George Osborne's growth policy is Killing British cities
I witnessed government growth policy at work last week on the road north out of Manchester towards Rochdale. The scene is one of utter devastation. Not just individual shops but entire parades have gone out of business and are boarded up. Mile upon mile of factories, garages, supermarkets and warehouses lie empty and for sale. Recession has delivered the coup de grace to a quarter century of manufacturing decline. Manchester is by no means the worst hit of English cities, but its northern suburbs are Detroit UK.
The British economy needs three things: demand, demand, demand. It needs cash in pockets and cash in tills. It does not need richer banks or easier credit lines or looser regulation. It needs that old Keynesian salve, money in circulation. If money can be showered short term on banks, it can be showered short term on consumers, whether through benefit handouts, vouchers, tax holidays or scrappage schemes. Osborne declares quantitative easing to be off his debit sheet. He can do the same for temporary boosts to the money supply.
In Britain the only growth the Treasury has recognised so far has been to turn to the banks. Ministers pleaded with bankers to lend more to real people, and even printed the money for them to lend. The banks simply carted the loot from the mint and used it to pay off their gambling debts. There is no evidence that one penny of the hundreds of billions of pounds made available "leaked" into the productive economy.
The cabinet's current response to the cry for growth is to dip into the old goody bag. Osborne is already spending or planning billions of pounds for new railways, tunnels under London, wind turbines and aircraft carriers. There are murmurs of power stations, toll roads and ecotowns. The portfolio of ideas flowing through Whitehall reflects the interests of those whom Whitehall meets – government contractors, land-owners, estate developers and the bankers who finance them. It comes from government departments lobbying for airports, colleges, roads and hospitals.
The reason why the Treasury likes such projects is that they make headlines for ministers and can be controlled from the centre. Also, few involve big spending now. They are slow growth, lobbyists' growth, dumb growth. They can be farmed out to private finance and are more likely to fuel the next boom than ease the present slump.
Smart growth revives the private sector through blood transfusion to the high street, rather than through the colossal public contracts favoured by Osborne and the industry secretary, Vince Cable. It makes cities denser, rather than depopulating them. It lets the market rather than the state allocate the extra cash. All this may lack ministerial glamour and earn little for consultants, but if politicians are serious about growth, smart sure beats dumb.