Tonight:
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Darling: We won’t spend our way out of recession
Paul Waugh, Deputy Political Editor29.10.08
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- Blog: Osborne hardens Tory line on recession
- Footsie and pound surge but all eyes on rate call in US
- London is best prepared of UK cities for recession
CHANCELLOR Alistair Darling will seek to reassure the City tonight that he will not go on a spending “splurge” to combat the recession.
Amid Tory claims that the Treasury has been spooked by the plunge in sterling, Mr Darling was set to declare that he will set out a clear path to bring borrowing back under control over the medium term.
He stressed that the Government did not want to increase spending overall, although projects could be brought forward to help in the downturn.
Mr Darling's words came after Gordon Brown and Tory leader David Cameron clashed bitterly over the economy.
Mr Cameron said that there was now a clear split between the Prime Minister's desire for a spending rise and the Chancellor's need to balance the public finances. He claimed Mr Darling was now “having to desperately back off” talk of a Keynesian-style boost for public spending.
The Chancellor was set to use his annual Mais lecture to Cass Business School to signal that Labour's fiscal rules will be changed to allow a temporary rise in borrowing. Mr Darling will say that to “apply these rules rigidly in today's changed conditions would be perverse”.
He will say: “We would have to take money out of the economy, exacerbating an already difficult situation. We must respond to the challenges and uncertainty we face today — supporting the economy now and maintaining public investment — while at the same time ensuring that we live within our means in the medium term.
“These are extraordinary times. The economy is facing unprecedented global shocks, and we need a new approach that is fit for these new times.”
Mr Darling will say that he believes in a “combination” of rules and discretion of governments to bend them.
He added that he would set out plans at the Pre-Budget Report “that demonstrate our commitment to keeping the public finances on a sustainable path”. He also hinted that inflation could go back up again over the longer term.
During Prime Minister's Questions, Mr Cameron was scathing about Mr Brown's claim in 1997 that “you cannot spend your way out of a recession”.
“Isn't the truth that you have been going around telling everyone you are the new John Maynard Keynes with your plan for a spending splurge,” Mr Cameron said.
“Meanwhile, the pound has fallen further than in any previous devaluation and the Chancellor is having desperately to back off.”
Reader views (6)
Ditherer & Darling are at it again, first it is we will spend ourselves out of recession, now it is we won't. What did these two clowns do look in the piggy bank and find it empty.
These Masters of the Universe don't know what to do so they are changing policy every day. Brown is no saviour he is a walking disaster and how people can believe this insincere arrogant Stalinist baffles me.
- Richard K, Nottingham
I wonder how stupid David Cameron feels when he looks at the exchange rate and the footsie this evening. Poor, foolish boy, perhaps he should ensure his brain is engaged before he operates his mouth.
- Val Daniels, Mijas Costa. Spain
...apart from the £37bn he has given to the banks. Oh, and the £60bn to cover the shortfall in tax revenue. But since Labour obviously don't know any basic maths or English, that isn't "spending" in the accepted sense, is it?
- Nobby Clark, Perth, Scotland
But last week he said he was?! Does anyone with Crash Gordon know how much damage they continue to cause to our British economy???
- Jacqueline, Hampstead, London
If the government came clean on its finances it would have to admit that it has already spent so much money on daft ideas that if it wanted to pay off the country's debts, each household would have to give £97,000. £97,000 per household. That's an awful lot of tax payments. For Darling to say he will not go on a spending splurge is the finest piece of terminological inexactitude ever spouted by our leaders. And, oh my, have they spouted some....
- John Problem, Hackney Wick, London, UK
When will the government start listening to robust advice? As John Molton (Alchemy Private Equity)said in a television interview recently, the government aren't listening right now. My own view is identical - I also gather that Standard Life advised them on the bank bail out package, an institution right at the very heart of the financial crisis. It beggars belief.
- Jon White, Wimbledon, UK
