What to make of Darling's spending spree?

CPowell

It won't work anymore than Government spending until now has worked. All it will mean is more waste and more taxes and more debt and more inflation. Just what we all need.....

Worried of Windsor

Simple. Redefine current public spending excesses as a Keynesian cash injection.

Next?

TrevorsDen

There is already a lot of spending(Olympics, Cross rail etc and gawd knows what else) in the pipeline so ...
Will this be significant?
Will the resources( the planing and the design resources as well) be there to carry out the work, will it make sense in terms of programming?
Will the jobs - needed quickly 'out of sequence' not simply come from more immigration again (and this after the recent anti immigration propaganda?)

Somehow all of this will - as you hint - have to be paid for.

What we have in fact is
a - propaganda to pretend that something is being done
and
b - IF extra spending can indeed be 'brought forward' - this is in itself a fig leaf to cover just plain unfunded spending to cover up the problem with the consequences left to go hang.

And consequences --- the poiund??

Maybe Cameron's first question to Brown (if he turns up this week) should be
"Does the Prime Minister have an exchange rate policy?"

roadrunner

This seems to be about wrecking any chance the tories have after the next election,typical Labour strategy,beggar the country as long as the tories suffer.

Forlornehope

Given Britain's very democratic, and therefore slow, planning system, any capital projects will only start to have an effect when the economy is already turning back up. It would be much better to give the money back to people and businesses to spend now by cutting taxes. He could do that tomorrow.

Prodicus

'...a significant reduction in future spending projection'?

Gee - you don't say. All part of a scorched earth SOP, surely?

Peter Wilson

Seems to me that Labour are beginning their economic 'scorched earth' policy for the likely incoming Conservative Government

Liz Brown

i feel desperately for our children and grandchildren - the real victims of this ghastly Government
The guilliotine is too good for them

Outer Circle

There is a lot waffle that Japan failed because it dithered. If you dig deep you will find that this is bogus and just spin. Japan threw in the kitchen-sink but the consumers had just gone to crazy in the mother of all bubbles. Britain has just had its biggest bubble in history. It may not be as insane as Japan's, but it was still epic. Brit consumers are tapped out debt junkies. The service sector is 73% of the UK economy. We have had a false economy based on a debt fuelled binge. There will be immense demand destruction as the "bad" money is killed off. The attempt to inflate the debt junkies will fail because they can't take any more debt - they are fried.

We are heading into a depression which needs to happen to rebalance the economy.

Savings will increase and investement will go into "REAL" businesses, not house flipping and home improvements.

The politicians will fight this because it is not a vote winner. This time gravity is just too strong and the debt deflation so immense that the forces cannot be manipulated.

The age of fake:- fake handbags, fake watches, fake money. The age of fake money is dead. Unless you want hyper-inlfation, the UK will have to live within its means.

Let's hope the current lunatics in the asylum don't go down this road.

The market will vote and dump the pound if it sniffs this. I'm betting the pound collapses.

The lunatics have just given us the greatest bubble and cannot be trusted.

Sound as pound?

Ian C

This sounds like a valid deployment of a national budget - until we factor in the politics of it.

Any gov't doing this is going to be doing it to save its own bacon first and ours last. So however plausible the cause, we cannot trust the execution of it.

Of course, this will have no effect unless and until the banks write of their toxic mortgage books, per the Japanese example.

There is the surreal belief that the current bank re-capitalisation package is an alternative to that requirement. It is not. All it does is make sure they can write off the sum of what they have injected. But they are being told to lend it at 1997 levels - so instead it will extend the crisis long into the future. So shares are plummeting in spite of the re-capitalsiation, because it does not address the fundamentals and we now have political direction of the banking capacity.

A must read for all is in Saturday's WSJ Online "Bernanke is fighting the last war" an interview with Anna Schwartz - Milton Friedmans co-author of 'Monetary History of the United States'.

Drew

Scorched Earth starts here.

pete D

Great opportunity for the Tories to put our money where their mouths are.

Oppose the increase is debt - slash wasteful spending and hold taxes as they are.

mac

Smoke and mirrors. Darling confirms that the Trident replacement, Crossrail and the new carriers will proceed. But they can be cancelled (remember TSR and CVA01) or spun out over a longer term. Such projects aren't uppermost in the thoughts of Piety Brown's 'hard-working families of Britain', but cancelling them would offend powerful interests, not least the Olympics 2012 crowd and British Aerospace.

I'm waiting to see just what shameless bribes are offered in the public sector to buy off the unions and the bloated New Labour state workforce. Funny old thing, I bet one or two juicy ones are trailed a day or two before the Glenrothes by-election.

O/T: Incidentally, Brown and his spinners must've been mortified at the media coverage of Bush, Sarkozy and Barroso discussing a new world financial order - how could they, without the colossus of Kirkcaldy there to guide them?

John Page

1. Wasn't it James Callaghan who admitted that Keynesian spending boosts didn't work any more?

2. The huge borrowings would be for a future government to deal with - and who might that be? It might be a good election to lose.

3. How fast could extra capital spending kick in?

4. If you're going to increase the deficit, why not do it by raising the basic income tax allowance? People face hard times, and that what the oppositions should be telling government to do.

5. However, this would mean your Tories having a definite policy!

Trumpeter Lanfried

The present crisis was precipitated by over-spending. The government's remedy? Spend more. They have learned nothing and forgotten nothing.

Of course, if you are going for a scorched earth policy it's not a bad idea to throw petrol on to the flames.

Rover

Two moments of pure theatre from Alastair Campbell.

1) Appoint Phil Woolas because he will get the commentariat chattering and make it look as if something can be done about immigration (under EU and Human Wrongs Act law, it can't).

2) Tell the country you'll save it from recession by spending. You can't spend your way out of a recession. Just ask Jim Callaghan.

All this is about is scorched earth. When the Conservatives finally have to wield the axe Labour will use the levels of cuts to say: 'oh look how wicked they are' even though it was they who added all this to the taxpayer budget.

It's the same with the finance meetings being held in 'war rooms'.

All of this is pure political theatre that Campbell and Mandelson have spent a lifetime honing their skills on.

Pathetic.

WINSTON SMITH

Just looking at the DARLING FACE says to me he hasn't a clue.
I could write several pages why it will not work .

Michael

Reinstate the 10% tax band. Order the Inland Revenue to pay up on Jan 1st. Cancel their Christmas break and make us all feel better

RobertD

Basic economic theory. The volume of economic activity times the price level EQUALS the stock of money times the velocity of circulation of money.

The credit crunch has drastcially reduced the velocity of circulation of money by destroying many of the instruments that have been invented to make each unit of money stock support more activity.

To prevent a collapse goverments have created a vast increase in the stock of money and mechanisms to increase the velocity with new instuments (T bond for toxic debt swaps etc).

However once the banking system get back to normal and velocity picks up again, then unless governments have effective plans to reduce money stocks, the outcome will be an increase in the rate of inflation. Getting involved in long term infrastructure projects is the sort of process that makes it difficult for the government to change rapidly, and will generate increased demand for labour and materials just when demand from the rest of the economy picks up.

Probable result - substantial increase in inflation from 2011 onwards, and another decade long battle to get it back under control.

West Brom Blog

John , yes it was Jim Callahan in '76.

"We used to think you could spend your way out of recession by boosting government spending. I tell you, in all candour, that option no longer exists. And in so far as it did exist, it only worked on each occasion since the war by injecting a bigger dose of inflation into the economy, followed by higher unemployment as the next step…"

Of course back then Darling and Brown were the firebrand socialists shouting him down.

Sterence

"You will see us switching our spending priorities to areas that make a difference", Darling apparently said to the Sunday Telegraph.
At last an admission of how pointlessly they have been spending our money up to now.

Martin C

So. When times were good and global economic conditions benign, Labour used the opportunity to increase tax revenue and fund a large increase in spending in the public sector. But now times are bad, tax revenues are dwindling at the same time as unavoidable expenses (benefit payments, jobless totals etc) are increasing. So the solution is: wow! a large increase in spending in the public sector.
The economic climate has drastically changed over the last year or so. However this government's game plan has only one tactic, applicable to all circumstances: Spend.
I probably wont be around to pick up the tab. But my children will be.

Minnie Ovens

Brown has left Atlanta burning and is now moving towards the sea.