Let’s borrow more to cut borrowing!

Past Labour governments have ended with a sterling crisis and a borrowing headache. It looks as if this one wants history to repeat itself.

Today we are to be told that the government needs to spend and borrow more to help us out of recession. It is curious, when we are also told that we are in the current mess because we have borrowed too much. This crisis came about because the Western Central banks and regulators decided to call time on too much lending. It’s a topsy turvy world.

So let’s get this straight. The government wants the private sector to lend and borrow much less, because it has overdone it. Once the effects of reducing borrowing come through, the government will then borrow more on our behalf. They will use the cash they borrow to prop up private sector companies and banks that have suffered from withdrawing the private borrowing, and to replace the activity and jobs which the private sector used to provide, with public sector ones. Anyone left in a productive job or with savings will have to pay more in tax to pay the interest and meet the repayments on the much enlarged government debt.

In the meantime many people who had worked hard and saved a lot will see the value of their pension savings, their homes and their businesses smashed. Some will be changed from being independent and successful to being bankrupt or unemployed, and dependent on the state. No longer able to live off their work or their savings, they will live off benefits.

Can someone explain to me why this is progress?

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8 Comments

  1. figurewizard
    Posted October 27, 2008 at 10:50 am | Permalink

    The bit about progress ought to be towards a Conservative government and at times like these it is the voice of the shadow Chancellor of the Exchequer which would be of the greatest interest to the voters. Vince Cable apart this appears to be sadly muted at present however.

  2. oldtimer
    Posted October 27, 2008 at 11:14 am | Permalink

    I am sure you know this better than me. It is not about progress but about politics – Brown preparing the ground for the next election. In his narrative, more government spending is an unalloyed good and Tory spending cuts are an unalloyed bad (cue refrain "hospitals closed" etc etc).

    Japan fell into the extra government spending trap in the 1990s with numerous wasteful and useless public spending projects. These failed to revive the Japanese economy.

    I agree with you that ways should be found to cut future spending plans and commitments in order to curtail the growth of borrowing. But if government borrowing is going to go up, it would be better employed funding tax cuts which promote economic activity across the economy.

  3. AEG
    Posted October 27, 2008 at 11:24 am | Permalink

    The pound is crashing, and the FTSE seems to be in free-fall. Brown is pledging to borrow more as the 'responsible' thing to do, when a fortnight ago he declared that the problem was that everyone was borrowing irresponsibly.

    I'm 22, so too young to remember anything to do with John Majors government, let alone anything before, that, but why does no one seem to care? I don't really care what Mandleson/Osbourne got up to, as no-one has actually done anything, let alone done anything wrong. As far as I'm aware, the FTSE seems to have gone from c.6600 to c.3700 in a year, most of which happened in the last month or so, and no-one's batted an eyelid.

    Why?

    • APL
      Posted October 27, 2008 at 2:35 pm | Permalink

      AEG: " but why does no one seem to care? "

      Oh we do care. Many people are furious!

      Perhaps, what you mean is, why does none of the politicians seem to care?

      Because the politicians in the UK are part of a confidence trick, a lie and a deception. Not one of them, not Brown, not Darling, not Cameron nor his sidekick Osbourne are willing to do anything about the problem, because to do so would involve telling the truth about the status of the United Kingdom and its freedom to act.

      We as a nation are trussed up and delivered to the European Union. Brown, Cameron et al, are happy to pay £10 billion per year of our taxes to get someone else to do THEIR job for them. Then one or other of them swank around pretending to govern the country.

      Meanwhile they run off cap in hand to this or that international buisness man to prostitute themselves and their country for a few pennies to keep their revolting parties in buisness.

      Curly: "Why cannot they formulate policies that would leave more money in my pocket, so that I can decide how and where to spend it?"

      They can't formulate policies because they have abdicated control!

      Neil Craig: "To do really well government should also cut the regulations that massively increase the cost of business, particularly in the building sector."

      Cut regulations? Go on how are they going to do that? By what authority??

  4. Curly
    Posted October 27, 2008 at 11:50 am | Permalink

    Why cannot they formulate policies that would leave more money in my pocket, so that I can decide how and where to spend it?

    They seem happier to lumber huge amounts of debt on to future generations making the green shoots of recovery fight harder to get their heads above the tumbleweed of public debt.

  5. Neil Craig
    Posted October 27, 2008 at 1:33 pm | Permalink

    A recession is where resources that are in less productive institutions are shaken out until you get to the stage where the remaining businesses average fairly productive. The problem is that the least productive user of resources is government & yet it is growing. The way out of the recession would therefore be for government to do more shrinking than the economy – the moreso the faster we get through it.

    To do really well government should also cut the regulations that massively increase the cost of business, particularly in the building sector.

  6. Stuart Fairney
    Posted October 27, 2008 at 4:44 pm | Permalink

    The problem if I may be so bold is big government. They are wedded to it and utterly incapable, both emotionally and intellectually, of considering any solution that does not have the government's fingerprints all over it. Thus disaster looms.

  7. mikestallard
    Posted October 27, 2008 at 9:33 pm | Permalink

    I am one of those with family savings in the bank……
    My dear old wife thinks they are safe. I try and try to explain inflation to her, but she just cannot see it. "Surely", she says, "£2,000 income per year is still £2,000?" Bless.
    This is the woman who, when we were in debt to the tune of a thousand or so with zero (and I mean zero) equity, coped by going from bank to bank until she found one that was constructive and helpful (Nationwide).
    There are gong to be a lot of people like us over the next few years unless Mr Brown has a Damascus Road experience.
    You see, the key time for us in the 21st century will be in fact the 1970s. I was stealing school food for my family, cycling 4 miles to work, sitting in the dark when the lights went out and reading of doom and gloom in the papers.
    "Crisis? What Crisis?"

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