claims are only possible because he assumes the government can, yet again, reduce grant levels. Under Labour’s programme average grants were £51k per unit. They’ve now fallen below £20k per unit; the Alexander programme would see them go down even further to £18k. Given the conditions that will apply to the new grants, including converting relets to Affordable Rent and sweating housing association assets even more than currently, it must be questionable whether associations will engage with the new programme to the extent required to build at more than twice their current output. Wouldn’t they be better off simply developing at market rents without grant, keeping their social rented stock and adding to it as when the profits from market rents allow?
Certainly, a strategy that depends on high levels of welfare benefits when these are under renewed threat, not to mention even greater leveraging of associations on top of their already high levels of debt, seems… shall we say… a rather shaky one. Danny Alexander is probably hoping that his plans for Investing in Britain’s Future will be quietly forgotten by the time of the next election, whoever wins power. And in that respect alone, he might well be proved right.