Infrastructure (Financial Assistance) Bill

Lord Desai Excerpts

Tuesday 23rd October 2012 Lords Chamber

[Lord Desai]

My Lords, as I came into the Chamber this afternoon, I was told that I had missed the U-turn on the badger cull, but I am glad that I am here to see the U-turn on the Treasury’s economic policy. Unlike the badger cull, it is as if only some badgers are not going to be culled, but others will be. It is a very minor regression from their policy by the Government. I guess it will do no harm to spend £50 billion doing something, although I still do not quite understand why it is necessary.

There are two problems. The Government’s economic case—I thought I was one of the few people who understood it—was that they would withdraw from spending money because we do not have any money, which is fair enough, and the private sector would take over investment. The private sector is flush with money. There is absolutely no shortage of funds in the private sector. The balance sheets of private corporations are very generously funded. Therefore, if these infrastructure projects cannot get money from the private sector, one needs to know what the market failure is. If the market failure is that the Government should have been spending this money anyway, why are we doing it? If the problem is that the Government have to spend money because projects will not be funded by the private sector, I understand that. I grew up with that argument and have no problem with it, but in that case, £50 billion is not enough. As my noble friend Lord Adonis pointed out, there are many more things that could be done.

The Government are not doing that, but are doing this. I still have not seen an intellectual case or any evidence that significant numbers of people are unable to get money, although it may be the case. One reason could be that people need some kind of pump-priming investment so the Government have to start something for other people join in. The Government have to show some confidence in the long-term prospects of the economy by, for example, starting a third runway, upgrading the A14 or whatever, and then there would be supplementary investment. But this says that the Government will not do anything except stand there because in 1932 Baldwin prevented the Government doing it. I find it very surprising that the Government cannot do this in any case, but that is a bureaucratic thing, a regular Treasury thing, and so I will never understand it.

I find it intellectually impossible to understand why it is being done now, why, if it is being done now, it could not have been done two years ago and why a much more ambitious scheme could not have been done many years ago. Why have the Government waited two years and had a massacre of infrastructure projects before we got to this? Lastly, have the Government any idea whether this is going to work? I still do not know which projects are stuck because they cannot get a bank loan. If they cannot get a bank loan, is it because the project will not make money? If that is the case, is the taxpayer about to lose more money than before?