More heat than light in Cameron's growth plan?

It's back to work Monday, and PM David Cameron and his cabinet chums are revealing - ta-daa - their grand plan to boost the economy.

by Andrew Saunders
Last Updated: 06 Nov 2012
If you need proof that the summer hols are now officially over - apart from the fact that the sun has finally come out - it is that our great leaders are back in harness and full of wizard wheezes that have sprung from their sun-ripened brains over the past few weeks. Most of them to do with re-energising the economy, which despite the best efforts of George Osborne in particular to talk it up remains stubbornly static.

Better late than never, you might say. GDP has been stuck below zero for too long and something should be done about it. Hence the PM"s ‘radical pro-growth agenda’. Trouble is it doesn’t appear to be all that radical, as much of what’s on the table looks very similar to ideas that have already been tried, without much success.

For starters, there’s the latest vow to simplify, slim down, speed up and generally sort out the planning rules. Now, only the deepest of deep greens could deny that the business of applying for planning permission is a complex, fraught and uncertain one that puts off would-be developers. Indeed, some would say that that is the point - raising the barriers to entry in order to maintain the quality of development that does get approval.

All the same, simplification thus sounds like a no-brainer - there aren’t enough houses in the places where people want to live, so making it easier to build more would not only create jobs in itself but facilitate a general economic expansion through making it easier for people to move to where the work is. The Treasury is also, we learn, to offer guarantees to support £10bn spending on new homes.

But this government has already had a stab at planning reform, which ended up a hugely watered down and ignoble failure. In some ways things are worse now than they were before, as local planning authorities struggle for even longer to reconcile the plethora of contradictory laws, codes of practice and recommendations which now seem to apply to anything more complicated than sticking a conservatory on the back of a three-bed semi.

And yet it managed to avoid utterly tackling the issue of the hallowed Green Belt, a policy which worked well in its day but which is long overdue for review. Another such attempt at ‘reform’ like that one and the whole system could grind to a halt.

Then there’s Chancellor George Osborne’s Big Idea for a Government-backed bank to lend to SME’s. Now, we all know that the reputation of banks and bankers is subterranean at the moment, and that Osborne has found it frustratingly difficult to persuade the Big Four banks to lend money to SME’s. But this policy is dangerously misguided for a host of reasons - for starters, if he seriously thinks that a bunch of Civil Servants is going to be any better at picking winners than professional bankers, he is in for a rude awakening. And how about the notion that there simply aren’t that many SME’s out there looking to borrow big money at the moment? The economy, as you may have heard Mr Chancellor, not being very strong just now. The number one lesson of the post 2008 crisis seems to have fallen on deaf ears at number 11 - that lending money to people or organisations who might not be able to pay it back is a very bad idea.

So, is there anything good in this morning’s big announcements? Yes there is. It is a very sensible proposal to use this Government’s hard-won credit rating and historically low rates on the bond markets to fund judicious investment in major infrastructure projects. So the £40bn of loan guarantees to be provided for this purpose is welcome.

And yet even here, the auguries are not good. After 15 yrs of arguing we appear to be no nearer a solution to the Heathrow expansion vs Boris Island debate, whilst (regardless of the merits of the plan) the on again/off gain nature of the HS2 rail link is also typical. In these crowded islands it seems that it is as often the political will to build, rather than the money, which is lacking…

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