Monday, September 20, 2010

We can't build growth on sands of debt

So spake Nick Clegg as he explained the highly flawed logic of cutting back public spending just at the time that the private sector remains unable to take up the slack.

In today's speech, he's promised to allow local councils to borrow against future business rate income to fund capital projects today. For a number of years, councils have been indulging in 'prudential borrowing' - money borrowed without government support and Birmingham has taken full advantage of this, with the Tories and the Liberals spending freely on capital projects.

It isn't clear what the difference is between local authority borrowing and that from central government, other than one is good and the other now bad.

1 comment:

john said...

One is borrowing for capital with an identified repayment revenue stream. The other is borrowing for revenue.