LONDON BRIEFING:THE SPECTRE of John Maynard Keynes has been stalking the City of London this week, invoked by Alistair Darling as the chancellor vowed to spend his way out of recession, writes Fiona Walsh
Keynes, who died in 1946, was one of the most influential economists of the 20th century. In the Depression of the 1930s, he famously advocated that one gang of labourers be employed to dig holes while another gang be paid to fill them right back up again.
Although nothing lasting would be achieved by the exercise, the men in the gangs would earn wages, which they would then spend, thus the economy would be boosted.
While Darling is not advocating gangs of labourers roaming the streets armed with shovels, he has made it clear that he and Gordon Brown intend to buy, or rather borrow, Britain's way out of economic trouble.
"Much of what Keynes wrote still makes sense," the chancellor said at the weekend. "What I want to avoid is getting ourselves in a position governments have done in the past, where you face an immediate problem and cut back on the things the country will need in the future."
The spending will be targeted on large-scale infrastructure projects, with government departments given the freedom to access future years' budgets.
Projects will be fast-tracked in an effort to stave off the worst effects of the recession, rather than put on hold in a move that could turn a recession into a depression.
Economists have stressed that the spending must be linked to productivity and must also be targeted towards the sectors of society most vulnerable in a downturn: the construction of housing, schools and hospitals.
Some fear that the remedy - spending funded by borrowing - is simply a continuation of the policies that brought the country to the brink of recession.
It would be wrong, the chancellor said, to take money out of the economy by slashing spending or raising taxes.
"We can allow borrowing to rise," he said, and rise it most certainly will. Even before his Keynsian-inspired comments at the weekend, the UK's borrowing was already soaring.
The public finances fell to a record deficit in September, with cumulative borrowing for the first half of the fiscal year at £37.6 billion, up from £21.5 billion.
However, at 43 per cent, the UK's public debt remains the lowest in the G7 countries and compares with Italy's 110 per cent and 180 per cent in Japan. That leaves plenty of room for manoeuvre, just so long as Darling remembers the lesson that millions of credit-happy consumers are beginning to learn - those debts must be repaid.
SHAREHOLDERS in department store chain Debenhams are the latest to feel the pain on the dividend front, with news yesterday that their final payment has been slashed from 3.8p a year ago to just 0.5p.
The group is buckling under the weight of almost £1 billion of debt and is planning a series of cost-cutting measures. The problem is that its customers are weighed down by their own debts and underlying sales at the stores chain tumbled by more than 4 per cent over the past six weeks.
Also doing without a dividend is Sir Philip Green, the billionaire behind Bhs and Arcadia. His Arcadia group yesterday reported a 2.8 per cent fall in underlying sales for the year to end August, while operating profits were down more than 6 per cent, at £275 million. The sales downturn at Arcadia, which takes in Dorothy Perkins and Burton, would have been higher had it not been for a stunning performance at its young fashion chains - Topshop and Miss Selfridge.
Whether this continues through the vital Christmas season remains to be seen - Sir Philip warned yesterday that the market remains extremely tough.
Some say the high street is facing its worst Christmas in 30 years and, at some point, even the teenagers will be forced to rein in their spending.
• Fiona Walsh writes for the Guardiannewspaper in London
