Chancellor Sajid Javid’s approach to the spending review is in danger of stopping the Boris-inspired Tory revival in its tracks. The Chancellor needs to think more like an entrepreneur and less like he’s a newly-wed on a tight income.
He intends to stick to the current spending rule that the annual deficit should not exceed 2 per cent of GDP in 2020-21 and plans to reduce total government debt as a proportion of national income. There is to be extra money for the police, health and education but other areas will continue to face strict controls. He likes to compare government spending with household expenditure. As every household knows, he says, it is necessary to make choices and choose priorities, but his homely analogy is irrelevant. It is just plain bad economics.
Entrepreneurs do not fix their borrowing as a percentage of sales revenue.
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