In These New Times

“responsibility on people to do all they can to help themselves”

Well, the bankers have helped themselves: now it’s our turn.

Helene Mulholland

Guardian

27th October, 2008

Gordon Brown will use a speech to business leaders to defend his economic plans. Photograph: Leon Neal/PA

Welfare reforms must be “intensified” to help deal with the fall-out from the looming recession, Gordon Brown will declare today.

The prime minister will use a speech to business leaders to defend his handling of the economic crisis and plans – slated by economists yesterday – to kick-start recovery by boosting public spending.

Speaking as next phase of the government’s plans to get a million people off incapacity benefit comes into effect today, Brown will say: “The very moment in an economic downturn when we need to invest in human capital is no time to slow down welfare reform.

“Welfare reform will be intensified and, as we do, we should also match the right to additional support with the responsibility on people to do all they can to help themselves.”

The prime minister will insist he is right to increase public borrowing to tackle the downturn, despite the latest quarterly public debt figures hitting a record £37.6bn – higher than the whole of the previous year.

Forecasts by the chancellor, Alistair Darling, of £43bn of borrowing this year are in tatters and some experts warned that debt could balloon to £120bn in three years.

A group of senior economists yesterday criticised the government’s “misguided and discredited” plan to spend its way out of the crisis – urging tax cuts instead.

A letter to the Sunday Telegraph signed by 16 economists, including Trevor Williams, the chief economist at Lloyds TSB Corporate Markets, and Peter Spencer, the chief economist to the Ernst & Young ITEM Club, warned: “It is misguided for the government to believe that it knows how much specific sectors of the economy need to shrink and which will shrink ‘too rapidly’ in a recession,” they said.

“Thus the government cannot know how to use an expansion in expenditure that would not risk seriously misallocating resources.”

The latest quarterly public debt figures hit a record £37.6bn – higher than the whole of the previous year.

But Brown will insist today the government would allow borrowing to rise to help restore demand and to come to the aid of workers, businesses and homeowners.

He is expected to say: “We have already combined targeted support through the tax system – such as the temporary increase in stamp duty thresholds, the freeze in fuel duty and the £120 tax rebate for basic-rate taxpayers – with a commitment to maintain the necessary government investment to enable Britain to benefit from the upturn.

“Through our actions we are both supporting families and businesses now and helping them prepare for the future. That is why the responsible course is to borrow now to maintain growth and output and to reduce borrowing as a proportion of GDP as the economy recovers and tax receipts rise again.”

The prime minister will highlight moves to boost the “low-carbon economy” as the transport secretary, Geoff Hoon, unveils plans to spend tens of millions of pounds trying to kick-start the market for electric cars.

He is also likely to point to a promise of new public services apprenticeships being made today by John Denham, the skills secretary, in a bid to boost employment levels to counter recent sharp rises in the jobless total.

Brown will also set out his proposals for international reforms – ahead of a crunch summit of the leaders of the world’s 20 biggest economies in Washington on November 15.

The German chancellor, Angela Merkel, will be at Downing Street on Thursday for talks with Brown, who in recent days has also spoken with the US president, George Bush, and his counterparts in Brazil, Canada, India and South Africa.