he industry was only mildly surprised to hear that the Jim O’Neill resigned on Friday as the Commercial Secretary as he had been making it known for some time that he was not happy with the direction of travel that the government was taking.
The high-profile businessman was brought into the Treasury following the 2015 general election by George Osborne to spearhead the policies of the Devolution, the Northern Powerhouse and Chinese investment but he was not a natural supporter of the government and his discomfort has steadily grown with the loss of George Osborne.
If you believe in the rule that nothing is true until it is officially denied, then it becomes possible to see what the issues were for him. Although he has officially given no public reason for why he has resigned, his letter to the Prime Minister states that it is not because he was unhappy in the job due her cautious approach towards Chinese investment, and her replacement of Osborne’s focus on the north with a broader industrial strategy across the whole country. You can also draw a further inference from the fact that he has resigned the Conservative whip and now sits as a cross-bench peer. So that makes it all nice and clear.
As so often happens in these situations, the departure gives us the ability to assess how well Lord O’Neill performed in his role. Compared to his predecessor Lord Paul Deighton, his legacy for our industry is considerably less then it could have been or should have been. The reason for this was that Lord O’Neill was very clear from the outset that infrastructure investment was not on the top of his agenda. As such our industry failed to get the hearing that it deserved, which is most disappointing.
In just under three years, Lord Deighton, however, managed to transform the way in which the Treasury engaged with the industry from an adversarial to a more collaborative approach which was reflected in the development of the much improved National Infrastructure Plan over that period. Having worked closely with Lord Deighton and Sir Danny Alexander during this period through my role as Co-Chair of the National Infrastructure Plan Strategic Engagement Forum (NIPSEF), I know how much effort was put into creating a long term pipeline of infrastructure projects and to reform the way the UK took strategic investment decisions by both of them. Since 2015, however, the priority for the Treasury reflected a greater desire to increase Chinese investment in the UK economy.
While this is undoubtedly a beneficial approach for our economic growth, it allowed the Treasury to take its eye off the ball, partly through integration of Infrastructure UK with MPA to form the new IPA, with regards to building the next stage of the UK infrastructure pipeline. The recent downgrading in importance of the National Infrastructure Commission (NIC) is just one of several decisions taken just recently that marks the change in approach to infrastructure policy in this country.
Following the appointment of Theresa May, Lord O’Neill required the PM to commit to the Northern Powerhouse agenda as the price for his staying in post and it seems that this commitment was given. The government’s approach to Hinckley Point, however, strained an already fragile relationship to breaking point and he made it known during the summer that he was considering his position.
His departure from the Treasury marks a further indication that the previously strong relationship with the city and Infrastructure industry under the last government is fraying which can bring into question the UK’s leading role in financial and technical services. Osborne in particular had prioritised the relationship with China, introducing legislation that eased operations for Chinese banks in the UK and encouraging Chinese investment but it seems that the government is reassessing this approach. Nick Timothy, the new Co-Chief of Staff, is a well-known sceptic about the value of a closer relationship with the Chinese and is rumoured to have been the one responsible for the delay to the Hinckley Point decision.
O’Neill’s decision to walk gives Theresa May something of a headache. Firstly, it casts doubt on her reassurances about promoting stronger ties with China. O’Neill was recruited by George Osborne primarily to woo Beijing but the wobble over Hinckley point has left this policy somewhat in limbo. As Jim O’Neill waited until after the PM eventually did give the go-ahead to Hinkley (and chose not to annoy China on this occasion), his timing doesn’t look good for the Prime Minister.
His resignation also suggests O’Neill isn’t confident about Theresa May’s plans to implement the Northern Powerhouse either. The PM tried to reassure again this week that she is committed to the project and her response to the resignation sought to strengthen this support. Yet O’Neill walking away suggests he isn’t buying it. It seems that George Osborne still has the ability to cause problems for the Prime Minister.
We must now await the appointment of a new Commercial Secretary to see which way the winds blow for our industry. That said, we may well find that it is Greg Clarke who now matters most to our interests as he will develop the industry strategy for the UK. All that can be said right now is that Jim O’Neill leaves a government he did not intellectually support having had far less impact on government policy then his career in the city would have suggested.
Notwithstanding this development, it very important that the UK Infrastructure industry leaders regroup its advocacy agenda with Theresa May Government to ensure priority is given to Infrastructure investment. Assurance from Government is urgently needed to ensure both NIC and IPA are given the statutory, political clout and capable resources to drive forward the short, medium and long term Infrastructure pipeline investment and secure UK competitive position as we navigate the Brexit negotiation with the EU.