Brexit: Why Tory embrace of Keynes doubles down on historic gamble – leader comment
If the UK Government’s planned spending boost fails to have a significant effect, Brexit Britain may find itself with an ailing economy and huge debts.
An economic stimulus is a tactic that is sometimes used by governments, usually but not always on the political left, to ride out a recession.
As the total spending pledges announced at the Conservative party conference passed £50 billion yesterday, it seems the current Government has decided to embrace Keynesian economics with some gusto ahead of Brexit.
Chancellor Sajid Javid even announced the UK would become “the first major economy in the world to end low pay altogether” over the next five years, with the statutory National Living Wage rising by more than £2 to £10.50 an hour.
Labour voters in mind
It was a bold pledge – clearly with the votes of Labour Leave supporters in mind – that he may not be required to keep in the event that his assessment, or that of a future chancellor, of the country’s circumstances changes. Javid also promised a “significant economic policy response” to a no-deal Brexit, with speculation this meant tax cuts.
‘Tax and spend’ is usually used by those on the political right to decry the policies of the left. ‘Cut tax and spend’ – assuming the Government is actually serious about all this – is unsustainable and potentially reckless.
If it works, a stimulus may help the UK get through a deal Brexit and remove some of the sting of a no-deal Brexit. The idea is that increased public borrowing – implicit in any plan to cut taxes while increasing spending – is paid off once the economy recovers.
If it does not work, the UK could face the bleak prospect of an ailing economy saddled with huge debts.
A no-deal Brexit is a potentially catastrophic risk and one that The Scotsman does not believe is remotely worth taking. Attempting to spend our way out of it may reduce the immediate political fallout, but if things go wrong the damage will be all the greater.
The policy also increases the pressure to get new trade deals, a situation that those on the other side of the negotiating table will exploit to their advantage. Only yesterday, International Trade Secretary Liz Truss said she expected deals to be struck in months, rather than years. The UK is in a hurry, other nations can afford to take a bit more time.
As the Scottish Conservatives dropped their opposition to a no-deal Brexit and with no real signs of a deal, the UK is raising the stakes of this historic gamble. And gambling, as many know to their cost, is too often the road to ruin.