Tuesday, 8 November 2011

Build, Build, Build.

Of all the things that annoy me about the ineffectiveness of our political leadership, the constant and stubborn ignorance of the benefits of a strong construction industry rankles more than most. Obviously there are failings in many other areas that, on a day to day basis are more of a concern for me but mostly that's to do with ideology. The attitude to the construction industry though, is not so much about ideology as it is incompetence. There have very rarely been people in positions of power who have either a) understood the industry properly or b) understood it's economic importance properly. Mostly we have had people who have combined both these faults.

Whenever times start to get tough, whether it's a recession or even just a slight downturn, the construction industry is nearly always hit first and hit hardest. There is a misguided belief that when money is tight it should only be spent on essentials and new construction is rarely classed as such. In reality, economically, the reverse is true.

Construction is the great multiplier. More so than any other form of public spending, construction creates revenue for the state. I am aware this is a slightly controversial and for the most part statistically unproven statement but that's because the statistics don't, and often can't, take into account just how much of a multiplier effect that spending has. The statistics also rarely consider the spending in terms of value over cost and as such a project that costs the state £25 billion mostly does stay, statistically, as a negative revenue project. It is nearly impossible to understand the reach that kind of spending has once it goes into the private sector.

This doesn't mean I'm advocating a massive drive to build more and more office towers that stand empty. It doesn't mean I want to see house builders taking on ever more debt to build poor quality homes to be sold at over inflated prices to people who have taken on mortgages they will never be able to repay. What I am advocating is massively increased state spending on key infrastructure projects - urban & rural rail projects, canal projects, port projects, school builds, road upgrades, and perhaps the most important of all; social housing.

These aren't just the sort of projects that help boost the economy in terms of direct and indirect employment or by increasing trade but also by adding value to the country. A country with superior infrastructure is a top competitor for inward investment from both businesses and individuals. We currently compare our infrastructure with others and for sure, it is often equal or favourable to other first world countries but frankly that's not good enough - we don't want to model our infrastructure on other's success, we want them to model theirs on ours. This means construction and it means lots and lots of it.

I don't accept the argument that there isn't any money. It's simply not true. We are, and will remain, a very rich country with significant resources to bring to bear when needed. Undoubtedly, there is an economic crisis but it is not because of our lack of funds but our mismanagement of them. We must address that mismanagement by first stopping the self defeating policy of reducing state spending on construction. People are often keen to apply business norms when looking at the way the government manages state money so they should have no problem with this. For a business to survive and grow, they have to spend on their own infrastructure, be it staff, facilities, plant or stock. The state is no different in that respect. When we scale down our spending on infrastructure, we scale down our chances of a strong, prompt recovery.

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