Rachel Reeves was given a lot of extra freedom by officials and the OBR with their new fiscal rules. They built into the new model the ability to offset assets created or acquired by the borrowing, arguing markets would appreciate state capitalism in action. Why not credit government with future revenues from investments made?
The problem is the quality and risk of the investments. Two of the government’s bigger ones, British Steel and the Post Office are absorbing about £500 m a year each instead of generating dividends for taxpayers.The investments in renewable energy require guaranteed prices and subsidies which the government wants to partly shift from bill payers to the Treasury as costs. Carbon capture and storage “ investments” just mean dearer energy.
The government as it desperately seeks new investments through the National Wealth Fund and Great British Energy is likely to get shares in the more risky projects the private sector is nervous about. Government will become a shareholder as bail out financier of last resort if the project goes wrong.
Its money spent on rail will be subsidy, not an investment bringing profits and dividends. HS 2 is the biggest so called investment they blunder on with. There is no likelihood of profits or dividends with no trains running before 2040!
Building 1.5 m homes this Parliament as promised looks impossible. They now need to build 350,000 a year when they are only doing about half that.Council homes cost too much to build for the government to make a big dent in the target by building more of them.
The decision to spend to invest can only work if government reverses the habit of a lifetime and backs winners that can turn a profit. There is no sign of this happening. Borrowing more on this pretext will not bring growth or confidence to a flat lining economy suffering from dear energy and high taxes.
August 6, 2026
Indeed. When governments talk of “investment” they mean piss down the drain. Worse still they invest money they have taken (or will take off people who spend or invest it far better than government will. So the net effect is huge disinvestment. The bond market are not fooled by the government pretending they are “investing”.
“There is no likelihood of profits or dividends with no trains running before 2040!” Indeed and it will never make any profit and the disruption it will and has caused is a huge negative. Finished value will be about 5% of the cost – assuming it is ever finished.