Deputy Prime Minister Nick Clegg said rather a lot of nonsensical things in his speech to the Liberal Democrat party conference, but perhaps most nonsensical is his claim that the Government simply does not have the money for spending ("Clegg rules out further breaks for millionaires", The Herald, September 28).
This might be true if we were enjoying full employment and the Government could only use resources by taking them from the private sector, something that requires tax revenue if it is to be sustainable.
But we have resources being unused and are in the middle of a recession. I have heard it remarked that a Government saying resources must be unused due to lack of money is akin to an airline telling passengers who wish to fly that it must fly its planes empty because it lacks tickets to sell.
To a degree the problem is that there is not enough money in the economy and this is partly caused by investors being unwilling to borrow for investment, thus lowering the amount of credit entering the economy. The Government must compensate for this by spending credit instead.
This prompts objections because "deficit" has been made such a scary word in political discourse, in order to provide ideological cover for austerity, but in reality even if the Government borrows through conventional means, interest rates are currently so low that provided economic growth can be achieved the borrowing will pay for itself.
This conventional borrowing is not even the only way for the Government to spend new money. While the quantitative easing programme has failed to stimulate spending or investment, it has got us to the point where the Bank of England holds around one-third of government debt. As the Government owns the Bank of England this is not debt that is has to service, something we do not hear often amid the hysteria about public debt. At present, the Government could borrow from the Bank of England in order to put idle resources to work. This is not a viable policy during good times – such a policy of effectively printing money would likely just cause inflation – but we are not enjoying good times right now.
Mr Clegg is misleading the public to try to get support for an austerity agenda that is unnecessary and counter-productive. Can we have an apology for that?
Iain Paterson,
2F Killermont View,
Glasgow.
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