Darling’s spend, spend, spend will hammer taxpayer

LABOUR will spend its way out of recession using tens of billions of pounds of taxpayers’ cash, Alistair Darling confirmed yesterday.

SPREE Mr Darling will prime the pump SPREE: Mr Darling will ‘prime the pump’

His policy immediately came under heavy fire, a former Government minister warning that the money could end up in a “black hole.”

Official figures are expected to confirm this week that the economy is shrinking for the first time since 1992.

But Lord Digby Jones, who quit this month as Minister of State for Trade, said there was a chance the cash would go on more bureaucrats’ wages.

He admitted that the cash, which the Government is expected to borrow, would eventually have to come out of taxpayers’ pockets.

Details of the spending spree are to be unveiled in next month’s Pre-Budget Report.

Lord Jones, one of Mr Brown’s non-party appointees, said borrowing was fine in the short term “but the taxpayer ends up paying.”

The former Director-General of the Confederation of British Industry said this was “because the interest on all that borrowing comes out of the budget and has to be repaid one day.”

He added that it would be difficult to avoid a situation in which taxpayers’ money, in two years’ time, “just goes down a black hole.”

Lord Jones said: “If it’s spent on just creating employment, in other words loads more administrators in the public sector, then it doesn’t work.”

He added: “It has to be productive public spending – on infrastructure projects, for instance, which facilitate the productivity of the country – airports, ports, railways, roads, hospitals and nurses, education, teachers.”

Baroness Jo Valentine, chief executive of London First, which lobbies for investment in the capital, said infrastructure projects like the Olympics and Crossrail were even more important now.

“When we were in boom time they were absolutely vital for expansion,” she said. “And now that things have turned down they remain even more vital for building our way out of the situation we are now in.

‘But also for providing jobs and investment during the downturn.  It’s absolutely vital.”

Chief Secretary to the Treasury Yvette Cooper said this was “not the time to end up cutting spending.”

She added: “Quite the reverse, we have got to make sure we keep up that investment to support the economy through a difficult time.”

Mr Darling said yesterday that huge Government investment, designed to “prime the pump” of the economy, would be targeted at major projects.

Schemes like the Crossrail project in London – priced at £16billion – plus two new aircraft carriers for the Royal Navy – at £2billion each – are likely to be speeded up.

About £43billion of investment in new school buildings could also get the green light quicker.

Mr Darling said: “At a time like this it would be wrong to take money out of the economy, in terms of cutting back on spending, in terms of tax. You do not do this when an economy is slowing down.

“We will switch our spending priorities to areas that make a difference. Housing and energy are classic cases where people are feeling squeezed.”

The plan would see spending earmarked for 2010/11 used in 2009/10. The proposals drew a cautious response from the Conservatives.

Shadow Chancellor George Osborne said big projects could take years to get moving. “That’s not going to help small businesses struggling this winter,” he added.

The Tories instead called for a six- month VAT “holiday” for small businesses – an idea that appeared to be backed by Lord Jones.

Mr Osborne said: “Government should be doing what it can to help so jobs aren’t lost.

“That’s why Conservatives propose allowing small companies in trouble to delay their VAT payments to the Revenue. That will give them a breathing space and help keep to people in work.

“Along with our plans for a freeze on council tax and a cut in small business tax, this is a measure that could be implemented immediately to help cash flow and in some cases prevent companies from going to the wall.”

David Cameron will today hold a small business summit at Westminster to discuss ways of helping firms.

The Tories claim that in recent months many small businesses have had overdrafts either withdrawn or  interest rates raised above 15 per cent.

They say this could see many small firms go bust as a result.

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