Leading article

Sorry, but trains can’t really replace welfare lines

Plus: a peaceful prediction that may finally be coming true

9 August 2014

9:00 AM

9 August 2014

9:00 AM

George Osborne proposed an attractive idea this week: that spending on state benefits should be diverted into new infrastructure in the North. His conceit was that while welfare spending produces no economic return, spending public money on new high-speed railways and the like will inevitably boost the economy.

We can’t fault the former assertion: that paying people to be idle is a drain on the public purse. But we take issue with the notion that infrastructure will always serve to boost the economy. The Chancellor made his remarks while in Manchester helping to promote the idea of a new 125mph railway across the Pennines, a little brother for the yet-to-be-started High Speed 2 and the central axis of a hypothetical new metropolis called One North, which would unite Liverpool, Manchester, Leeds, Sheffield and Newcastle.

The promoters of HS2 only managed to achieve a positive economic case for their project by discounting the value of time businessmen spend on trains. But you don’t have to travel far by train to see passengers busily working away on laptops, reading documents and making phone calls. The rationale for the latest proposed railway is even more dubious. England’s northern cities have been places of unrealised potential ever since the heavy industries on which they were built went into decline. But it is far from clear that this can be put right through an attempted merger to create a ‘northern global powerhouse’, as Mr Osborne likes to call it.

Still less clear is how a single high-speed rail line could effect such a merger. It would bring city centres closer together, yet do nothing to improve lousy connections between the five large cities and their suburbs and satellite towns: the Oldhams, the Dewsburys, the Blackburns.

And if the quality of transport connections was the be-all and end-all of economic health, Britain would be languishing at the bottom of the European growth table, while Spain would be roaring ahead with its new high-speed rail network. The reality, of course, is the other way about. The British economy is growing at an annualised rate of 3.1 per cent while Spain’s is bumping along at 0.8 per cent.

If the Chancellor really believes that infrastructure always fuels growth, he should take a trip to Ciudad Real Airport, a €1 billion facility opened in 2009 to generate growth in a zone halfway between Madrid and the Andalucian coast. He will have to go by car, mind. The airport closed three years ago and now lies derelict.

The other glaring fault with the suggestion of switching welfare payments into infrastructure is that the Chancellor has not given any indication as to which benefits he would cut, nor how. It is all too easy to imagine the likely outcome: that far from exchanging welfare for economic growth, this latest high-speed rail project would merely add another economy-sapping tax bill on top of that which we already pay for welfare.

War and peace

Sir Ralph Norman Angell does not stand out as one of history’s great seers. In 1909 he published The Great Illusion, arguing that the economies of Europe were so intertwined that war between them had become unthinkable: they had so much to lose from conflict that their leaders would see that it did not happen. We know what happened next.
But was Angell so very wrong? Western European nations have not been at war for nearly 70 years, and no one now expects their arguing over trade and political issues to erupt into violence. This is not due to the political bonds of European Union so much as to the interdependence of European nations. Thanks to trade, war has become mutually assured economic destruction.

Is it too much to hope that globalisation will repeat that process on a worldwide scale? It already has. Hard though it might be to imagine with Gaza, Ukraine and Syria raging — and notwithstanding Douglas Murray’s points about the free world’s failure to tackle those crises — the last decade has seen fewer war deaths than any in the past 100 years. Each death in Ukraine, Gaza and elsewhere is terrible. But we shouldn’t let it blind us to the bigger picture: we are living in the most peaceful era in history.

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  • Most major Western nations (including the United Kingdom) have Welfare States that are out of control – and the West may well be heading for economic and cultural bankruptcy. As for “war” – the nations of Europe (other than Russia) do not have large scale armed forces any more (they have been sacrificed to feed the expansion of the Welfare State) – our own Royal Navy and Royal Air Force were gutted as long ago as the late 1960s (by Defence Secretary Denis Healey – the same”moderate” who later supported putting up taxes on income and investment to over 80%).
    As for Mr Osborne his wild “infrastructure” spending (whether it is HS2 or son of HS2, or the Crossrail extension idea, or the Corporate Welfare “loans” to housing estate builders for roads and drainage, or…….) will not reduce welfare spending. Sadly the lessons that Bastiat (and the rest of the great economists) tried to teach have been forgotten – government has no resources of its own, taxing, borrowing and printing (or creating money via book keeping tricks) divert existing resources away from efficient private uses to less efficient government (or Corporate Welfare) ones. Indeed it is hard to know what is worse – the fiscal policy (the “infrastructure” spending and so on) or the monetary policy (the low interest “cheap money” policy) to encourage the housing bubble and so on.
    The political opposition? They are actually WORSE.

    • Fergus Pickering

      Don’t understand any of this. High Speed Trains a lovely idea. Tn France they lead to the demise of horrible aeroplanes which must be good. All this lap top stuff s beyond me too. I wouldn’t waste my time on bloody laptops..

    • Terry Field

      The west can recover if it rediscovers its 19th century success.
      The West is still tough and sufficiently ruthless to cut off the dead branches.
      I have faith it will do that one of these days.

  • Mark McIntyre

    NO2 HS2/3 – one hundred lines for Gideo !

  • Terry Field

    There will be much more of this whoever wins the election.
    Looked at the total debt and the continuing massive running deficit lately?????
    Hello bankruptcy!!! Looking forward to the Sterling crisis!!!!!!!
    Unless the reality misses people. the British State is all but a busted flush, and it will get to be MUCH smaller in the not too distant future, even if the Wensleydale cheese salesman and his ballsup friend get to ride in the limos in a few month’s time.
    The paid-to-do-nothing game is, officially, over.