The Economy

Keynes himself argued that we need to save in the good times or, as JFK on the left put it, we need to fix the roof when the sun is shining. That argument has no foundation in economic theory or experience. I have a second argument that I want to challenge. It was put this morning by the shadow Chancellor in The Times. He said:"““The argument is whether it is better to be borrowing billions more… or whether action now to get our economy moving will get more people into work paying tax and help to get the deficit down in a fairer way.””" I could not agree with him more. It is better to be taking action now to get our economy moving rather than borrowing billions more, which is the policy of the Labour party. Their position, therefore, is illogical. Their argument is that borrowing is going up. However, the shadow Chancellor was forced to admit after an intervention that borrowing is falling; it is lower this year than last year and it was lower last year than the year before under Labour. It is falling in the OBR's forecast every year. Labour members may smile, but when their argument is inconsistent with the truth, they know that they are on weak territory. My final argument concerns the idea that low interest rates are a bad idea. The shadow Chancellor holds both that borrowing is good and that higher interest rates would be better because he has said that low interest rates ““are a failure””. I put it to all Members in this House to ask their mortgage-holding constituents and their small businesses whether that is the case. The only conclusion I can come to is that the reason they hold this position is purely political so that they can oppose the cuts.