Recession On The Never Never

It is, if anything, worse than we thought.

A government that has brought public finances to the brink of insolvency has shown that it is equally bankrupt of the ideas needed to aid recovery.

As George Osborne said today, even James Callaghan understood that a government cannot spend its way out of recession. In the space of six months our economic thinking has regressed 40 years. Not since the sixties has anyone seriously believed that increased government spending can help create the jobs to aid a recovery.

Government spending at times like this is not the answer because:
..a) it is usually poorly targeted and does not bring relief to the sectors of the economy that most need it;
,,b) it is horrendously expensive, in terms of cost per job created;
..c) projects take so long to get off the ground that by the time any job of note are created we’re coming out of recession anyway;
..d) the jobs that do get created are rarely permanent, or need sustained public expenditure to keep them alive.

It's not rocket science: cut public spending, cut taxes, let the market do the rest.

Instead, there is no recession in recent history which a government, by its actions, has not deepened or prolonged but this one now looks as of it's going to be one of the worst. The tax rises scheduled for 2011 will hit both individuals and companies just at the point when the upturn should be coming, and Darling’s plan will shut the door in our faces. The most insidious of those tax increases is the creation of a new top threshold of 45%, signalling once and for all the end of the Blair era and a return to the envious socialism that created the Brain Drain of the 1970s. Have no doubt what will happen to that top threshold if Labour stay in power.


Those tax increases, though, do not deliver us from a borrowing explosion not seen in generations. Even the BBC (in the shape of Hugh Pym) admits that the scale of government borrowing (optimistically) projected by the government is “staggering”. Not even Denis Healey ever got us into a hole like this one; 57% of national income in 2013/14, and not even an attempt to balance the books before 2016.

...Graphic nicked from the BBC, which will doubtless put me in the clink

Osborne today accused the Chancellor of addict-like behaviour in trying to borrow his way out of debt, but to call this “binge-borrowing” is to do a disservice to any Saturday night town centre reveller. If Darling did with alcohol what he’s doing with borrowing, he’d be dead.

The final kick in the balls is that for petrol, fags and alcohol the VAT cut is wholly offset by a rise in duty. And you can bet your willy that when VAT rises again, the duty increases will stay.