The truth about Boris Johnson’s “New Deal” package of infrastructure spending

What’s happened?

Boris Johnson last week called for the UK to “build, build, build” our way out of the virus-induced recession and announced a “Rooseveltian” New Deal package of infrastructure spending to help us do it. But the invoking of Franklin D. Roosevelt seemed more a political nod to Johnson’s “levelling up” agenda than a credible comparison. Roosevelt increased the US federal government’s spending from under 4% of GDP in 1930 to over 10% by 1939, transforming the US. Overall, his New Deal package amounted to around 40% of national income in 1929 (though the extent to which his government’s spending drove economic recovery remains contested). By contrast, Johnson’s £5bn amounts to 0.2% of GDP. Even the whole package of £640bn in gross capital investment over the course of this parliament, first announced in March, will leave the UK’s public spending at the same level, as a share of GDP, as it was pre-Covid-19. 

So not a deal of Rooseveltian ambition?

Perhaps not. As both the FT and union boss Len McCluskey acidly observed, Roosevelt’s New Deal spawned mega projects such as the Hoover Dam; Johnson’s list includes the reannouncement of repairs to a bridge in Sandwell. The £5bn package, which brought forward a small fraction of previously announced infrastructure spending, includes £1.5bn for hospital maintenance, £100m for road projects, £1bn for the first phase of a new school building programme, £200m for further education colleges, £142m for digital upgrades and maintenance for law courts, and £900m for “shovel-ready” local growth projects, such as improving high streets.

Is our infrastructure that bad?

It’s not great, but not shockingly bad either. According to the World Economic Forum’s (WEF) annual comparative survey of 141 world economies, the Global Competitiveness Report, the UK economy ranked ninth in the world last year for overall competitiveness. The WEF’s assessment involves analysis and ranking of several “pillars”, from political stability to “business dynamism”. Overall, it puts Singapore top, followed by the US. Within Europe, the UK is beaten by the Netherlands, Switzerland, Germany and Sweden. But while we came ninth overall, we only ranked 11th for the “infrastructure” pillar, suggesting that this area is pulling us down a bit without being a disaster. Within the infrastructure category, relative UK strengths include airport connectivity, while weaker areas include utilities infrastructure, the quality of roads and the efficiency of train services. This chimes with similar OECD surveys, which have frequently rated the UK as a poor performer among rich countries on transport infrastructure. The WEF survey analyses communications technology as a separate pillar: here we are significant underachievers, relatively weak on fibre internet and mobile broadband. 

What about the politics of it?

Given this government’s shambolic handling of the coronavirus crisis, “side-stepping the problem and distracting the public” from the dangers of a no-deal Brexit by focusing on infrastructure does make political sense, says Henry McLeish in The Scotsman. But the politics of it looks confused. Invoking Roosevelt’s New Deal smacks of “desperation and delusion”, when all you are in fact offering is a “reheated programme of infrastructure projects and previously announced financial commitments”. What the UK desperately needs, said Jeremy Warner in The Daily Telegraph, is a strong government capable of getting a grip on the “terrible mess we have created for ourselves”. Johnson’s woolly “fusion of Rooseveltism and Thatcherism” is presumably an attempt at “boosterism”, but it’s hard to take seriously.

Is this a leftward turn by the Tories?

It’s definitely a signal. Like the whole of the Treasury response to Covid-19 – including Rishi Sunak’s latest fiscal stimulus package, which announced £49bn in support for public services, £30bn more than the Office for Budget Responsibility’s June estimate – the Johnsonian “New Deal” represents a “180-degree change of mind from the modern Conservative belief in squashing state spending while letting the private sector drive”, said Martin Vander Weyer in The Spectator. Paradoxically, though, the mark of this crisis has been the resilience of private enterprise. While Downing Street’s “incompetence and dither” has fuelled “borderline public disorder”, businesses large and small have pivoted their plans and adapted their processes. Yes, some will go under, or only survive with the state as a shareholder, says Vander Weyer. “But most will pull through, create jobs again and drive a return to prosperity, while Johnson’s New Deal languishes and overruns like Crossrail and is eventually forgotten.”

Isn’t that a bit harsh?

Sceptics hungry for more detail may have more to chew on in the autumn, when the government’s National Infrastructure Plan is due to be published, which will include details on rail, road, energy, waste and flood-defence projects. But in the meantime, we may be seeing the emergence of “Johnsonism” – and it deserves to be taken seriously, argues Camilla Cavendish in the FT. The aim is to “tackle the nation’s unequal productivity” and genuinely level up, deploying a mix of statist intervention and targeted deregulation (including much-needed planning reform). This will surely cause Tory turbulence: many who have “spent their lives fulminating against Brussels red tape are aghast at the morphing of the Conservatives into something which looks like a European social democratic party”. It’s also a bold challenge to Labour and means that the next election may be fought not on ideology, but competence. Johnsonism, it seems, “leans leftwards on the economy and rightwards on culture. It is an attempt to unleash animal spirits and productivity, within a big state. It certainly matches Roosevelt for audacity”.