John Glen is Economic Secretary to the Treasury and City Minister, and is MP for Salisbury.
The 2019 general election was an epochal moment in the history of the Conservative Party. In winning seats across the North of England which even eluded Margaret Thatcher at the zenith of her power, we demonstrated broad, ‘One Nation’ appeal, gaining the support of those on modest incomes as well as more affluent voters.
No-one denies that Brexit played an important part in the result. But, equally, it reflects a wider international trend in which working class voters have moved to the right politically, abandoned by the divisive identity politics of centre-left parties. The Conservative Party still faces significant challenges in Scotland, but the inroads we made in Wales, the Midlands and the North is a vindication of the Prime Minister’s levelling up agenda.
The Conservative Party will always be a broad church. For those of a more libertarian persuasion, some of the spending increases announced by the Chancellor yesterday will not have been at the top of their wishlist.
But the twin challenges we face of Coronavirus and weak productivity cannot be met by stale repetition of small state mantras. We have to make sure that our public services, businesses and households have the support necessary to get through the current public health threat to the economy. And we cannot shirk tackling regional imbalances in our economy and the enduring productivity puzzle.
Over the weekend, in between delivering leaflets for a council by-election in my Salisbury constituency, I was working closely with the Chancellor and our Treasury officials, thrashing out the details of the Coronavirus Business Interruption Loan Scheme.
Given the scale of the difficulties we face, the Chancellor knew that we had to move swiftly and decisively to make sure businesses can access the support needed to continue functioning through the worst of any downturn as a result of COVID-19. This scheme will provide loans of up to £1.2 million with the Treasury providing lenders with a guarantee of 80 per cent on each loan (subject to a per lender cap on claims).
The loan scheme is one part of suite of measures the government is introducing to combat economic difficulties created by coronavirus. Other measures we will deploy to meet this threat head on include refunding eligible statutory sick pay (SSP) costs for SMEs, and increasing the Business Rates retail discount for small businesses to 100 per cent from 50 per cent for 2020-21, as well as expanding the discount to the hospitality and leisure sectors.
We will also be providing £2.2 billion to local authorities to support businesses which already pay no business rates as a result of Small Business Rate Relief. The total package of measures in the Budget to tackle the impact of coronavirus totals £12 billion, with a further £18 billon of fiscal loosening resulting in a total stimulus of £30 billion.
Alongside these temporary spending increases to cushion the blow to the economy from COVID-19, yesterday’s Budget shows the government’s determination to invest in infrastructure to provide the productivity boosts necessary to help level up the economy.
The great success of our decade in power has been a major reduction in the £150 billion budget deficit we inherited in 2010 while also continuing to expand the economy and reduce unemployment. But we have been less effective in tackling low productivity which continues to lag most of our comparator countries according to OECD data.
The capital spending announcements yesterday mark a significant shift in our approach as we make a sustained, concerted effort to tackle our productivity weaknesses, change our economic geography, and level up the economy.
Over the next five years, the Government will invest £640 billion in building hospitals, roads, railways, telecommunications, and power networks across the UK – the highest level of public investment in the United Kingdom since 1955.
The details will be filled in when the National Infrastructure Strategy is published later in the spring and the Comprehensive Spending Review concludes in July. However, the Chancellor gave a flavour of some of the schemes that will be prioritised including dualling the A66 Trans-Pennine route, upgrading the A46 Newark bypass, and building a tunnel for the A303 next to Stonehenge in my constituency to unlock economic growth across the South West through reduced journey times to and from London.
Away from transport, there will be additional funds of £10.9 billion put into housebuilding, £ 5 billion invested in gigabit broadband, £1.5 billion to refurbish further education colleges, and a £2.5 billion National Skills Fund to boost skills.
Changing the economic geography of our country does not mean we throw away our principles. Major capital investment to level up the economy is a very long way from John McDonnell’s egalitarian drive to massively ramp up day-to-day expenditure and soak the rich, class warfare.
The ambitious capital budget announced yesterday by the Chancellor can be achieved with relatively modest increases to the deficit as a percentage of GDP. And at a time of record low interest rates with no sign of increases on the horizon, it is an appropriate moment to avail ourselves of this opportunity to upgrade the country’s infrastructure and to make the economy more productive.
We do not yet know what the full impact of coronavirus will be. But the Budget leaves us well prepared to tackle its short-term challenges as well as helps shape the long-term trajectory of the economy through capital investment and the reduction of regional imbalances.