A senior adviser to Greater Manchester Mayor Andy Burnham has called for the government to increase borrowing to fund major infrastructure projects, arguing that the current fiscal rules are too restrictive and hinder long-term economic growth.
Adviser's proposal
In a report published on Wednesday, the adviser, who was not named, proposed that the government should relax its self-imposed borrowing limits to allow for more investment in transport, housing, and energy networks. The report claims that for every £1 borrowed for infrastructure, the economy could see a return of up to £2.80 over the long term, based on estimates from the Office for Budget Responsibility.
According to the adviser, the current fiscal rules, which require debt to fall as a share of GDP, are arbitrary and prevent the UK from addressing its chronic underinvestment in infrastructure. The report cites examples such as the delayed HS2 rail project and the lack of progress on Northern Powerhouse Rail as evidence of the need for a new approach.
Political context
The call comes as Labour leader Keir Starmer has committed to fiscal responsibility, pledging not to increase borrowing for day-to-day spending. However, the adviser argues that borrowing for capital investment is different and should be exempt from such constraints.
Andy Burnham has previously expressed support for greater infrastructure spending, but has stopped short of endorsing a specific borrowing target. The report is seen as an attempt to influence Labour's policy platform ahead of the next general election, which is expected within two years.
Economic impact
The report warns that without increased investment, the UK's infrastructure will continue to deteriorate, harming productivity and living standards. It notes that the UK has one of the lowest levels of public sector net investment among G7 countries, at just 2.5% of GDP, compared to an average of 3.5%.
“By failing to invest now, we are storing up much larger costs for future generations,” the adviser said in a statement. “Smart borrowing for infrastructure is not reckless; it is the responsible thing to do.”
Reactions
The proposal has drawn mixed reactions. Some economists have supported the idea, pointing to low interest rates and the need for post-pandemic recovery. Others have cautioned that higher borrowing could spook financial markets and lead to higher inflation.
A Treasury spokesperson declined to comment specifically on the report, but reiterated the government's commitment to fiscal discipline. “Our fiscal rules are designed to ensure debt remains sustainable while allowing for necessary investment,” the spokesperson said.
