Date: 29 October 2008 12:39:46
The Chancellor is making a speech tonight about the government's need to spend responsibly to get us out of the coming recession. He wants to bring forward spending on public projects, such as schools and hospitals, as a way of alleviating the downturn.
This is a return to good old Keynesian economics from the 20's & 30's. To get out of the depression he suggested that government should spend, spend, spend; to a certain extent it worked - not just here but in Germany and America. However it did saddle us with a great debt that would need to be paid off later.
Unfortunately things got worse because of some unrecognised results - i.e. German rearmament and WW2. It took us until the very late 50's & early 60's to begin to recover; only for us to fall again in the 70's. It took Mrs T. and her policies to turn things around, though that caused other problems.
Since 1997 the public debt has risen from £500 per person to a staggering £3200 and now they want to spend more. This is officially declared debt and does not include spending on PFI initiatives, these don't appear on the government accounts. PFI debt is "off balance sheet" debt, the kind that led to the fall of Enron and Worldcom.
Is it really the right thing to do to spend further in the hope of heading off a deep recession? Is it prudent to keep spending money you don't have?
We have already found billions to bail out the banks, not that it's worked yet and may not do. Companies are finding it more and more difficult to find finance to keep the wheels moving. The loosening of credit constraints, promised as a boon of the rescue have not materialised. The exchange rate is dropping and dropping; the economy is beginning to slow very quickly - I know this from the amount of work coming our way; jobs are being lost and companies closinmg down their facalities - either going bust or moving to low cost alternatives.
If it was us we would be stopped by our bank. They wouldn't allow you to borrow and borrow and borrow without stop. Yet the government, under our "Prudent P.M.", have no problem with this. Unfortunately we'll be left to pay for this for many years to come. Maybe he's happy because he knows that it'll be someone else's problem after the next election.