Investment Clock insights

Autumn statement should be going for growth


Trevor Greetham 

21 November 2016

Now is the time to reset fiscal policy and the focus should be on boosting nominal growth to offset Brexit uncertainty rather than trying to deliver 'austerity-lite'.
Going for growth should reduce the debt burden over time as the government can borrow money in the gilt market at a cost of 1-2 per cent per annum and invest in an economy with long-term growth potential of four. The government should counteract the lack of private sector investment since the financial crisis by improving transport infrastructure, housing and power generation while continuing to support research and new technology.
Contrary to popular opinion, governments can borrow their way out of debt if interest rates are low enough - or 'save' their way deeper into debt if austerity causes the economy to weaken.

Now is the time to reset fiscal policy and the focus should be on boosting nominal growth to offset Brexit uncertainty rather than trying to deliver 'austerity-lite'.

Going for growth should reduce the debt burden over time as the government can borrow money in the gilt market at a cost of 1-2 per cent per annum and invest in an economy with long-term growth potential of four. The government should counteract the lack of private sector investment since the financial crisis by improving transport infrastructure, housing and power generation while continuing to support research and new technology.

Contrary to popular opinion, governments can borrow their way out of debt if interest rates are low enough - or 'save' their way deeper into debt if austerity causes the economy to weaken.

The value of investments and the income from them is not guaranteed and may go down as well as up and investors may not get back the amount originally invested. The views expressed are the author’s own and do not constitute investment advice.