I\’m not sure that Ritchie gets any of economics, finance or accounting

Requiring just one quarter of all new pension contributions go into new infrastructure investment – in exchange for a guaranteed and proper return, maybe with an upside if something went especially well, is a wholly reasonable condition of giving pension tax relief.

That\’s the finance part he doesn\’t understand. If infrastructure investment could provide a guaranteed and proper return, with that option on the upside, then you wouldn\’t need to direct investment into it. There\’s hundreds of billions out there crying out for such guaranteed and proper returns. You could pave the country three times over with what people would be willing to invest in a proper and guaranteed return.

The problem isn\’t finding the money: it\’s creating the guaranteed return. Which is the part that he and Colin Hines haven\’t in fact addressed except for some wibble about….well, what have they actually said about where the guarantee comes from?

So long as these funds were invested witha view to returns then they’re not part of the revenue cycle and should not be considered part of the deficit or government borrowing. It is ludicrous that such stupid accounting definition are destroying real lives and constraining rela growth – precisely because the government is slashing investment now to try to balance books to meet these accounting rules, and is destroying lives in the process. No business is constrained by such stupidity. When they invest the profit and loss account is not punished – the asset is put on the balance sheet and the behaviour is applauded. That should be true for government too.

And that\’s accounting that he doesn\’t understand. Sure, let\’s have a proper balance sheet for government. Let\’s put the assets onto it. And given that it is indeed a balance sheet then we\’ve also got to put the liabilities onto it. You know, all those unfunded pension rights for example? Look a bit sick at that point, wouldn\’t it?

As to his not understanding economics, well, blogs passim and all that.

10 thoughts on “I\’m not sure that Ritchie gets any of economics, finance or accounting”

  1. The proposed new high speed railway line shows just how beneficial infrastructure expenditure by the government is likely to be.

  2. It beats me why no one has even thought of attaching the nation’s main airport – Heathrow – into the national rail network. That might be a “flyer” financially. The HS2 link just seems a waste of time.

  3. “The proposed new high speed railway line shows just how beneficial infrastructure expenditure by the government is likely to be.”

    ie “very, unless you believe mad lies”.

    Not only Crossrail, but Airtrack, which would have been a cheap, high-benefit scheme to integrate Heathrow with services to the west and SW rather than just London.

    It was dropped by Phil Hammond because the associated increase in train frequency over level crossings would have slightly delayed some of the drivers in his constituency.

  4. I’d love to see Ritchie’s reaction if he were to read this piece of doom and gloom from Tullet Prebon

    http://www.tullettprebon.com/Documents/strategyinsights/Tim_Morgan_Report_007.pdf

    As one small excerpt to give the general flavour: “The widespread assumption that the
    right blend of macroeconomic policies
    alone can overcome Britain’s economic
    and fiscal problems is fundamentally
    mistaken. Governments have tried low
    interest rates (which have been close
    to zero for 28 months), devaluation,
    £390bn of fiscal stimulus and £200bn
    of quantitative easing, all to no effect.
    The so-called ‘plan b’, which could
    be better labelled ‘Brown lite’, is not
    worthy of serious consideration. In the
    years prior to the recession, Britain
    borrowed £2.18 for every £1 of growth.
    Continued high borrowing would be
    nothing more than a pain-deferral
    exercise leading inevitably to a fullblown
    economic crisis”

  5. john b
    It would have been more than slight delays if Airtrack had come about, these crossings are already very busy and a couple of them would have spent most of the time against road traffic, with no alternative routes this is a serious problem, not least in extra emissions from stationary vehicles, opposition can’t just be dismissed as moaning petrolheads and political self interest. Attempting to shoehorn extra trains on to crowded and inadequate routes is always hard at best and often counter productive, a completely new segregated link to Heathrow with connections into the main line network is what is needed but the cost would be huge, however it would be money better spent than HS2 IMO.

  6. I thought one lesson from PFI was that ‘contingent liabilities’ aren’t as ‘contingent’ as one might like?

  7. Can anyone else remember the word “walk”? when I was a child my school did not allow anyone who lived less than a mile away to cycle to school. My father cycled to work (ICI had a “senior staff cycle park”) until he was nearly 50 when he handed down his bike to me because I had grown out of mine.
    Public transport *should* be economically and environmentally preferable to cars: when they are not it is due either to mind-blowingly incompetence by the operators or massive greed by the unions. If you need to compel investment in public infrastructure, that demonstrates that Murphy’s TUC paymasters cannot fool enough “Greens” with their environmental arguments.

  8. MMJ

    Not just from PFI. It’s the main lesson from the financial crisis. Contingent chickens still come home to roost.

  9. Young Master S-E had to be taken out of school on Monday ’cause he had to go to get the wires welded back on his teeth.

    We’re 5 mins walk from the school. They had a pre-delivered note with the Orthodontics Dept appointment letter attached.

    He wasn’t allowed to walk home … Or back? After “lunch” (not that he was up to eating anything.)

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