Letter: Take a long view and escape public spending dilemma

Sir: There is a way in which the Labour Party can solve the dilemma of wishing to increase public expenditure without being seen to increase public expenditure. It would involve adopting longer time horizons and reforming the basis of cost analysis. Housing provides an example of what this would mean.

Everyone recognises that we have some of the worst housing in the EU, much of it occupied by the eight million households receiving benefit. The main problem with the housing stock is its poor thermal efficiency, which leads to widespread fuel poverty and ill health. It is estimated that the cost to the health service due to cold- and condensation-related illness is more than pounds 1bn a year. Faced with the problem, the Government has consistently suffered policy paralysis for fear of abusing the PSBR. Its only answer, the Home Energy Efficiency Scheme, barely scratches the surface.

However, if the problem were to be tackled within a 10-year time frame and the capital costs and consequent benefits of undertaking a national thermal upgrading programme considered within a single accounting system, then the picture would change dramatically. Improving the national average thermal efficiency by 30 per cent would have a profound impact on the worst cases. For example:

1. The problem of fuel poverty and its impact on benefits would be progressively eliminated.

2. Health services costs attributed to bad housing would be virtually eliminated.

3. In employment terms, one new job is created for every pounds 35,000 spent on the retrofitting system.

4. In addition, there is the re-spend factor. The European Commission estimates that at least one extra job is created for every new full-time job in construction, resulting in a substantial switch from an unemployment cost burden to income from tax and National Insurance.

In due course it will be possible to monetise the physical and atmospheric damage caused by the burning of fossil fuels, 30 per cent of which is attributable to housing. For the moment, a target of 30 per cent overall reduction in the carbon dioxide emissions due to housing must be seen as an aspect of the "precautionary principle" alleged to be government policy.

A unitary capital-cost/revenue-benefit approach to policy on housing would show that a radical national retrofit programme for housing would yield a net benefit to the Exchequer over a 10-year timescale. This approach to accounting would release a whole range of other possibilities without damaging the bottom line. It might even liberate us from an idiotic system which will show that the Sea Empress disaster has contributed to GDP on account of the clean-up operation.

Professor Peter F Smith

Director

Sustainable Building Network

University of Sheffield