When Boris Johnson entered Downing Street with a thumping majority in December, it marked a fundamental change in direction for the Conservative Party. The Tories had just won the election by promising support for the NHS as well as the billions they planned to borrow to invest in their attempt to “level up” the country. While the spending promises were enough to make some Tory fiscal hawks uneasy, the scale of the victory meant everyone was happy to stay quiet.
Fast forward a few months and nobody could have predicted the level of borrowing the Government is now undertaking.
This week, the Office for Budget Responsibility said the unprecedented round of state intervention to shield the economy from the impact of coronavirus will cost the Treasury more than £100billion in extra borrowing this year.
But, speaking during Thursday’s Downing Street press conference, Prime Minister Boris Johnson suggested he would not copy the deep public spending cuts imposed by David Cameron and his Chancellor George Osborne in the wake of the 2008 financial crisis.
He claimed austerity will not be “part of our approach” once the pandemic has subsided.
In an exclusive interview with Express.co.uk, Jonathan Portes, Professor of Economics and Public Policy at King’s College London, analysed the Government’s strategy and suggested that Chancellor Rishi Sunak might be following Gordon Brown’s economic views as a way to bounce from the coronavirus crisis and reboot growth across regions.
Following the global financial crisis of 2007–08, there was a worldwide resurgence of interest in Keynesian economics among prominent economists and policy makers.
This included discussions and implementation of economic policies in accordance with the recommendations made by John Maynard Keynes in response to the Great Depression of the Thirties – most especially fiscal stimulus and expansionary monetary policy.
During the 2010 general election campaign, former Labour Prime Minister Gordon Brown famously advocated a Keynesian response to the financial crisis, while the Tories were calling for austerity.
Mr Osborne argued that markets would turn on sterling if the debt was not addressed urgently.