Rishi Sunak and Jeremy Hunt should ramp up government investment spending to unlock a £149bn boost to the UK economy, an influential think tank has urged today.

Spending on quality capital projects like expanding renewable energy infrastructure and improving transport networks could “pay for itself” by yielding tens of billions of pounds in growth and tax revenues, according to a report by the Institute for Public Policy Research (IPPR).

Harnessing the government’s capacity to borrow from international investors to raise cash to channel into the economy may “unlock industries of the future, spur technological advances, and thus boost growth,” the report argued.

Fiscal hawks have said stepping up capital expenditure risks the Prime Minister and Chancellor missing their fiscal rules – getting debt as a share of the economy down and the deficit falling in five years.

Higher interest rates caused by the Bank of England and central banks globally trying to rein in screeching inflation has also made government borrowing more less affordable. UK borrowing costs have risen 13 times in a row to a near 15 year high of five per cent. They are expected to top six per cent.

Britain’s debt pile is already larger than the size of the entire economy at around £2.5 trillion, swelled by the government borrowing hundreds of billions of pounds to pay for Covid-19 support. Debt interest spending is also on track to top £100bn for a number of years.

But, according to the IPPR, an annual £30bn boost to public investment would actually skim the debt pile.

“The GDP growth benefits can still ensure alignment with falling debt to GDP ratio,” Carsten Jung, senior economist at the IPPR and author of the report, said.



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