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26-10-2008, 06:04 PM
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| Darling spending plan 'misguided' The government's plan to spend its way out of the looming recession is "misguided and discredited", say leading economists. Chancellor Alistair Darling wants to bring forward spending on key state-funded projects to kick-start economic recovery. But a group of 16 economists say it risks damaging private sector recovery. In a letter to the Sunday Telegraph, the group of economists criticised the policy. The signatories of the letter include Trevor Williams, chief economist at Lloyds TSB Corporate Markets, and chief economist to the Ernst & Young ITEM Club, Peter Spencer. "We would like to dissent from the attempt to use a public works programme to spend the country's way out of recession," they wrote. "It is misguided for the government to believe that it knows how much specific sectors of the economy need to shrink and which will shrink 'too rapidly' in a recession. "Thus the government cannot know how to use an expansion in expenditure that would not risk seriously misallocating resources." They added that public expenditure had already increased rapidly in recent years and that the state may become so dominant that it would "stunt the private sector's recovery once recession is past". To managing the slowdown, "the best tools are monetary and not fiscal ones" they said. Meanwhile entrepreneur and cross-bench peer, Lord Bilimoria, also expressed concerns about the implications of the policy on taxation. "I think part of the problems we've got now have been caused by the government over the past ten years having spent far too much and not having enough for a rainy day now," he told on The World This Weekend, on BBC Radio Four "So I really do believe that there isn't much room for the government and with all this extra borrowing that it's having to take, there is a scare that taxation is going to go up even higher." Public borrowing was a record £37.6bn between April and September, official figures show - greater than the whole of the previous financial year. BBC NEWS | Business | Darling spending plan 'misguided' Is spending our way out of recession really the answer ?
__________________ The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries - Winston Churchill      |
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