New plans for growth?

 

As our political editor Nick Robinson can reveal they believe Mr Osborne could raise capital spending on infrastructure projects

The BBC can reveal that cabinet ministers believe that the chancellor could increase capital spending by up to £5bn on roads, broadband and other infrastructure projects in order to stimulate economic growth without abandoning its deficit reduction strategy or what's become known as "Plan A".

The government has already announced plans to "accelerate" spending on 40 key infrastructure projects; to reallocate half a billion pounds in unspent departmental budgets on a fund to boost local infrastructure projects - for example, building a link road to allow a housing development to go ahead; and to examine how to maximise the impact of existing plans.

An announcement is expected soon on a plan to increase house building.

The debate which is just beginning in government is whether to go further by increasing capital spending above and beyond the totals outlined in the Budget.

Currently the Treasury is arguing that it would risk a loss of credibility in financial markets to change their plans in any way.

The main business lobby group, the CBI, recently called on the government to "act now to attract vital new investment into the UK's ageing infrastructure. Swift investment across Britain's road and rail networks, digital, waste and energy would ensure we remain internationally competitive and kick-start UK growth".

The government has promised to publish a National Infrastructure Plan to set out the long-term investment needs and priorities for the UK by the end of this year.

Treasury figures show planned capital spending halving over the next five years once depreciation is taken into account.

Today's gloomy IMF forecast is fuelling the private debate in Whitehall as well as the public debate between parties about how to stimulate growth. Both Labour and the SNP have called for increased capital spending.

Note for nerds:

The reason some ministers argue that capital spending can be increased without abandoning Plan A is that the Treasury's so-called "fiscal mandate" aims to target current not capital spending.

Their other target - a fall in the debt to GDP ratio - limits their ability to spend more on capital projects unless the Treasury argues that it can stimulate growth in the future by spending more now.

 
Nick Robinson Article written by Nick Robinson Nick Robinson Political editor

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  • rate this
    +1

    Comment number 137.

    132#

    What a dork.....

  • rate this
    0

    Comment number 136.

    JH 110

    Yes. Pretty much as per Coats (114) - extra spending to be directed at areas of solid, long term value; energy, transport, housing, state bank ...

    Then (shouts of "whoa there, steady on tiger!") I'd also reduce VAT and cut IT for the low paid - get some quick hit booster effect going.

    And more QE.

    Last throw of the dice before we settle in for the long march across the mountain.

  • rate this
    +2

    Comment number 135.

    chris @ 130

    Not sure you've understood me. My fault.

    What I'm saying is IF we're intervening to get the economy moving, it's important we not be half-hearted, tinkering around the margins, that's worst of both worlds; let's do it with (faked) confidence and commitment. Otherwise don't bother.

    And maybe we should - it fails, we're a bit worse off; but if it works we potentially gain a lot.

  • rate this
    +3

    Comment number 134.

    "41.richard bunning

    Nearly half the deficit left by Labour was the bank bailout - we have £100 Bn+ of equity"

    You don't understand what a deficit is do you? Yes, a proportion of our DEBT was money given to the banks. A DEFICIT is the amount of extra money we borrow each year - we do not give 100+ bn each year to the banks.

  • rate this
    +1

    Comment number 133.

    A large part of our economy is engaged in financial casio operations of dubious value, another group is doing nothing very useful on benefits, a huge public sector including a raft of failed projects, reams of left liberal legistlation as a burden on business and a mountain of debt. Anyone that thinks these problems can be solved by marginal short term policy differences needs medical help.

 

Comments 5 of 137

 

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