Borrow to invest?

Last month we argued that, despite the Coalition Government’s obsession with cutting the deficit, we should be using public borrowing to pay for the additional costs of a low carbon infrastructure. Seems like someone agrees with us – over at Left Foot Forward, Gerry Holtham has been arguing something very similar. As he puts it:

“Public debt is less of a problem if there is a counterpart growth of assets yielding a return. The current deficit largely finances consumption. Yet the UK faces a potential energy crisis and has a decrepit infrastructure and should reduce carbon emissions. The investment in tidal and nuclear energy and the creation of electrified high-speed rail links and better roads would cost hundreds of billions. There is no better time to undertake such investments than when the economy is faced with persistent under-utilization of resources. The government should catalyse and finance such investment.”

Gerry goes on to to posit the creation of  a parastatal which could issue government backed debt, and use this to invest in infrastructure projects via preference shares in a series of joint ventures – a sort of super Green Investment Bank.


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Filed under Infrastructure, Public borrowing

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