Sam Coates, Chief Political Correspondent
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Alistair Darling intends to raid future budgets to pay for massive public spending projects in an attempt to counter the economic slowdown.
Invoking John Maynard Keynes’s response to the Great Depression of the 1930s, the Chancellor said that he was bringing forward spending plans with an economic stimulus package paid for by borrowing. It could also wrongfoot the Tories.
The Government is bracing itself for bad news this week, with government borrowing figures today and, on Friday, GDP figures that could show the first quarter of negative growth, following zero growth between April and July.
The Treasury has confirmed it is looking at “fast-tracking” construction projects, including schools and medical buildings, housing and leisure centres. This would bring forward expenditure plans from 2010-11, potentially hitting Tory calculations for what they would do if they won the election that must take place by spring 2010.
“Much of what Keynes wrote still make sense,” Mr Darling told The Sunday Telegraph. “You will see us switching our spending priorities to areas that make a difference – housing and energy are classic cases where people are feeling squeezed.”
Mr Darling said it would be “wrong” to start taking money out of the economy by cutting spending or raising taxes. However, the three-year spending limits for each department, agreed in last year’s Comprehensive Spending Review, are not being reexamined, according to Treasury sources.
The stimulus package will give departments immediate access to future years’ budgets. This is to be funded in the short term by borrowing.
Justifying the expected increase in borrowing in the PreBudget Report, which could double from Treasury projections of £43 billion to £90 billion, Mr Darling said that Labour had reduced government debt during its first ten years in power. “We can allow borrowing to rise,” he said.
The Chancellor made clear yesterday that capital spending in health and education were likely to benefit from the public spending increase.
Details of how this will happen are uncertain, however, since many are dependent on Private Finance Initiatives, which depend on bank lending that has almost dried up. Currently £23.3 billion in infrastructure projects are funded in this fashion.
The £45 billion Building Schools for the Future, to overhaul every secondary school in England, is among those programmes for which spending could be brought forward. But there are concerns that rushing the scheme will result in shoddy workmanship and badly designed schools. Many existing projects are behind schedule. There are also questions whether departments might compromise the tendering and audit process in the rush to get projects “out the door”.
There could be a political cost to the Tories. They have pledged to divert £4.5 billion from the school building programme for their policy of helping teachers and parents set up their own schools. Yesterday they said that they doubted the Government could spend money at a fast enough rate to touch the £4.5 billion that the Conservatives have ring-fenced for their project.
The Conservatives would not say explicitly whether they would support a raid on future spending allocations – which could have an impact on the first term of a Tory government.
John Maynard Keynes
— John Maynard Keynes was born on June 5, 1883. He studied mathematics at Cambridge
— After the First World War Keynes joined the Treasury and, after the Versailles peace treaty, he published The Economic Consequences of the Peace, in which he criticised the war reparations demanded from a defeated Germany
— Keynes’s best-known work, The General Theory of Employment, Interest and Money, was published in 1936. He said that government action was often the route out of recession. The heart of the book was his idea that economic downturns are not necessarily self-correcting and, in certain circumstances, economies can get stuck
— Keynes argued that during a recession governments must pump money back into the economy by some means, such as spending on public works, to persuade individuals and businesses to save less and spend more themselves
— Between the wars, he amassed a fortune from the financial markets
— He led the British delegation to the Bretton Woods conference in 1944, and played a significant part in planning the World Bank and the International Monetary Fund. He died in 1946
Source: Times database

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A masterstroke by Darling. He is working on one of England's great strengths; building projects that develop spiraling costs e.g. the Dome. For every £100m projected then double it. The economy will be fuelled on more and more debt leaving the next government to pay for it by raising taxes.
Mr R Norton, Shrewsbury, U.K.
We need to change our strap-line from a 'force for good' to one of 'minding our own business': cut overseas aid and development, conduct a strategic defence review and then start living within our means...
Let's get back to basics!!
Rob, oxford, uk
Why not dispense with the 7000+ quangos that Labour's set up from 1997? Or, start manufacturing again which is the only way to create true wealth? Stop putting 1000's of asylum seekers up in UK in hotels at £100 a night?
These measure alone would give Darling £1'000'000'000!
Collin Brown, Cotgrave, Nottingham
Given events of the recent past, I for one cannot see any potential problems at all in using short-term borrowing and betting against future budgets to finance spending!! Clearly nothing more than attempt to delay the inevitable chaos until the inevitable loss of the election by Labour.
Tom, London,
This is so wrong it's frightening, what happened to living within ones means?
I am sick and tired of labour government spending my children's tax money.
Tom , Caernarfon, Wales
Didn't Keyness also recommend low spending at good times. What happened to that part of the strategy?
The people who got us into this mess are 'using their experience' to get us out. Isn't that the main problem.
Nick Matthew, London,
Whos going ton these public spend construction jobs? The jobless middle class recruitment consultants.I dont think so.
den, london,
Keynes ONLY worked pre EU. Spend your way out of unemployment NOW and you help the lower paid from the EU (i.e. pay for lots of Poles to come over by the busload to take the jobs.) Can't blame them if they can. Result. Marginal reduction on uk enemployment, big reduction on EU unemployment. Cool!!!!
Jim, Blackpool,
This is Labour's despicable 'scorched earth' policy, as they know it almost certain with a recession coming, Cameron will win the next election. Tactic is to destroy public finances before the Tories come to power, so Tories have no room to cut taxes. Despicable.
D Townsend, London, UK
How will massive public spending on projects that don`t bring a return on capital improve the UK economy. The only thing this will achieve is a burden of more debt that will take many years to pay off. Blair,Brown and now Darling have really made a mess of UK plc. The sooner they are out the better.
S.L.Green, Colchester, UK
An increase in public spending will only benifit a few, and still has to be paid for. A substatial reduction in interest rates will give most people more to spend which will benifit many more (although obviousy not savers) but will raise confidence which is what's needed to get back on track
Andrew Moncur, Dundee, Scotland
Nick Leeson spent and spent to change a market - it didn't work.
W Smith, Manchester,
It makes sense for the govt to spend on infrastrure arguably it should be transport and most definitely energy.They should not necessarily increase borrowings how about delaying aircraft carriers or buying one we don't need two unless planning a war along way away.Similarily trident and ID cards
rogerb, bridport,
Brown and Darling can't take one part of Keynes without the other. Save money in good times, spend it in bad times - counter cyclical! These people are desperate and cynical. They should spell out the true PFI commitments and true liabilities for public sector pensions - or is that too scary!
Richard, Newcastle, England
What about investing in universities - grossly underfunded for years? Universities are the intellectual engines of the economy yet seem again to be neglected.
Clint, Brighton, UK
Agree with Richard Marriott. Invest in transport infrastructure (TGV lines to Manchester and Edinburgh: and a new London airport in the Thames Gateway), and national optical cabling for starters. Don't throw more money at the NHS.
Martin Griffiths, manchester, UK
Isn't that what brought the economy in this crisis - consumers spending money they did not have? Now it's the govt doing it. Don't they ever learn?
Morgan, Birmingham,
Many companies cannot survive unless they can obtain working capital from the banks and sooner rather than later. How many companies will be still around to bid for this new work when it finally appears? Only companies flush with cash will be able to bid for these works.
Derek Emery, Bedworth, UK
By "raid future budgets" he means borrow more - in other words put it on our national credit card - in other words more of the same irresponsible behaviour that got us into this mess in the first place. We have to start living within our means - in other words borrow less, spend less, and save more.
Ian, London, UK
Presumably Darling is overlooking the billions spent on PFI, these like all debts will have to be paid for.
Reduce red tape, bureaucracy, and yes sack 100,000s of paper shufflers in the public sector this increasing its efficiency.
Then simplify the tax & benefits system
D.E. Gent, Ashington, Northumberland
I can understand this approach if the projects are completed using materials and labour sourced entitely from within the UK. If, as always seems to happen nowadays, they mean spending money on importing materials and employing immigrant labour how does that help us?
Ian Skelly, Hemel Hempstead,
So on one hand, the government is telling us to live less on credit cards, to only spend what we have, and to budget properly, while they are ignoring all of their own advice, and are going to be hitting the credit cards all day long. Come on, give us an election before the country collapses!
Arthur, Newcastle,
What a good idea lets tax our children's children, not yet born.
Let's call it an inheritance tax. Ensuring: not only will they face a pensions crisis but a tax crisis.
A Walton, Leicester, England
This move seems more politically strategic than economic. Brown knows he has very little chance of winning the next election and by saddling the opposition with unmanageable debt he believes will expedite Labours return to power.
Abusing Keynes' theories just adds a bit more insult to injury.
Rex lester, Surbiton, UK
Labour need to show they can take tough decisions. Nationalising the banks and increasing spending is as hard for them as an alcoholic having another drink. They are a quick fix before the election.
Anthony, London,
This Labour government is in its last throes, so it adopts true Labour Policy....Spend, Spend and put the country more in debt. No wonder it takes the Tories a good 10 years to sort the mess out. When will the populace learn that a Labour government is a recipe for economic disaster.
Callum, Liverpool, UK
This is the wrong sort of spending - if the Government is determined to mortgage our futures by borrowing to spend now, the responsible thing to do would be to invest in our creaking infrastructure, thereby increasing the future capacity of the economy, not yet more spending on schools and hospitals
Richard Marriott, Kidderminster, England
Keynesian economics has it's place and avoiding a re-run of the Great Depression is one of them. But being nu-Lab they're wasting money on do-goodery rather than investing it in alternative energy sources which is were the money is needed.
John Small, Faversham, UK
Winston Churchill was quoted as saying: "If you put two economists in a room, you get two opinions, unless one of them is Lord Keynes, in which case you get three opinions."
Louis, Liverpool, UK
What happens if next year and the year after there is less money coming in?. This is just doing what the U.S. has done for years, that is increase the budget deficit and hope that the good times will come later. I cant see that leisure centers are a necessity.
Robert Winter, San Sebastian, Spain
Darling has mentioned trident in this context, but how can a system built in America help us? And what's the point of long term capital projects for today's problems? He is sacking thousands of civil servants - better to keep them on until after the recession.
Neil Murphy, Cromer,