Former Goldman Sachs chief economist and a former Treasury minister has criticised Labour’s economic plans
Good morning. Jeremy Hunt, the chancellor, has given an interview to Sky News in which he said that he would be comfortable with interest rate rises pushing the economy into recession if that had to happen to bring down inflation. Asked if he was “comfortable with the Bank of England doing whatever it takes to bring down inflation, even if that potentially would precipitate a recession”, Hunt told Sky’s economics editor, Ed Conway:
Yes, because in the end, inflation is a source of instability.
And if we want to have prosperity, to grow the economy, to reduce the risk of recession, we have to support the Bank of England in the difficult decisions that they take.
It [Labour’s economic mission] is kind of daft really. I like a lot of what’s behind it. But it’s a bit silly. I’m somebody that spent the best part of 40 years looking at global growth and, obviously, there’s another six countries you can’t do anything about how they grow directly. But, much more importantly than that, it’s not a really credible sign of ambition because part of the problematical broader world we’re living in is that most of those G7 countries don’t grow very well either.
We have to get out of the conventional way of thinking that, frankly, has taken hold across the whole of the world because otherwise we haven’t got the slightest chance of getting out of the situation we’re in.
At the heart of conventional economic thought is that debt is bad and so you have got to avoid it. A lot of that actually is pretty sensible. But it doesn’t distinguish between government spending to create more wealth and assets, and government spending to consume or maintain our nice little cosy lives. And there’s a huge difference.
You basically think of it as a parallel for fiscal policy of what we did with the monetary policy council when it came into existence. And you ask these guys who’ve got independence to say, what are the areas of investment spending that are going to create? What economists would call very strong positive multipliers … to create very significant growth and wealth for the future.
