If John Maynard Keynes were alive today, he would be appalled at the disastrous state of our public finances. He is loved and hated in equal measure as the man who made pump-priming during downturns intellectually respectable. But nothing he ever wrote could be used to justify the scandalous mess in which Gordon Brown has landed Britain.
Not only has Keynes been body-snatched by advocates of big state spending, but he finds himself in the battleground for the next general election. At Labour’s conference next week, the Prime Minister will say that Labour must be re-elected precisely because it will cut spending by less than the Tories. David Cameron’s attempt to reduce the fiscal deficit more quickly, he will argue, will tip the economy into a new recession. This will be Labour’s war-cry from now on.
Mr Brown’s agenda is fairly straight-forward. Next year, according to the OECD, state spending in Britain will reach 55 per cent of national income — up from 38 per cent ten years ago. This crucial statistic has been largely overlooked; yet it demonstrates that almost an extra fifth of our economy has come under state control on Labour’s watch. It is, from Brown’s perspective, a major accomplishment. It has reshaped the British economy in the mould of traditionally socialist states like France and Sweden.
So should spending stay at such levels, as Labour suggests? Or should more radical action be taken? Let us consider Brown’s main claim: that Britain would fall back into recession if the Tories were to cut state spending at a faster rate than Labour intends.
There is, of course, a risk that this will happen. But there is a far greater chance of a new recession — one just as violent as last year’s crisis — if spending is kept at current levels.
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