Dr Steve McCabeBy Dr Steve McCabe, Director of Research Degrees at Birmingham City Business School

The ‘leaked’ headline that there will be an additional £5 billion investment over the next three years spent on rebuilding schools, improving transport infrastructure and in science is good news; especially for construction companies which can expand their workload.

Clearly any future upturn in the economy will require that education, transport and science are conducive.

What is notable is that such investment will mean that the average of that capital spending compared to national income under this government for 2010-15 will be greater than that under New Labour which was in government between 1997-2010.

However, this £5 billion is not new money and the question that must be asked, is what effects will there be on the departments that will be expected to make the savings to fund this investment? Most particularly, what impact will there be on the ability of ‘frontline’ services such as the police and social services.

Business Secretary Vince Cable will no doubt be very pleased that more money will be invested in science. The belief that there will be additional places for higher education and apprenticeships will also be welcome.

The reality is that growth is weak and that there is the danger that the economy may go into a ‘triple dip’ recession in the fourth quarter. This is causing concern among the bond market and there is a widespread belief that one of the ratings agencies will reduce the UK’s AAA status.

This was not supposed to happen and many – especially in the Labour Party – will criticise the pain that has been suffered in the quest to create ‘recovery’ through austerity, as is shown by the additional 200,000 long-term unemployed and the fact that national debt has risen by £150 billion.

So there is a belief that this is a ‘make or break’ budget for George Osborne and, of course, the government which has staked so much of its reputation on wiping out the UK debt by the end of this parliament.

That clearly will not now happen and there is view that if the Coalition is to save itself from a catastrophe at the next general election it needs to do something adventurous.

What will be really intriguing is how George Osborne responds to Lord Heseltine’s recently published report on how to achieve long-term economic growth ‘No Stone Unturned’.

It is believed that Osborne will provide more details on the £1 billion taxpayer-backed initiative to create a small business bank which will provide financial assistance to those who have found it difficult to secure funding through existing banks.

There is likely to be an announcement on the provision of temporary tax breaks for investment by business which would be considered a very useful incentive to job creation and economic growth.

However, it is unlikely that George Osborne will embrace Lord Heseltine’s report in its entirety; that would be too radical.

Therefore what should be expected is a ‘pick and mix’ approach that will attempt to create growth through the areas identified.

As to whether it will revive the economy is a more difficult question to answer; there are many other influences at play such as the state of economies in the Eurozone.

For everyone’s sake let’s hope that it does, though the portents for the next few years do not look good.

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Dr Steve McCabe

Dr Steve McCabe

Birmingham City Business School