Sunday, 16 September 2012

Labour continues to invoke Keynes

Tristram Hunt, historian and Labour MP for Stoke-on-Trent Central since 2010, called for a Keynesian approach to the economy on "The Week in Westminster" last Saturday. It should be pointed out that Dr Hunt stood at the general election on a Labour manifesto which was marginally more austere than the course plotted by the coalition and that the Bank of England would no doubt claim that Quantitative Easing is a Keynesian measure.

He should also be aware, as a letter-writer* to the Independent put it: "Keynesianism is about cyclical deficit spending [...] governments should not run structural deficits, i.e. spending more than receipts during times of economic well-being. It is during such times of plenty that surpluses should be used to reduce the total debt and the size of the ongoing interest bill.

"It is precisely because Gordon Brown and Ed Balls ran a structural deficit between 2001 and the start of the recession in 2008, that the interest bill was already so large."

Peter Black draws attention to a CEBR study that predicts that personal recession will turn round in 2013. There are already signs this month in the form of unexpected council by-election Conservative gains from Independents, Liberal Democrats and even Labour, that some parts of the country are beginning to feel comfortable again. One hopes that chancellor George Osborne does not make the same mistake as Gordon Brown and indulge in a pre-election splurge, though there is no excuse for further raids on the social security budget.

*Steve Travis, Nottingham, Independent Letters 11th April 2011

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