Kyalo Burt-Fulcher discusses the government's spending plans in today's budget.
There's a lot to be announced in today's budget, but if we're focussing on the most important issues, one question blows everything else out of the water. How much is the government going to spend?
The correct answer is "shed loads" - here's why:
1. Government bond yields are at historic lows (again), but this time it’s ridiculous - the 30yr spot rate is 0.6%, the 10yr rate is 0.27%! These rate have literally only been reached in the last few days as global markets tumbled due to corona virus.
2. Britain’s infrastructure has suffered from decades of underinvestment. We need HS2, new airport capacity, and a revolution in transport both within and between regional cities and towns - not to mention nuclear power stations). It’s going to take more than filling in potholes... (though we should definitely do this as well).
3. The world is fast heading toward a corona virus driven downturn and possible recession. Central bankers have been unanimous that this can’t be addressed by monetary policy alone - its needs significant fiscal stimulus.
This is a once in a generation chance where conditions are perfect to borrow and invest - it’s necessary to avoid recession, there are loads of worthwhile projects, and it’s cheap af. If the government is serious about “levelling up” the British economy it should issue as many long dated gilts as possible in the next few days/weeks as possible (we’re talking 100s of billions), and then get planning on how to invest the proceeds. For more, listen to me and others on the Young fabian podcast going live tomorrow morning.
For more on our thoughts on the budget, please head to our podcast, where the team will do a full breakdown, with especial mention to how the budget will affect young people.
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