Nick Clegg will today call for a “gear shift” in capital spending. But he cannot escape the truth about his government’s austerity programme. Capital spending is being cut by 29 per cent.
The Guardian reports today that:
Nick Clegg will announce plans on Wednesday to “accelerate” government capital spending projects, conceding the government must now perform a “gear shift” to ensure state spending and infrastructure play their part in Britain’s economic recovery.
But the paper has been briefed that:
“there is no new money being announced nor any spending being brought forward from later financial years…
“The spending reflects money already committed by the chancellor in his comprehensive spending review and Treasury sources said there was no question of bringing forward funds from future years to invest in the economy earlier.”
The table below shows the settlement in the Spending Review 2010. Capital expenditure by government departments is projected to fall 29 per cent between 2010-11 and 2014-15. This includes cuts to school and other education building projects of 60 per cent, 34 per cent for environment, food and rural affairs, and of 17 per cent for the NHS.
Meanwhile, the Green Investment Bank will only be capitalized with £3 billion of public money and will not be allowed to borrow until 2015-16 – despite the historically low yields on government debt currently standing at 2.46 per cent on 10-year bonds.
Clegg’s analysis is right. The economic situation has “changed dramatically” for the worse in the past six months. But doing something about it will require slowing the pace of spending cuts and launching new infrastructure spending of the kind announced by President Obama recently.