Why Governments Won't Invest

Sir Vince Cable

CEP Reports from Centre for Economic Performance, LSE

Abstract: The UK Government is currently exerting a sharp and tightening squeeze on public investment at a time when borrowing for public investment has never, historically, been cheaper with interest rates close to zero in real terms on long term public borrowing. Moreover, financially prudent and disinterested bodies like the IMF are calling for the UK to be more expansive in public investment. In this paper I discuss the Treasury's aversion to public investment, an issue which has persisted for some time, but become all the more pressing since the financial crisis. I argue that policymakers should focus on identifying and investing in high quality, professionally assessed, public projects - something that can be aided by a National Investment (or Infrastructure) Bank which would neatly complement the newly created Infrastructure Commission. But, like the Green Investment Bank, and other institutions before it, it would be allowed only a very modest role unless the institutional obsession with curbing public investment can be overcome.

Keywords: UK economy; public investment; public debt; government policy; infrastructure (search for similar items in EconPapers)
JEL-codes: G10 H54 H60 H83 (search for similar items in EconPapers)
Date: 2016-03
New Economics Papers: this item is included in nep-pub
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Persistent link: https://EconPapers.repec.org/RePEc:cep:cepsps:33

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