Disturbing stuff from Sir Keir Starmer, the shadow Brexit Secretary, over the weekend. In case you haven’t noticed he’s been protesting about the award of the contract to print the new blue British passports to a French company, whose bid just happened to be £120 million cheaper than their British rival. Leaving aside the irony that said British company currently prints passports for 40 other countries, what we now know is that the Shadow Secretary clearly does not have enough grasp of basic economics to be in the job. Not that the actual Brexit Secretary, David Davis, does either of course: this isn’t a partly political point. If our political leaders can’t grasp the idea that leaving the European Union cannot be used to justify dumb-arse economic nationalism then Britain is doomed to head down the fiscal toilet sooner rather than later after exit.
One of the interesting points made – and there are a lot of them – in Tim Harford’s The Undercover Economist Strikes Back is that there is a strange habit of governments following exactly the wrong type of policies for a given set of economic circumstances. What happens, mentioning no Gordon Browns in particular, is that we overspend and over-borrow during times of economic growth, when surpluses should be accumulated to deal with the inevitable recession that is just around the corner. When we get round that corner we get governments that cut back on spending, especially capital spending, at exactly the time when the economy could do with a stimulus. The reason they pick on capital spending is because it’s less politically sensitive than other parts of the budget. However, it is precisely well-chosen infrastructure projects that can help to kick-start the economy when it is in recession. This, by the way, is blindingly obvious, but apparently not obvious enough for our leaders to grasp it.
