Government spending "out of control"

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Government spending "out of control"

Wed 21st Oct 2009

The government needs to cut spending and alter its fiscal policy in future boom periods, according to an academic expert.

Geoffrey Wood, a professor at the Cass Business School, made his comments following research from the Confederation of British Industry, which indicated that the Chancellor of the Exchequer needs to take out £120 billion from current spending plans to balance the books.

Mr Wood recommended that spending programmes be cut and that taxes be raised, but even this may not solve the problem.

He said: "Government spending is out of control, it's growing. But tax revenues are collapsing because, of course, we were very dependent on the finance sector."

In his view, the root of the issue is that the government should not have borrowed so much money during boom periods, because the country now faces a long, slow economic recovery as a direct result.

Mr Wood used the metaphor of a large Victorian bath to describe the shape of the recovery graph, where there has been a steep drop and a plateau at the bottom and now things will gradually increase again.

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