As we approach the upcoming Budget, the government has a critical opportunity to break this cycle and usher in a new era of long-term infrastructure investment.
“Conservative chaos has seen major projects abandoned, decades-long delays, cost overruns, uncertainty for supply chains, and our infrastructure crumbling”. So said the Labour Party manifesto. It is a broken system—one Labour promised to fix.
“Our economy has been held back by decisions deferred and decisions ducked,” declared Chancellor Rachel Reeves just days after Labour’s landslide election victory. The fiscal landscape inherited, she said, is dire: high taxes, soaring debt, stagnant growth, and a government overspend. Labour’s solution, as we consistently heard throughout the election, is to grow the economy. Yet, in the same breath, she axed a host of road and rail infrastructure projects previously pledged by the outgoing government, justifying it with the simple phrase, “the money isn’t there.”
But is the money really the problem, or is it how we think about money?
The Chancellor’s decision, however understandable in the immediate term, is concerningly reminiscent of the very same short-termism the Party criticised in its manifesto. Most telling was her announcement of a review of all transport projects, led by the Secretary of State for Transport, Louise Haigh. This review, set to last until the Spring, adds yet another delay to a system already mired in inertia. Take the 4.5-mile tunnel into London Euston station—a project that has languished on ministerial desks since before the election. HS2 bosses have warned of the consequences: “We can’t start until the budget is in place, and we get the go-ahead from the Government… You can’t leave such complex equipment underground for an extended period. It would be like putting a car in the garage and not starting it for a year.”
A similar fate looks over the Lower Thames Crossing. A decision on its planning has already been pushed back due to the General Election, and now, with the new Government’s reviews, it may be delayed further.
Labour appears to be looking to private finance models as a workaround to keep spending off the Government’s balance sheet. This could be a welcome move—if executed properly. But the real risk is that Labour, too, will fall into the same trap as its predecessors: governing for the short-term.
To showcase fiscal competence, Labour has tied itself to Jeremy Hunt’s fiscal rules, which demand that debt falls as a percentage of GDP by the fifth year of the latest forecast. But these rules inhibit the long-term stability and growth Labour claims to champion.
The real issue with current fiscal rules is that they fail to distinguish between capital investment and day-to-day spending. This encourages short-term fixes—like slashing infrastructure investment to meet immediate spending needs—while ignoring the long-term benefits of such investment. They prioritise near-term costs over future growth, perpetuating the cycle of underinvestment and economic stagnation. To truly support sustainable growth, we need a fiscal framework that values long-term investment.
To its credit, Labour’s manifesto pledged long-term infrastructure plans, including on transport and industrial strategy. Chief Secretary to the Treasury, Darren Jones, has hinted that more details will be unveiled later this year.
But pledges and plans mean little without a fundamental shift in how the Government approaches infrastructure spending. If Labour doesn’t seize this moment to change the failed approach, which views infrastructure as a burdensome cost rather than a vital investment in the nation’s growth—they will merely perpetuate the same broken spiral.
The Labour Party has a chance to break free from the constraints of short-term thinking and make a lasting impact on the country’s infrastructure. But to do so, they must challenge the fiscal rules that prevent long-term stability and growth. Otherwise, the cycle of deferral and decay will continue, leaving the UK’s foundations in a crumbling state for years to come.
