Vast spending pledges by Tory and Labour parties show how worried they are about Brexit.
“Neither a borrower nor a lender be.” Clearly in a modern capitalist economy, those words – fatherly advice from Polonius to his son in Hamlet – are no longer taken quite so seriously. Borrowing to buy a house or a car or to invest in a money-making venture is a reasonable thing to do. However, Shakespeare’s adept turn of phrase perhaps can still act as a warning against the dangers of borrowing too much.
Shadow Chancellor John McDonnell’s pledge of government investment “on a scale never seen before in this country” was to be expected, given the current Labour leadership is the most left-wing since Michael Foot in the early 1980s. If elected, Labour plans to spend £150 billion over the next five years on a ‘social transformation’ plus £250bn on a green transformation over ten years. These are eye-watering sums.
Chancellor Sajid Javid’s response was also typical, as he accused Labour of “fantasy economics” and wanting to “spray money round like confetti”.
However this message was somewhat undermined when he announced changes to state borrowing rules to allow some £100bn of extra spending over five years – and then adding “you could easily add another £100bn to that”. Well, if that’s “easy”, why not just push the boat out a bit more, make it £200bn instead?
It feels like the UK’s two largest parties are panicking at the economic damage that Brexit is expected to inflict and have decided it must be offset with a vast stimulus package. Labour has considerable ambitions beyond staving off a recession, so their sum is higher.
The one good thing that can be said about borrowing is that interest rates are currently low. But, still, a country with a large national debt will be at greater risk of running into serious trouble in the event of major global economic problems that some fear are on the horizon.
This again begs the question, should we really be going ahead with Brexit? And, if we are to do so, shouldn’t we double-check that the ‘will of the people’ is still the same as three-and-a-half years ago and the stark fiscal realities of Brexit have not encouraged a rethink?
According to the Liberal Democrats, staying in the EU would deliver a £50bn “Remain bonus”. Even if that is an over-estimate, it’s pretty clear where our best economic interests lie.
Hamlet is a tragedy in part because of the main character’s bad decisions. Fingers crossed Brexit ends less badly.