“If people are prepared to lend to government at less than 1% real interest, let’s bleed them dry, because cheap money won’t last forever; infrastructure spending should be undertaken now, whilst it’s cheap.”
The construction collapse will have the same effect on labour costs, which we can offset by removing the impact of crowding-out from multiple public-sector projects. So let’s go for 200,000 new council houses (£20bn); a TGV line from London to Leeds via Birmingham and Manchester (£20bn); and nuclear power stations covering 30% of UK energy requirements (£40bn); while also going ahead with Crossrail (£10bn).
These would raise the national debt by 7% of GDP to levels that are still historically fairly low, while adding £900m per year of real interest to be met by taxpayers (approximately a 0.1% increase in government spending).
If I was in a political party that looked almost certain to lose the next election, then borrowing an enormous amount of money to spend on infrastructure projects that won’t be completed for about 10 years (by which point the next government will be so tired and jaded that nobody will credit them with the achievement), would be top of my list of priorities at the best of times. The fact that it currently makes economic sense to do it is a happy coincidence, and hopefully one that’ll work in all our favour…