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Alistair Darling’s proposed spending spree on bringing forward major capital projects suggests the government is prepared to sacrifice the economy’s long-term interests for short-term political gain.

Anthony Hilton rightly points out the sums involved are too small to save us from recession. Yet they are significant in terms of the budget deficit. As the public accounts slide even further into the red, private investment will be crowded out and before long taxes will have to rise to pay for the Chancellor’s largesse. These effects will delay the private sector’s recovery and threaten to make the current slowdown more like the prolonged Japanese slump of the Nineties than the short, sharp adjustment experienced by the UK in 1981.

Only private enterprise can lead the economy out of recession. Rather than increase government spending, the Chancellor should focus on making life easier for British business.

There needs to be a huge bonfire of red tape to lower costs. Burdensome new environmental and employment laws should be abandoned and the minimum wage scrapped to address rising unemployment. Given the perilous state of the public finances, radical deregulation is now the only practical option.

Letter by Richard Wellings published in the Evening Standard on 23 October 2008.

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Director

Richard Wellings was educated at Oxford and the London School of Economics, completing a PhD on transport and environmental policy at the latter in 2004. He joined the Institute in 2006 as Deputy Editorial Director. Richard is the author, co-author or editor of several papers, books and reports, including Towards Better Transport (Policy Exchange, 2008), A Beginner’s Guide to Liberty (Adam Smith Institute, 2009), High Speed 2: The Next Government Project Disaster? (IEA , 2011) and Which Road Ahead - Government or Market? (IEA, 2012). He is a Senior Fellow of the Cobden Centre and the Economic Policy Centre.

6 thoughts on “A Keynesian spending spree won’t lead the economy out of recession”

  1. Posted 27/10/2008 at 10:39 | Permalink

    It is necessary to have a balance between short term and long term goals. Short term Keynesian spending is needed to work in parallel with ‘radical deregulation’. At a time of low confidence, it is essential that the government intervenes, to improve the flow of liquidity and encourage firms to invest into their business plans to revive the economy. Further deregulation is required to ensure long term benefits. However,abandoning the minimum wage may cause market failure in terms of inequality.

  2. Posted 27/10/2008 at 10:39 | Permalink

    It is necessary to have a balance between short term and long term goals. Short term Keynesian spending is needed to work in parallel with ‘radical deregulation’. At a time of low confidence, it is essential that the government intervenes, to improve the flow of liquidity and encourage firms to invest into their business plans to revive the economy. Further deregulation is required to ensure long term benefits. However,abandoning the minimum wage may cause market failure in terms of inequality.

  3. Posted 27/10/2008 at 13:27 | Permalink

    Dear Sirs, a good part of the regulatory apparatus in place owes it existence to dictatorial EU diktat. The sort of thing Britain’s political elite denies. They would rather bankrupt the country than change their minds over membership of this fraudulent anti-democratic organisation. We are in for a poor future.

  4. Posted 27/10/2008 at 13:27 | Permalink

    Dear Sirs, a good part of the regulatory apparatus in place owes it existence to dictatorial EU diktat. The sort of thing Britain’s political elite denies. They would rather bankrupt the country than change their minds over membership of this fraudulent anti-democratic organisation. We are in for a poor future.

  5. Posted 06/11/2008 at 20:04 | Permalink

    When will we re-learn that markets regulate themselves best, with light touch from government? Government never can pick winners (recall A.Benn Esq!). As someone who served on a National Regulatory body for nearly four years and who has seen the inside and how it doesn’t contribute save to raise costs, curb innovation, and ignore realities from the consumer’s point of view, I know of which I speak.

  6. Posted 06/11/2008 at 20:04 | Permalink

    When will we re-learn that markets regulate themselves best, with light touch from government? Government never can pick winners (recall A.Benn Esq!). As someone who served on a National Regulatory body for nearly four years and who has seen the inside and how it doesn’t contribute save to raise costs, curb innovation, and ignore realities from the consumer’s point of view, I know of which I speak.

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