Mandelson justifies delay in spending cuts

Lord Mandelson today defended the delay in cutting the country’s huge deficit.

Mandelson used a speech to attempt to back up the Government’s business credentials prior to the general election in May. He said: “Only by growing our economy can decent jobs be created, living standards protected, and the winners’ circle expanded outward to those on low and middle incomes."

Government spending, he said, was providing vital demand when private sector activity was low.

"Pull away that prop for the economy and you reduce the tax take, push up spending on unemployment and make the deficit worse. This is the paradox of government thrift. We learnt it in the 1930s.” (Actually, quite evidently, we didn't!)

He went on to say: "Let me say this quite bluntly. For the past decade we allowed ourselves to become over-dependent on the City and financial services for growth and our tax revenues."

It is interesting that he feels that his party, who were a big cause of the problem (as admitted above), will also have the solution.

Why is it that the Government told banks to lend more responsibly – implying that we all need to borrow more carefully – yet they feel the best way out of a huge deficit is to continue spending more?

If we rack up the full amount on our credit cards, is it sensible that we don’t bother to pay it off, but continue to borrow more?

Lord Mandelson also said that the new 50 per cent income tax for top earners "is justified in the quite exceptional circumstances we face". Yet, the top earners may well leave the country, ‘reducing the tax take’ (see para 4).

He also suggested there should be a new culture of long-termism in business managers.

Yet many recent strategies by the Government smack of short-termism … or electioneering.