In a bid to divert attention from the wet blanket of Philip Hammond’s budget last week, the Establishment has been attacking Labour’s plans for borrowing (only) for investment.
Channel 4’s FactCheck issued an article criticising Shadow Chancellor John McDonnell’s supposed lack of understanding of how government borrowing works – allowing Tories to crow briefly and erroneously – only to have to issue a corrected version. Other ‘MSM’ piled in with similarly-misplaced attacks.
The push-back against this nonsense has started. A group of twenty-three renowned economists also made a firm, public statement of support for the sound economic principle of government borrowing to invest to strengthen the economy – and the tax take.
Now the impact of government investment – and the reality that it pays for itself in economic growth and improved tax-receipts – can be seen in these previously-unreleased case studies of three planned Labour investment projects:
Crossrail for the North
- Cost: £10bn
- Returns: unlock potential £85bn of additional economic growth
Labour has pledged at least £10bn to link up cities across the North with a new,
fast rail link, running west-east from Liverpool, Manchester, Leeds, Hull and Newcastle initially – dramatically improving journey times, increasing capacity on overcrowded routes and allowing for greater economic growth.
The independent Economic Review of the Northern Powerhouse commissioned by Transport For the North (a body consisting of businesses and local councils) estimated that Crossrail for the North could help unlock a potential £85bn of additional economic
growth in the North of England.
Great Western Railway electrification
- Cost: £700m
- Returns: 2.5 bigger than the original cost approx
After years of delays and cancellations, Labour will electrify the whole GWR line to Swansea, at a cost of £700m. Electrification would improve journey times and reliability, as well as reducing congestion on an increasingly busy route between the growth centres of the South-West, and London.
The Department for Transport has estimated that the economic benefits of this are almost 2.5 times bigger than the cost.
East-West Rail Link (“Science Valley”)
- Cost: £520m
- Returns: £73m annually
East West Rail is a major project to establish a strategic railway connecting East Anglia with Central, Southern and Western England. Labour’s version of the scheme would connect Oxford through to Bedford, Milton Keynes, Cambridge and Norwich.
The towns and cities connected form a major East-West growth corridor, but capacity constraints on existing transport infrastructure and the limited supply of land for building create the need for new transport links allied to further expected housing development.
Engineering consultancy Arup estimated at least an annual £73m boost to the regional economy from the East-West Rail Link, due to the significant increases in connectivity the new rail would provide.
Connectivity is reckoned by economists to be critical to economic growth, since it means (for instance) that people can travel more easily to work. This boost would be a permanent boost to the economy, including £37m of extra taxes for government annually as a result of the economic growth. Arup estimate it would take only five and a half years for the line to pay back the initial investment.
There is therefore a sound economic case for making the investment and there will be no net long-run cost to the taxpayer after making the initial investment.
These are just three of the projects that would take place as part of Labour’s plans to massively upgrade the UK’s infrastructure and boost our economy – for the benefit of the many, not just the few.
Which probably explains why the Establishment attacks on those plans have been so desperate.
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