A Sustainable Level

It seems that the Government is getting itself in a bit of a muddle over its new economic programme. Once again, the Chancellor of the Exchequer has strayed from the boundaries that his Prime Minister has laid out for his ministers, and has managed to get himself into a muddle, exposing the real ideological dilemma within New Labour.

Oh yes, the Keynesianism is still there. Alistair Darling is no doubt that borrowing is necessary to "support the wider economy", and, he reassures us, is sustainable:

"We can boost the economy only because we have built a foundation of sustainable public finances, because governments everywhere must live within their means, and I will ensure that we do this in the medium term."

Obviously, international investors disagree, hence the plummet in the value of sterling. However, as he carries on speaking, it becomes apparent that Darling isn't really sure if it's sustainable after all:

"People should be in no doubt that Government will take the decisions necessary, to ensure sustainability in the medium term. To return borrowing and debt to a sustainable level - once these shocks have worked through - just as we have in the past."

In the one instance, Darling is telling us that borrowing massive amounts is "sustainable" because Britain has a "foundation" of sound "public finances", but in the next instance tells us that after the recession has eased he will "return borrowing and debt to a sustainable level", meaning that they will have to become unsustainable beforehand. And what does he mean "in the past"? I thought Gordon Brown had abolished "boom and bust"?

So, we must reach the conclusion that Darling doesn't know what he's saying and has no idea what he's doing. Not a good position to be in when you're at the head of the world's fifth largest economy during a recession.

It could well be that Darling is confused because the Cabinet is confused, that it's caught between "priming the pump" with Keynesian public works, advocated by the more left-leaning ministers and those that see short-term electoral advantage; and the pragmatists, those that understand that, for all the socialist fantasies abound, the books do have to balance. Consequently, the Chancellor doesn't know what to do. He doesn't know whether he has to borrow all the money for these public works, raise taxes, or what.

Or maybe he's caught between being honest (the public finances are in dire shape) and toeing the party line (the public finances are fantastic), between reality and fantasy. Either way, it's not good for a British economy brushing dangerously close to the rocks.