Duncan’s Economic Blog

Public Spending

Posted in Uncategorized by duncanseconomicblog on September 8, 2009

I can only echo Don Paskini today.

Today’s opinion poll shows that most people want the government to spend more in real terms on health and education, every year.

Tomorrow, Labour ministers will announce plans to cut public spending in all areas, including health and education, and do more New Labour reform instead. These plans are seen as vital to Labour’s re-election campaign.

This leaves the Tories with the tough political choice between getting the credit for being prepared to spend more on health and international aid than Labour would, or having the political cover to drop those policies if they seem inconvenient. I bet they are quaking in their boots.

Let’s be clear a 12% odd deficit is not sustainable. But rushing into cuts as the ‘recession is over’, opens the door to a double dip recession. There will come a time to blance the budget, just not yet. And tax rises will play a part in that adjustment.

I stand by my prediction that this recovery will be shallow and driven by temporary factors. I also stand by my claim that quantitative  easing isn’t working.

In this environment the last thing we should be doing is outlining spending cuts.

The excellent blog ‘News from 1930’ has the following from this week 79 years ago:

Most economists agree business upturn close; peak in business was reached July 1929, so depression has lasted about 14 months. “Those who have faith and confidence in the country and its ability to come back will profit by their foresight. This has also been the case over the past half century.”

 Ironic is it not that Darling intends to use the Callaghan lecture to set out his stall? It was wrong to cut spending in 1976 and it’s still wrong to do it now.

One Response

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  1. charliemarks said, on September 8, 2009 at 9:47 pm

    By endorsing mass spending cuts, Darling has probably given up any chance the party might have had to win the next election. It won’t be easy to motivate activists or get the vote out if the pitch is “we’ll make things worse, but not as worse as the other lot.”


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