Johnson’s spending spree challenges Conservative fiscal orthodoxy

Birmingham, United Kingdom – Prime Minister Boris Johnson‘s December election victory was built in places like Northfield.

The south Birmingham suburb’s parliamentary seat had been held by Labour since 1992 – but, along with a host of other seats in the English Midlands and the North, it swung to the Conservatives, allowing Johnson’s supporters to crow that he’s now the champion of the English working man.

His challenge now is to keep hold of those voters, and seats such as Northfield, in the geographic centre of the country. And Johnson’s government may have an answer – and possibly a very un-Conservative one: a big increase in public spending.

The Conservatives have already ignored their old spending rules. Under former-Prime Minister Theresa May, one steadfast principle was that government borrowing had to remain below 2 percent of GDP. Another was that national debt had to fall as a percentage of GDP in the 2020-21 fiscal year.

Johnson’s recently departed chancellor, Sajid Javid, had been persuaded to allow government borrowing to increase to 3 percent of GDP. And now that Javid, a fiscal hawk, has departed, that might give Johnson even more freedom to spend on infrastructure, and possibly even welfare.

There’s been a lot of talk from the government about “levelling-up” the Midlands and the North – meaning that regions of the country that have historically had low levels of investment will be brought in line with richer areas of the country, predominantly in the South.

That’s what people here in Northfield want to hear. The constituency has approximately 100,000 people, and is a mix of well-off and poorer areas. But the child poverty rate is above 30 percent, and unemployment is at almost 9 percent. Birmingham, the country’s second-largest city, is also the seventh-most deprived local authority area in the United Kingdom.

Northfield used to be the centre of car manufacturing in the UK, with the Longbridge plant churning out world-famous marques including Rovers and Minis since the start of the 20th century. But the last car rolled off production lines in 2016, and the industry here has died, with not much in the way of a replacement.

It’s why the approval of the 88 billion pound ($114.4bn) HS2 high-speed train line to London, as well as talk of a vastly expanded Birmingham metro line, has excited people.

Peter Rossiter has lived in Northfield all his life. The middle-aged warehouse worker is one of thousands of voters here who supported the Conservatives at the most recent election, having been a Labour voter in the past. And now, he wants to see investment.

“Hopefully the government will come good. We’ve lost three to four years as a result of the upheaval with Brexit,” Rossiter told Al Jazeera. “HS2 is a major development for Birmingham; it’s going to have a big, positive knock-on effect. But we need a lot more done to bring us in line with the South.

“Look at Longbridge. The factory went 10 years ago. They built supermarkets, but nothing else. The car industry is gone, there’s nothing more that they can do. But they could bring more manufacturing into the area. [An electric car battery] Gigafactory would be a good idea.”

Employees and shoppers on the main strip outside Northfield Shopping Centre point to the area around them as a symbol of the weakness of the local economy. There is a sea of charity thrift shops and fast-food restaurants, and shoppers find the big brand stores of Birmingham city more appealing than their local suburb.

The hope is that a metro link to the city centre will make things better here.

“Maybe some people might want to come to Northfield [if the metro is built]; they might want to come to places outside the city centre and see what alternative shops there are here,” said Stuart, a local retail worker. “Jobs-wise, as well, people might want to travel and get work outside of the city centre if it’s easier to get to.”

The Conservative mayor of Birmingham, Andy Street, made an expanded metro system a central plank of his re-election campaign. It would cost 15 billion pounds ($19bn) over 20 years, and Street wants the central government to invest in the project.

A new kind of Conservative?

Traditional Conservative voters tend to be based in the more prosperous areas of southeast England, as well as many rural parts of the country. They expect low taxation, less government intervention, and a small state.

But now the new Conservative seats in the Midlands and the North have brought a new type of Conservative voter, one that is more inclined to support more public spending. So, the question remains whether has the dynamic changed and if Johnson’s government will now rely on public spending to boost economic growth – especially with the potentially negative economic fallout that may emerge as Brexit negotiations with the European Union drag on.

“At a time of economic uncertainty, Keynesian-type interventions such as public investment on infrastructure projects can play an important role in supporting employment and business growth,” said Sarah Longlands, the director of think-tank IPPR North.

“So the government’s commitment to infrastructure expenditure, most notably HS2, is welcome, and we can expect to see more of this from a flagship project-loving prime minister.”

As mayor of London, Johnson launched a 60 million pound ($77m) cable-car over the River Thames and presided over the opening stages of construction of the Crossrail project to build a new train line across the capital. He also backed – to the tune of 53 million pounds ($68m) of taxpayers’ cash – a new “garden bridge” spanning the Thames, which ended up never being built. In recent weeks he has talked seriously of supporting the construction of a bridge between Scotland and Northern Ireland.

Longlands, however, is still not sure that headline-grabbing infrastructure announcements represent a new direction for the Conservatives.

“The government’s commitment for large scale capital projects should not be seen as a sign of a change of fiscal heart. In the context of low interest rates, capital expenditure makes sense, but we should not be under any illusions that revenue expenditure on public services such as education, health and social care will benefit from dramatic cash windfalls from government any time soon.”

But traditional conservative economists are still worried about the new government’s inclination to spend big.

“Increasing state spending will ultimately damage the UK’s economy,” said Matthew Lesh, of the Adam Smith Institute.

“New spending does not come from thin air, it must be funded either with higher taxes or more debt, both of which will hurt the Conservatives’ reputation for fiscal prudence. We should be saving for an ageing population, not borrowing more today on our children’s credit card.”