David Cameron has just promised that he will pursue a ‘forensic and relentless’ approach for future growth…that over the course of this Parliament – and the next – he believes he can transform our fortunes. That’s absolutely great Dave, but what about now? Have we got to get into the hole before we can get out of it?
What is depressing is that there doesn’t seem to be anywhere near the same effort and focus being put into a plan for growth as there was on last week’s cuts. That can’t be right. If we’re going to have any chance of avoiding a double-dip recession and not making a bad situation worse, we need some big ideas, and in very short order.
Edward Prescott, the economist and Nobel prize winner observed that ‘to spend is to tax, to tax is to depress’. Without a serious plan to boost the economy, George Osborne’s tax increases and spending cuts are going to snuff out any signs of recovery. They’re going to lead to an increase in government debt because tax revenues are going to plummet. Things will get worse, not better. Without a plan to boost growth we are up a creek without a paddle.
What about another dose of quantitative easing? QE is meant to free up more money so that it can be lent to consumers and businesses at favourable rates. All good stuff, but so far banks and institutions have put the money in their pockets and raised two fingers to the rest of us. More QE would probably have the same effect.
So what’s the answer? The answer in the short-term has to be to boost confidence. How? By putting a huge amount of energy into a plan for growth. Much, much more than was put into the plan for cuts. If people can be reassured that there is a strong tonic to overcome the effects of the medicine, then there is every chance that confidence can be kept high and government revenues can be maintained. Then we need some very, very big ideas for future growth. There was no evidence of them today. Rupert Murdoch said last week that we are a nation of small thinkers. Isn’t it time to prove him wrong?