Magazine article Public Finance

Economists Query Darling's Recession Plans

Magazine article Public Finance

Economists Query Darling's Recession Plans

Article excerpt

The government s abandonment of its fiscal rules and new readiness to borrow have prompted questions from economists, as new figures showed a year-on-year fall in the UK's gross domestic product.

Chancellor Alistair Darling's adoption of Keynesian economics also came under fire from the Conservatives, with shadow chancellor George Osborne outlining their strategy for the economy.

GDP estimates released by the National Institute for Economic and Social Research on November 6 showed that output fell by 0.5% in the three months ending in October.

NIESR said: 'It means that the output level in October is now below the level of October 2007 although the figures for individual months are inevitably volatile. This is the first time that this has happened since the 1990 recession.'

Darling signalled a new readiness to borrow and the scrapping of the government's fiscal rules - which had set a ceiling for debt at 40% of GDP - in his Mais lecture last month. He had earlier suggested that planned public sector capital projects could be 'brought forward' to help boost the economy.

But the chancellor has provided scant detail of his plans ahead of the Pre-Budget Report. Jonathan Loynes, chief European economist at analyst firm Capital Economics, said the government had a choice about where money raised by rising borrowing would go, although it seemed to be 'leaning towards' boosting public spending rather than cutting taxes.

Bringing forward planned capital projects would have 'some appeal' because it was capital rather than current expenditure, Loynes said. …

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