Just one thing: beef up the Green Investment Bank

If George Osborne does one thing today he should use the Green Investment Bank to create jobs and transform the economy. The collapse in private sector investment is the biggest single factor behind the UK's stagnation, with investment by firms down some £48bn from its 2008 peak.

And Britain's infrastructure is clapped out - Professor Dieter Helm has estimated that £500bn will be needed, over the next decade, to bring it up to international standards. Investment now in green infrastructure - from improved public transport to renewables - means new jobs and a future-proofed economy.

Bribes for the super-rich, like the expected reduction in the 50p tax rate, won't even begin to deliver this. Corporate profits have risen over the last year, but this hasn't led to greater investment - quite the opposite, with retained earnings by large companies at record levels. To meet the challenges, government has to take a lead. A fearful private sector won't do it alone.

Yet the government's flagship initiative, the Green Investment Bank, is a pathetic, stunted creature. It's not a bank - it has no powers to borrow. It has a £3bn cash pot - a tiny sum when set against the scale of the tasks ahead. It can only invest on strictly commercial terms. Granting the GIB the power lend and borrow, letting it invest in long-term projects, and beefing up its capital stock - perhaps through a part-merger with RBS - would turn it into a serious proposition, able to take a lead in major infrastructure projects and develop an expertise.

On current showing, the Chancellor's economic record is poor. His entire fiscal strategy boils down to an economically illogical and socially damaging commitment to austerity. If he can manage one valuable step, creating a Green Investment Bank worthy of the name should be it.

James Meadway is the senior economist at the New Economics Foundation

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