Dr. Tom McDonnell:

The problem with infrastructure is that it takes a long time to do. Even to begin an infrastructure project often involves such a lag that the recession might be over by the time it is done.

The better way to deal with an immediate recession such as a Covid shock or something like that is actually countercyclically. If we were ever going to reduce taxes or increase welfare payments, that would be the time to do it. If a bad recession hits, we want to increase aggregate demand arising from Government decisions, and if we can do that quickly, we can put more money in people's pockets very quickly.

Infrastructure, on the other hand, is helpful for that as well but the main purpose of infrastructure is to increase the productive capacity of the economy over the medium to long term. What we want to do with infrastructure is to have a golden rule, even if it is not an official one, whereby we keep infrastructure spending at a particular percentage of economic output, or projected economic output over the longer term, which is not changed. Rather than cutting back infrastructure, we are protecting it, almost in its own budget, from tax increases or current spending during a recession, as it always is. One of the two savings vehicles is this climate fund, which is meant to be a fund that is protected over the cycle. That in many ways is analogous to the second type of fund I am talking about, a fund that would be used to essentially protect the budget from short-term political decision-making because it is easier to cut the next infrastructure project than to increase taxes, if that makes sense.