We have become used to dealing in £billions since the onset of the banking crisis. With the economy facing such a dire economic outlook, there is a sense that many more £billions should be thrown at the problem – but the danger is that, in our desperation for a solution, we rush headlong into potentially more destabilising circumstances.
The UK is in a particularly tricky situation, with the European Commission expecting our deficit to deteriorate to 6.5% in 2010 (the second highest borrowing forecast among the 27 member states), and the Financial Times reporting a probable rise in public borrowing to £120bn. This causes a problem with regard to credibility: will the stimulus be reversed to put the government’s house back in order?
If so – and the Treasury has so far hinted that tax cuts will indeed only be temporary – then the taxpayer is more likely to save the handout, neutralising the expansionary impact.

Britain’s best politics newsletters
You get two free articles each week when you sign up to The Spectator’s emails.
Already a subscriber? Log in
Comments
Join the debate for just $5 for 3 months
Be part of the conversation with other Spectator readers by getting your first three months for $5.
UNLOCK ACCESS Just $5 for 3 monthsAlready a subscriber? Log in