Wednesday, 6 June 2012

A welcome return to common sense: now for delivery

Two weeks ago, I wrote this:
When I'm asked in interview or articles to sum up concisely why I think the government should change course on fiscal policy, I usually say something like this:
"with long-term government borrowing as cheap as in living memory, with unemployed workers and plenty of spare capacity and with the UK suffering from both creaking infrastructure and a chronic lack of housing supply, now is the time for government to borrow and invest.  This is not just basic macroeconomics, it is common sense. "
From today's Independent:  
A senior government source told The Independent:
"While a lot of families are struggling and have no disposable income, there are others who are quite cash rich but have nowhere secure to put their money where they can be guaranteed a decent return. Because interest rates are as low as they are, there is the potential to tap into this money and get it invested in infrastructure which will have a dramatic effect on Britain's long-term growth."  
The benefits of investing in infrastructure were twofold, the source said.
"Not only will it provide a welcome kick-start to the economy at a time when growth is sluggish, but infrastructure improvement will also help Britain's long-term competitiveness and encourage investment from overseas. In that way it is a win-win situation."
There is no meaningful difference here: the argument about the economics of whether we need more government borrowing (on or off balance sheet) to increase demand and investment spending is over.  The issue for the government now is delivery and implementation: can they actually do it, quickly enough and on a scale big enough to make a difference?  Too much time has been wasted already.  

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