Interest rates are interest rates whatever the Chancellor says

What if there were some single, one, neat trick that made government spending look better than it actually is? Well, there is!

So first, I am making changes to the Treasury’s Green Book – reducing the discount rate from 3.5% to 3%.

That will skew investment towards projects with more long-term potential, meaning that more places across the UK will get a fair hearing.

This makes the benefits in the future of investment now look better. It also reduces, in the plans and spreadsheets, the costs of borrowing to make such investments. That’s the one neat trick. By playing with numbers we blind ourselves to the true costs.

For government is still going to have to pay 5% and change to fund such investments.

Ho Hum.

Tim Worstall