Boosting the Economy (for dummies!)

Well it has been quite a while since my last post – social media, blogging and updating websites constantly is something that you need a separate staff member to do. I still have to earn a living, which is becoming increasingly difficult…

So forgive me while I wander of the reservation of Architecture and Urbanism and blunder into the world of economics and government policy. The construction industry and all of its related fields has always been a canary in the deep mine of the economy; once we start to choke - the rest of the economy is not far behind. Not that you’d think this was the case due to the way construction industry data is always ignored by successive governments. I have rather unsurprisingly found that my fortunes are directly related to the wider construction industry data  and that our collective travails are about 2-3 months ahead of the rest of the economy. The summer is traditionally a very slow period for our industry and Olympics/Jubilee excuses not withstanding, it has been the hardest summer since I started up. Before you just think I should just try a bit harder, I am not just basing this on my declining fee income but on the amount of negative information I am receiving from other professionals, suppliers and contractors. The  canaries are dropping off their perches and the economy is in for a very rough ride in the last quarter of 2013.

So it is now abundantly obvious to most rational people that the Coalition’s strategy of cut, cut, cut is having the exactly predicted effect on the economy; it’s tanking. No one wants to invest, no one wants to spend and no one wants to hire. Every single business I know is slashing spending, reviewing employment and keeping as much money in the business as possible. This simply means that government income (i.e. taxes) are dropping at an alarming rate. No one spending means much less purchase taxes, no one hiring means much less income taxes and no one investing means much less corporation and capital gains taxes. In the meantime the welfare bill climbs as those locked out of the job market by this spiral have no option but claim benefit and wait for the economy to pick up. Perversely the Tories seem to think that the solution is to crack down on benefit rather than stimulate demand. Massively reducing government investment equals plummeting private sector investment is now such an obvious equation I feel like kicking the TV every time Gideon Osborne comes on to explain how being a wallpaper salesman qualifies him to slash and burn the nations finances.

Government borrowing rates are the lowest in living memory, investors are hungry for long term safe havens, the debt is less than many other developed nations and we really, really need a push start. It is startlingly obvious that if the the private sector is going to invest its historical cash horde in large construction projects  the government will have to lead the way with an open wallet. For example if the Thames estuary airport was given the green light with a government spending boost (and followed by the inevitable Qatari petro-dollars) then obviously Fosters will have to hire en-masse to get it out to tender, ditto Arups, ditto Balfour Beatty who will have to hire battalions of staff to get such a project on site. Across the entire south east region businesses from hotels to plant hire, from sandwich shops to taxis will see a rocket in trade as tens of thousands of people descend on the region to build such a large project. The chancellor will then see a huge upswing in tax revenue from the region and London gets a “fit for purpose” airport. Meanwhile Heathrow and Gatwick are sold off and made into new towns to address the south east’s housing crisis, more construction, more investment and on and on and on. Add in other large beneficial (i.e revenue earning) capital projects such as the Severn Barrier, Forth Bridge (with a re introduced toll) and a renewal of much of our power generation infrastructure and we will see a nationwide boost for not just the construction industry but the entire nation’s economic output. If the projects are all large commercial projects such as airports, power generation, toll bridges and the like then the vast cash reserves of the private sector and bondholders will come out of hiding and we will have our push start. The resultant increase in tax revenues and reductions in the welfare bill will allow the government to stop gutting the public sector.

Its how we got out of the great depression and basically how every other country in history has got out of depressions – by starting spending and starting building. Osbourne is now just looking like a younger version of Norman Lamont; dithering and directionless. We need a new chancellor – who cares what party; just one who has some ideas and the conviction to implement them.