Labour have been good at abusing the word investment. Traditionally it refers to a decision to spend money on equipment or property that allows you to supply goods or services over a period years. This spend can be accounted for as capital spend, with building or equipment included as an asset in the balance sheet. If an enterprise spends more on employing people or on energy that is a running cost to be included as a cost in annual accounts.
You can argue that spending on training or research is an investment as they may yield benefits in future years that add revenues.
If you do spend on capital items you often have to borrow to pay for them. You put both the value of the item and the loan to buy it on the balance sheet. Businesses expect to earn sufficient money by having an extra machine or a bigger building to be able to pay the interest on the loan to buy them, to repay the debt over a period of years and make a profit.
The government often makes investments that cannot do this. It may be good to build a replacement school but there will be no extra revenue to pay the interest on the debt or return a profit. Plenty of investments in free services paid for by taxes need some other way of appraising their contribution.
The state also makes investments that can and should be appraised like private sector investments. New railway lines need to generate new and additional rail revenue to justify their capital costs. Green investments by Great British Energy or the National Wealth Fund need to be cash generative. I will discuss how in a future blog.
November 1, 2024
You, me and many contributors to this diary have personal hands on experiece of what an investment is. To the best of information I have, none of the current front bench have ever run anything designed to make a profit. Nor have they ever even had to make choices between competing services that would lead to the most effective way of achieving a goal. They cannot even accept that the market is best at deciding these things. They seem driven by thought that emmanates from around Islington dining tables, and therefore live in a possibly alchohol fueled fantasy world of political theory.
Rachael Reeve has suddenly discovered that her budget is a one off surgical necessity, but killing the patient, so ensuring there is no sun dappled life in the future she is selling on day two of her disasterous budget. She is erroniously borrowing vast sums of money after her destructive tax increases. Day two is the verdict day when everyone affected realises her budget is a death sentence. The only discentor being the IMF with whom she will be generating a closer dependant relationship in years to come. For sure on wednesday she pressed the UK’s self destruct button, confirming that the lunatics are back in charge of the asylum.
November 1, 2024
Do Labour even understand the concept of needing to earn a return on an investment? Between them all government ministers appear to have little, if any, experience of setting up or running a business. The utter ineptitude of the tax on farms is clear evidence that they are clueless about farming. Miliband’s planned energy “investments” will only serve to make energy more expensive and reduce its capacity to provide security of supply. The extra taxes on jobs and businesses will reduce returns and stunt growth.
November 1, 2024
The issue over the farms is, I believe, to do with HMRC. HMRC have, quite rightly, identified that wealthy people in order to avoid inheritance tax were buying up farms in order to pass onto their children and then sell on, with no or little tax paid, to HMRC. The amounts are small, much like they were when people were using limited companies to avoid paying ENIC and NIC via the use of dividends. Hence why we got IR35. Unfortunatly, it is a hammer to crack a nut approach and will cost HMRC, the government and the nation far more than they recieve.
November 1, 2024
Good morning.
I do not know why Gordon Brown decided to change from spending to investments. Maybe it just sounded better and he wanted to give the impression that he was doing well for the country. In fact, what he was doing was circumnavigate EU spending rules (which we did not have to observe) by putting on ‘tick’. ie PPP, or Public Private Partnership. PPP Was first introduced by the Conservative government. It was designed to take the more risky parts of government spending and let private ventures take on the risk themselves. In return, they would receive money from the government for their use and, in some cases, would be able to purchase the project outright. It would cost more in the long run but, with so many of such projects going into overspend and over time costing far more, it was considered a necessary risk. A risk that was on a small scale. Labour under Gordon Brown massively expanded this in order to avoid large spending, borrowing and tax increases. Unfortunately he spent the money with the likes of the NHS and us, having to pick up the bill.
I would therefore, regard that from taxpayers’ point of view, a very bad investment but a neat con trick.
Reply I remember turning down Treasury suggestions of a PFI hospital project in Wales, successfully insisting on money from state borrowing as that was clearly cheaper.
November 1, 2024
When a medical treatment goes into a “routine” phase it should be dealt with privately.
So for example new glasses or regular ear wax removal.
This also applies to handing out prescriptions, giving regular injections, performing standard operations, regular physio.
Doctors should be used to investigate illness and prescribe a treatment.
It would then be best for the patient and funding to go to the private sector to get a standard or regular treatment.