Tuesday, 3 November 2015

inside the northern powerhouse suite

There's a lot of talk of the Northern Powerhouse at the moment, including last Friday's speech by Osborne, at the National Infrastructure Commission meeting in York National Railway Museum. Given the location, the locomotive in the background for most of the coverage didn't look very British.

It initially reminded me of a massive German locomotive, both in shape and because of the foreign-looking paint job. A kind of strange symbolism, maybe? My inner trainspotter had to take a closer look.

It turns out it was British designed and built in 1935 by Vulcan Foundry from Newton-le-Willows, Lancashire for the Chinese Government Railways. A KF7 class 4-8-4 No 607 to run on the Canton-Hankow railway. After decommissioning in 1981 it made its way back to the UK.

So it was made by British northern workers using British steel for export to China, where it worked for 46 years.

I've been in the north for the last few days. Stuck in huge traffic jams from road works, diversions and similar from the broken infrastructure. It makes me very wary of Osborne's words. All that time parked on the motorways has given me time to think. Since Osborne took office, there's been a 5.4% fall in infrastructure investment. Now he plans to announce a 'suite of asset sales' which the Treasury expects to raise billions of pounds to be ploughed back into projects. That sounds like code for more privatisation.

Potential examples of one-time sales are:
  • Royal Bank of Scotland circa £23.2bn
  • Lloyds Bank circa £13bn
  • UK Asset Resolution (UKAR) circa £13n (that's the mortgage bits of Northern Rock and Bradford and Bingley)
  • Royal Mail circa £1.5bn
  • Monetising the Student Loan Book £12bn (watch out if you have student loan)
Then there's a few more aspirational items like Channel 4, the debt-laden Network Rail and a few crony cash-in favourites like Ordnance Survey and Companies House. The trouble is, the total is still somewhere up to about the £70bn range, so maybe the rest will come from loans. I seem to remember the EU has agreed some support for the nuclear programme as an example.

It is all very mysterious, because on the one hand Osborne is having to rediscover ways to recoup the £5bn-£10bn gap caused by changes to the benefits plans, but at the same time he is promising £100bn of infrastructure spending by 2020. He says the bundle will have initial priorities of examining connections between the big northern cities, London’s transport system and energy infrastructure.

Ever the tactician, the bundling of statements makes better headlines.

As a quick example, my supposition is that the first £25bn goes on Hinckley Point C and perhaps another £30bn on another power station for Bradwell. That's more than the first half of the money gone without any of it directly reaching the north. Now let's add in the Crossrail 2 plans for London. That's another £32bn. Also southern.

Assuming the London plans don't also include airport spending, there's still £13bn left. I'll round it up to £15bn, because that's the amount that was stipulated last December for road improvements across the UK. I took a look at the statement and it breaks down as:
  • north east and Yorkshire - 18 schemes worth around £2.3 billion and estimated to create 1,500 construction jobs
  • north west – 9 schemes worth £800 million and estimated to create 600 jobs
  • Midlands – 17 schemes worth £1.4 billion and estimated to create 900 jobs
  • east of England – 15 schemes worth £1.5 billion and estimated to create 1,000 jobs
  • London and south east – 18 schemes worth £1.4 billion and estimated to create 900 jobs
  • south west – 7 schemes worth £2 billion and estimated to create 1,300 jobs
Of course, £15bn is still a considerable sum, but somewhat short of the £100bn headline. Slightly weasel-worded it talks about 'examining connections' rather than 'building connections' for the north. We should also notice that the money is to be spent between 2015 and 2020. Of the balance, that works out to around £2.6bn a year, even if it all were to go to the north. The above transport link plans suggest that about half is spread elsewhere. Not quite such a good headline, is it?

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