Letter: Out of the air

Letter: Out of the air

Sir: One of the reasons given for the decision to privatise the National Air Traffic Services is that it is the only way to finance the necessary capital expenditure (perhaps pounds 1bn over the next few years) that Nats needs ("Safety fears over air traffic sell-off", 28 July).

This reason is specious. An analysis of the public finances to 2003/04, as contained in the March 1999 Treasury Red Book, suggests that the Treasury could easily finance pounds 1bn Nats capital expenditure without breaching the Treasury's own borrowing rules.

The Treasury operates two borrowing rules. It can only borrow to finance capital expenditure, and not current expenditure; and it seeks to ensure that net public sector debt at any time is below 40 per cent of GDP. Treasury figures show that in the five years to 2003/04 the Government could borrow an extra pounds 50bn without breaching those rules. The Treasury would only have to borrow half this additional amount to finance the Nats capital expenditure of pounds 1bn, together with the proposed PFI capital expenditure over the same period (around pounds 17bn) and the pounds 7bn public-private partnership proposed for the London Underground.

Thanks to the prudent stewardship of public finances by the Chancellor, the public sector has sufficient firepower to finance public sector capital projects in its own right - if it so wishes.

MAURICE FITZPATRICK

Head of Economics

Chantrey Vellacott DFK

London WC1