Prospect readers have their sayby Prospect / July 19, 2012 / Leave a comment
Published in August 2012 issue of Prospect Magazine
The path to growth
Both Paul Krugman and your panelists (“How to get growth” July) assume that fiscal stimulus is the only way to achieve growth. Yet, for the UK at least, a package of alternative measures would be more effective but lower risk. The government could tap the vast resources of sovereign wealth funds by offering them an attractive deal to invest in the country’s infrastructure: actual ownership, by means of 40-50 year leases, of the projects. This should be an acceptable concession; it would be a temporary mortgage on as yet non-existent structures. Second, an incentive should be provided for corporations to deploy their record level of cash by imposing a 10 per cent tax on it. Third, underwrite 20 per cent of the value of new loans to small businesses. The danger to the country’s already vulnerable AAA credit rating would be minimised. Fourth, if Scotland votes for independence in 2014 the English government should charge it for two services which it is currently assumed would be provided for free: guaranteeing Scotland’s national debt, and its defence.