The spending tap is waiting to be turned on – my letter in the Guardian today

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I have this letter in the Guardian this morning:

Labour’s clear commitment to a £250bn “green transformation fund” correctly puts climate centre stage in this election (Turning on the spending tap: How the parties’ plans compare, 8 November). The usual economic suspects have immediately lined up to wring their hands, worrying about levels of debt and the availability of “shovel-ready” projects. They miss the real points.

The first is whether there are buyers for the bonds that will fund this spending. At present, more than 80% of UK personal wealth is invested in tax-incentivised assets.

In that case simple tax rule changes will drive buyers towards Green New Deal bonds. For example, if the rules on Isas were changed so that all funds saved had to be invested in Green New Deal bonds, and an interest rate of 1.85% (the current average cost of UK government borrowing) was paid then the £70bn that goes into Isas each year could be directed towards the Green New Deal. Simple changes to pension rules could provide the rest.

Second, as for a lack of shovel-ready projects, Labour’s plans include making the UK’s 30m buildings energy efficient while shifting energy supply to renewables. We already have the skills and knowledge to restart this transformation, since many in those sectors lost their jobs when the Conservatives cut support for such activity. Of course, a massive retraining programme will also be required, but if the government makes the money available you can be sure that the shovels will come.

Prof Richard Murphy
City, University of London