The government needs to beware of bad state investment

Faced with charges of a borrowing splurge on so called capital investment the Treasury says there will be guard rails. They will not borrow all they will be allowed to under their new laxer rules. It would be more convincing if they told us how they choose the investments, how they will control them and what the actual borrowing limit is going to be.

The sad truth is the nationalised industries have a dreadful record of unproductive and unprofitable investment.

A very expensive Post Office computer system sent honest employees to prison and landed taxpayers with a large compensation bill. The Post Office has presented taxpayers with accumulated losses of £799 million despite or because of the bad investment. HS 2, a nationalised railway, has been unable to deliver an important project to time or anywhere near budget. The project has had to be slimmed down losing its main point of going to the North of England. There will not be enough extra revenue to make a profit or pay the interest. The rest of the nationalised railway spends on capital only to need more subsidy and state support.

All the time roads are nationalised and paid for out of road taxes that greatly exceed road costs there is a case for further expansion and improvement in the network on state borrowing. Unfortunately this government so far has announced cuts in new road spending. Roads are crucial to our economic success as service providers and on line parcel deliveries come by van, ambulances drive to hospitals and trucks supply our factories by road.

There is no need for government investment into most energy projects. Customers are made to pay high prices for U.K. energy. If the government let the private sector make the investments we need in replacing imported LNG and building some additional gas turbine capacity we could boost growth and help lower world CO 2.