Letter: Prudence and the bill

July 27, 2001

You suggest that increased public spending on infrastructure could not be part of "any prudent economic policy" (Leader, THES , July 20).

Private, voluntary, and not-for-profit provision is valuable if it can do things better than traditional public provision, but you are mistaken about its greater "prudence".

Private spending on infrastructure would be imprudent if the short-run impact on demand would create an unsustainable boom, or if we could not afford, via taxes or user charges, to pay back the money invested by the private sector.

But if we can afford to meet a commitment to the private sector, we can also afford to repay an equivalent amount of government borrowing.

To favour private provision merely because it reduces measured government borrowing would be crazy.

Richard Green
Professor of economics
University of Hull

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