14 October 2019


11 June 2015

Osborne's roof

The chancellor’s pledge to effectively only fix the roof when the sun is shining could offer an opportunity for private finance – but it could also prove a deadly trap
Chancellor George Osborne’s annual Mansion House speech has certainly raised a few eyebrows.

Insisting that the UK must “fix the roof while the sun is shining” is, of course, nothing new – from this or any other chancellor presiding over a growing economy. But the way in which he intends to ensure that remains the case is rather novel in this country. Osborne proposed “a permanent change in our political debate and our approach to fiscal responsibility” that will see the upcoming Budget include measures to ensure the country runs a budget surplus “in normal times”.

Leaving aside the question of what constitutes “normal times” (and one suspects what will be ‘normal’ for one chancellor might be different for another), the proposition raises some serious questions over the future of investment in infrastructure in the UK.

For example, what happens if (or as some would insist, when) the budget for HS2 begins to spiral and more money has to be ploughed into the project to ensure it is not a half-built white elephant? And what happens if, at the same time, work on Crossrail 2 hits some hurdles that demand extra government support? Surely neither of these eventualities could constitute ‘abnormal’ times? And that is without considering all the non-infrastructure spending that could quickly erode the proposed surplus in any one year.

At first sight, the announcement could well be seen by some in the infrastructure community as an opportunity to dust down the PF2 documents – a signal from the Conservatives, perhaps, that this government will be more amenable to private finance in public infrastructure projects, and may be required to turn to the sector if it is to deliver new projects while still running a surplus.

That, though, would be a dangerous path – both for the politicians and industry. Over the past five years, PFI has been pilloried as a “mortgage on the future” of Britain’s public services, with critics vehemently arguing that the model was used as a trick during the Blair-Brown years to keep spending off the balance sheet.

Any suggestion that a government today was sticking to its rules on running a surplus while pushing through a huge amount of off-balance sheet privately financed deals would quickly be rumbled. Indeed, the Daily Mail, perhaps unsurprisingly, is already onto the potential for such a ruse, warning of the “temptation for chancellors” to sidestep the rules through “such ruinous dodges as the private finance initiative”.

All of which means Osborne is painting himself into a rather small corner, with infrastructure in danger of being the biggest loser. Osborne may like the metaphor of fixing the roof when the sun is shining, but such a strict straitjacket as the one he is planning threatens to leave plenty of real roofs without the cash to be fixed, regardless of the weather.


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Osborne's roof


The chancellor’s pledge to effectively only fix the roof when the sun is shining could offer an opportunity for private finance – but it could also prove a deadly trap

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