It’s at times like these that demonstrate the colour and width of the water between the two main parties. The Chancellor is already talking about massive injections of public money into the economy. He reckons he can boost the “job creating industries” with tax-payers’ cash. David Cameron has cleverly anticipated this move by preaching the gospel of responsible finances (or Prudence by another name) and small but important measures to help cash-strapped small businesses. The difference could not be clearer – the Labour government still believes in Keynesian economics and believes that bringing spending forward will boost the economy now with money that can be paid back in the longer run, while the Tories believe that it is important to only spend what the government already has.
All this has happened before. Throughout the 1960s and 1970s, governments of both hues tried to avoid electoral defeat by pumping public money around the economy. Each time the economy faltered, up went the deficit to reflate things again. For those who have forgotten the lessons of that era a quick reminder: hyperinflation, economic stagnation, a huge decline relative to our industrial competitors, national bankruptcy, the IMF bail-out, strikes, the three-day week. We might also do well to remember how hard it was to get out of that vicious circle once we had become ensnared: Mrs Thatcher had to raise taxes, put interest rates through the roof and clamp down on public spending. The medicine was not pleasant. Have we really failed to learn those lessons?
Mr Darling also labours under another assumption: that public spending can get the engine restarted better than private spending. Instead of creating new jobs in the sectors he prefers, why not try and stave off mass redundancies in the first place? Why not help small businesses keep staff on? Economic pragmatists (like me) know that the private sector is better at allocating resources than the public sector. That means that a tax cut of a certain size will boost productivity more than a spending splurge of the same size. Also, can anyone tell me how “two aircraft carriers and a new nuclear deterrent” will boost the productivity and competitiveness of British industry? How is that going to be more effective than paying people to dig holes and then fill them in again? If we are to have a deliberate expansion of the deficit, it should be used to slash business taxes and fund a large increase in the income tax thresholds. If we are to have a construction splurge why not build prisons and train lines – two things this country is crying out for?
The Labour party has spent its time in office claiming to have been taking “hard” decisions and planning for the “long term”. The policies it is outlining currently are nothing but a short-term binge in a desperate attempt to make us feel like things are a bit better in time for the next election, whenever that might be.
PS It wasn’t very long ago that the government was so sure that public sector pay-rises were about to wreck the economy that it stamped hard down on frontline workers such as coppers and nurses. Have things really changed that much since last year?
“It must be time to call in the cavalry.”
Better not. The way things are going, we’ll get these guys…
Nu Lab don’t want prisons.
Pretty much my point, EK. The government *could* spend money on things we really need, but instead it will take the opportunity to buy things *it* wants.
It takes a special kind of stupidity to fail to realise that injecting into the economy cash that you have just removed from the same economy via taxation or government borrowing is not going to help.
It takes a special kind of arrogance to believe that, after the inevitable deductions to fund the administrators who remove the cash from the economy, you will spend that lesser amount more wisely than the original owners of the whole.
Yet both are on display, so I guess Brown and Darling have indeed learnt nothing from the 60s, 70s and 80s. So, sadly, it looks as if once again Labour will screw up the economy, leaving the Tories to fix it and take the blame.
It had never occurred to me to ask where the money is to be borrowed FROM. Unless it’s from abroad, it will be borrowed from people who might otherwise have invested it or spent it on other, possibly better, things.
They can borrow borrow borrow, knowing that the Conservatives will be picking up the tab and not them.
A piece on what should we get for our money
Build electricity generating capacity
Free Re-training to grad level, in science subjects
New school facilities
Re open coal mines.
Build oil/gas storage capacity for 150 days each. Were some of the best comments.
But many people were commenting on what we should STOP or CHANGE or ABOLISH.
Sadly that sort of thing could only be realised with a change of administration. They are Tory, smaller tax, smaller state policies and Gordon Brown would be as likely to implement, say,an end to regional assemblies as he would be to announce his retirement.
Am watching the last ever episode of The Wire tonight, so post away!
What will I do now?
Good question. I have been putting off answering it. Once you’ve seen the whole of the best series ever made, what is left to watch? I think I might get rid of my telly and save the licence fee.