….umm, shinola? Or is it the other one?
There is a logical argument stating that government should be doing the investing for us. Government can - because it has the backstop of being able to charge future generations of taxpayers to pay back the loans - borrow more cheaply than near any private organisation. Therefore profit from investing should be higher. It’s also true that government has all those Rolls Royce minds to decide upon what should be invested in. And thus the insistences from the likes of Professora Mazzucato, Professor Richard J Murphy and every politician eager to get their hands on the spending taps that, really, government should be doing the investing.
Well, it’s a logical argument but as with all such it does need to be tested against that reality outside the window:
Four district councils in London’s commuter belt have accumulated debts worth a collective £4.2 billion, or about £10,000 per resident, on property investments, many of which have gone awry.
Woking, Spelthorne and Runnymede, all in Surrey, and Eastleigh in neighbouring Hampshire have the highest debt-to-income ratios in the country. The four owe debt between 700 per cent and 1,500 per cent of their annual income, according to the Chartered Institute of Public Finance and Accountancy.
Woking is already effectively bankrupt, while both Eastleigh and Runnymede have been the subject of notices from central government concerned about their financial health. Spelthorne has yet to receive a similar warning, but in 2022 KPMG, its auditor, warned that the council’s decision to borrow £225 million to purchase three Heathrow properties in 2017 was unlawful, a ruling that Spelthorne contests.
Note that these local councils did enjoy those presumed benefits. They borrowed from central government at central government (ie, gilts or thereabouts) rates in order to invest into market rate paying investments. With, of course, all that lovely information that government has about what should be done and those very fine, well tuned, minds to make the decisions.
They then lost all that money and have driven themselves bust in doing so.
So, we have now tested this idea that government should be doing the investing. The idea is found wanting when tested against that reality outside the window. This despite having those preferential financing rates, centralised information and fine minds.
The logical arguments fail because even with those advantages they then decide to micturate societal capital up against the wall.
Let’s not have government and politics deciding what to invest in, eh? If only for the societal value of clean, dry, walls.