Building hospitals and roads boosts growth in the economy

Public investment, particularly in infrastructure like roads and hospitals, is crucial for economic growth. A recent discussion paper from the Office for Budget Responsibility highlights the importance of public spending that creates long-term assets. While immediate benefits include job creation, these effects are temporary, typically lasting only three years. The paper emphasizes the significance of enhancing the economy's supply side, which can lead to a sustained increase in potential output. Specifically, a 1% increase in public investment could raise potential output by nearly 0.5% after five years and around 2.5% in the long run. This long-term growth potential is particularly relevant in the context of economic challenges, such as the estimated 4% economic hit from Brexit. The findings underscore the necessity of strategic investment in projects that are delivered on time and within budget, as these contribute to the nation's future economic stability and growth. The government’s focus on green energy projects is an example of good investment that can yield significant benefits for the economy.