Giant infrastructure projects won't deliver the growth Britain needs any time soon, says ALEX BRUMMER
During a painful run-up to the Budget, Rachel Reeves and her team repeatedly complained about the Office of Budget Responsibility’s choice to reassess Britain’s productivity.Despite a reality in which the Bank of England and the IMF had pared UK productivity and growth projections, it was suggested that the OBR was behaving unfairly, having failed to update its upbeat forecast for 15 years.The Chancellor places great faith in the £120billion of extra capital spending to deliver improved productivity and output. As wonderful as projects such as a Lower Thames Crossing might be, big infrastructure will struggle to repair Britain’s growth shortfall any time soon.The US has some of the worst roads, bridges, railways and airports in the Western world but the most robust expansion. 'As President Calvin Coolidge noted a century ago: ‘The chief business of the American people is business.’ Tax and spend: Chancellor Rachel Reeves (pictured) is convinced that government can deliver growth through state investmentOne would be hard put to find Reeves or anyone in the Labour Party say that. Among the more disturbing lines in the OBR’s forecast is the trend for business investment. Far from driving output and prosperity, it is set to slump by 0.4 per cent next year and expand at a pallid rate up to 2030. The wealth-creating private sector of the economy has little chance of delivering. Reeves could have doubled down on business expensing, allowing firms to charge investment in plant, machinery, and the digital economy against tax.Remarkably she headed in a different direction. The Budget toughens up the rules governing the writing down of assets, in a move that raises £5.5billion of revenue over the course of the Parliament.It may appear a harmless adjustment, but it strips cash out of corporate coffers. Money being removed from commerce far exceeds the amounts being spent on what the Red Book describes as a Modern Industrial Strategy to support key sectors such as life sciences and digital tech.Reeves promised an assault on the cost of living with a price freeze on rail fares and prescriptions and the removal of green charges from household energy bills. That’s all fine. But the jump in the minimum wage, the upcoming workers’ rights bill and the raid on salary sacrifice pension contributions all add to corporate costs and eventually feed through to higher prices.The Chancellor is convinced that government can deliver growth through state investment. Soaring costs of HS2, the super-nuclear plant at Hinkley and disruptive, never-ending road works, all show how little bang the state gets for its buck.Dimon geezerWriting in his annual letter to shareholders in 2021, celebrity banker Jamie Dimon argued that Brexit ‘cannot be positive for Britain’ and warned the bank might move European operations out of London. That has changed dramatically. JP Morgan has launched Chase as an online bank in London and acquired City wealth management app Nutmeg.Currently, admiration for Britain shows no bounds. JP Morgan’s new state-of-the-art headquarters in Manhattan was designed by famed UK architects Foster + Partners, and the multi-layered catering – including a pub – is being provided by Compass. Now the Wall Street giant is calling on Foster again to design one of Europe’s biggest towers in East London at Canary Wharf as part of a whopping £9.9billion investment in Britain.The new tower will house 12,000 JP Morgan bankers and be its largest office in Europe, the Middle East and Africa. The project will be one of the biggest post-Brexit commitments to London as a financial centre, dwarfing the Shard and demonstrate that the glory days for Canary Wharf, a landmark project of the Thatcher-Heseltine era, are far from over.The Chancellor’s decision to forgo a new bank tax, as advocated on the Left, cannot have hurt.University challengeNatWest is doing its bit to support UK innovators at pioneering research universities by signing entrepreneurial partnerships with Oxford, Manchester, Brighton and York. Its target is to support British R&D by backing early-stage firms, university spin-outs, and student entrepreneurs. Not quite venture investors Sequoia and Silicon Valley yet, but the right idea.DIY INVESTING PLATFORMSAJ BellAJ BellEasy investing and ready-made portfoliosHargreaves LansdownHargreaves LansdownFree fund dealing and investment ideasinteractive investorinteractive investorFlat-fee investing from £4.99 per monthFreetradeFreetradeInvesting Isa now free on basic planTrading 212Trading 212Free share dealing and no account feeAffiliate links: If you take out a product This is Money may earn a commission. These deals are chosen by our editorial team, as we think they are worth highlighting. This does not affect our editorial independence.Compare the best investing account for you
