The way out of a global crisis caused by excessive borrowing? Borrowing even more! Even those closest to Gordon Brown must see the horrible irony in his recently announced budget. In what the headlines have dubbed ‘Brown’s big gamble’, the Prime Minister has announced a 2.5% cut in VAT as well as an extra £4bn to spend on public works. In total this is said to have added £20bn to the UK’s national debt, the total of which, officially, will spiral to over 1 trillion pounds next year. And this figure does not account for much of the country’s debt in the form of PFI and various other ‘investments’ the Brown government keeps off the sheets. Even if we had been running a budget surplus and could now afford to borrow money, this sort of Keynesian economic approach is very much outdated and, quite simply, doesn’t work.
Part of being in a free market economy is accepting the consequences of failure, something Gordon Brown seems to have forgotten. Recessions are a natural part of the economic cycle and no amount of borrowing or spending is going to change that. What the government can and must do in a situation like this is to ensure confidence and make sure that businesses built to weather a downturn can continue to function as normal. Instead the former Chancellor intends to throw money we don’t have at a problem he can’t and shouldn’t solve.
Mr Brown’s transparent attempt to turn around his own political fortune rather than that of the country’s economy will do a lot to harm the current situation and nothing to help.
Brown has said that the extra money the country spends will be paid off by higher taxes in 2011, when the country will, he predicts, have come out of the recession. Yet he has provided little conclusive evidence that recovery will be so quick. The general consensus amongst economists is that the mid-point of the recession will fall at approximately this time and so Mr Brown has simply created a fiscal time-bomb ready to go off when the country is least in a position to cope with it.
With all these economic initiatives Mr Brown has managed to paint the Tories as the do nothing party, as if this is something to be scorned. By tampering with the already fragile economy, Brown is creating public debt of unprecedented levels, as well as allowing unemployment and inflation rise dramatically. Letting the recession take its course, while keeping inflation low and ensuring businesses are able to function, is the only responsible action to take in a situation like this.