Switching spending to capital projects

 

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The chancellor looks set to use next week's Autumn Statement to switch some day-to-day spending to spending more on Britain's infrastructure - in the jargon moving some spending from current to capital projects.

His deputy, the Chief secretary to the Treasury, Danny Alexander, said today in a speech that "next week's announcement will switch funds to capital spending plans".

Ministers have already suggested that they want to find ways to use Britain's low long-term interest rates to underwrite private sector investment in roads, broadband and other infrastructure, which will increase Britain's long term growth rate.

At the Liberal Democrat conference, Danny Alexander announced the creation of a new half a billion pound infrastructure fund paid for from under-spending of departmental budgets.

One source close to the decision said of the funding switch: "It is undoubtedly significant. It will mean essentially extra spending on infrastructure. It does not mean more borrowing. But we are switching some money from one side to the other."

In September, I revealed that some Liberal Democrats believed up to £5 billion more could be spent on infrastructure. The key to their argument was that the government's deficit rules allow capital spending to be increased without abandoning Plan A as the Treasury's so-called "fiscal mandate" targets 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 is prepared to argue that it can stimulate growth in the future by spending more now.

 
Nick Robinson, Political editor Article written by Nick Robinson Nick Robinson Political editor

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  • rate this
    +3

    Comment number 1.

    Yes, this is a great time for the country to borrow. Current gilt yields are low - far lower than they should be - so let's load up as much as possible (and for as long as possible) and spend the money on productive projects. Better to do it now, on the cheap, rather than delay until the markets wise up and price our credit properly.

  • rate this
    -4

    Comment number 2.

    Worst chancellor......... since Gordon Brown :-S

  • rate this
    -3

    Comment number 3.

    1. Sagamix

    If only the coalition would listen. Instead they want to switch current account spending to capital. A bit like cutting out the dog food and spending it on a kennel.

    If overall spend is not changed, then there's no multiplyer effect.

    Imagine the impact if we spent £50bn on infrastructure - not just on unemployment, but on housing, roads, etc.

  • rate this
    0

    Comment number 4.

    #1

    Within limits yes - clearly they have to take a more interventionist stance - things are not just going to happen whilst the western economy is in gridlock.

    Small steps in the right direction is the best we can hope for in adverse conditions.

  • rate this
    +4

    Comment number 5.

    2. SleepingSpurs

    IMHO nearly all chancellors have been bad.

    You need to distinguish between bad policies and "bad" personalities. He certainly wasn't the "nicest" chancellor. Caused a few problems for the UK too, but which chancellor hasn't.

    Now if you said worst PM, then I would not begrudge you that, though there are quite a few contenders for that title, inluding his current lordship.

 

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