The Independent’s Hamish McRae – who’s been on the money more often than most commentators during this downturn – today outlines the reasons to be wary of a Government spending boom in the PBR. They’re worth quoting in full:
“The first is international. Trust is vital and there is a danger of a systemic loss of confidence in British financial management. Already sterling has fallen by as much as it did in 1992 when it was ejected from the ERM. We are going into this downturn with an exceptionally high budget deficit of around 4 per cent of GDP and that could rise to 6 per cent or more in the next financial year. It is plausible that the deficit could be even greater proportionately than the deficit run up by the Tories in the early 1990s.
The money has to be borrowed from the international financial community – there are not enough savings in Britain to do it.
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