The musical ride

Once things settle down in the financial sector, attention will start to turn to the question of how the Government will pay for the bailout. Tax hikes? Spending cuts? The correct course would probably be to do nothing, as either raising taxes or cutting spending would slow the economy. The sooner the economy gets back on track, the sooner the Government is likely to be able to punt its newly-acquired bank shares back into the market at a profit to the taxpayer. Rising GDP would also begin to rein in the debt-to-GDP ratio that everyone seems to be worrying about.

There's a good precedent for the "do nothing approach". Canada dug itself into a dire fiscal mess in the 1980s, with the public debt/GDP ratio topping 100%. (By comparison, most estimates suggest that even with the bank bailout in full swing, the UK's ratio is unlikely to go much above 50%). Whenever there were calls for spending cuts in Canada, public servants always made sure that one thing topped the list: the Mounties' Musical Ride, a horse-and-brass-band extravaganza that showed up at fairs and rodeos across the country. The Ride was popular, so there was always an outcry. The Government never could quite bring itself to axe it, and somehow sparing it always seemed to mean that the rest of the spending cuts never happened either. Canada eventually got out of its fiscal hole in the 1990s, thanks to a prolonged period of strong GDP growth triggered by low interest rates and an undervalued dollar. The economy grew out of the problem, so the Musical Ride may have saved quite a few worthwhile worthwhile spending programmes.

This is not to say that there are no spending plans in the UK that should be considered for sacrifice: the Olympic money pit (how are we ever going to build the damned thing if all the Eastern Europeans go home?); the ID card scheme that nobody likes and that probably won't work anyway; the Trident Missile replacement (if we want to confound our enemies in the future, we can just sell them some credit default swaps).

Then there's Prince Andrew, Duke of York and supposed trade ambassador. Conspicuous consumption at other peoples' expense is just so last year. Maybe he can be our equivalent of the musical ride -- though I'm not sure there'd be much public outcry if Gordon Brown cut up his credit card.