by William Rees-Mogg: This
Is Not a Scandal — It’s aRevolution
are good at facing reality, when their Government is courageous
enough to spell out the dangers. Nothing undermines confidence more
rapidly than refusal to face the facts.
The key economic
facts now include the rise in unemployment to almost
2.5million and the forecast, based on Treasury figures, that public
expenditure will have to be cut by 9.3 per cent over the next four
years. The cuts may have to be even larger and may have to go on
of rising unemployment and the need to cut spending is disturbing.
has been fighting the 2008 recession with Keynesian policies.
was the brilliant Thirties Cambridge economist who advocated increases
in government spending and higher borrowing as the way to fight
recession and unemployment.
cuts in government spending will have the opposite effect; they
will tend to raise the level of unemployment. Prime Minister Gordon
Brown is himself a Keynesian big spender, and has claimed credit
for injecting huge sums of money into the British economy.
may already have injected too much extra money. Even apart from
this year’s projected spending, he increased spending by more than
six per cent in real terms in three of the five years between 1999
years helped the Labour Party win the General Elections of 2001
and 2005, but the increases were far larger than the growth of British
productivity or the economy would have justified. Britain was already
overspent before the beginning of the banking crisis.
The total overspend
in the years before 2005 was at least as large as the cutbacks the
Treasury is now forecasting for the years after 2010.
When he was
first Chancellor of the Exchequer, Brown used to boast he was ‘prudent’.
We can now
see he was prudent so long as he was sticking to the spending plans
of Kenneth Clarke, his Conservative predecessor at the Treasury.
After 2000, Brown built up the overspending which now has to be
claimed last week that Brown misled the country and the House of
Commons about the need for cuts. As Tory leader David Cameron put
it: ‘Wednesday after Wednesday, the Prime Minister stood up in the
House of Commons and repeated the line that the coming battle was
between Labour investment on the one hand and Tory cuts on the other.
All these words have now turned to dust.’
Rees-Mogg is former editor-in-chief for The Times and a member
of the House of Lords. He has been credited with accurately forecasting
glasnost and the fall of the Berlin Wall — as well as the 1987 crash.
His political commentary appears in The Times every Monday.
His financial insights can only be found in the Fleet Street
Letter, the UK’s longest-running investment newsletter.