This week on The Critic, Tom and Chris are joined by economist Andrew Lilico to discuss government finance, free markets and the growing role of the state in the economy. Andrew challenges the idea that governments can finance projects more cheaply than private companies, arguing that this misunderstands the realities of government borrowing and creates misleading arguments about the benefits of state intervention.
They discuss the history of price controls, particularly in the water and electricity sectors, and why water companies have become such an easy target in the public debate. Andrew also considers whether Ofwat has really lost control, the expansion of quangos under New Labour, and the political logic behind creating the appearance of independent expert oversight.
Finally, they examine Labour’s short-term political incentives, the dangers of government bailouts and the distortions created when lenders believe the state will always step in.
