THE NEWSDESK: Mr Cameron, there is always an alternative
ANY parent will tell you that if they have to resort to the well-worn position “do it because I said so”, their children will have scented blood.
There is, therefore, a whiff of shark bait about David Cameron and George Osborne this week after Cameron’s “There Is No Alternative” speech on the economy and deficit reduction plan.
There is, Mr Cameron, always an alternative – as your own coalition business secretary pointed out in a well thought-out piece for the New Statesman.
As Vince Cable says, whether to admit that after the loss of the UK’s AAA credit rating precisely because of weak growth and the government failing to meet its own target of paying down its debt relative to what the country produces there should be a programme of public investment, is a matter of judgement.
There are just as many arguments for such a programme as against it.
A significant number of economists would agree with Mr Cable that the arguments in favour of investing and borrowing more have grown significantly in recent months.
Cable himself does not come down firmly on the side of higher borrowing in the article.
But what he is doing is pointedly contradicting the “my way or the highway” scenario painted by Number 10.
He points out that the current fiscal cuts are a blunt instrument with greater effect than, say, tax increases because of issues like their effect on consumer confidence and spending. They have cut deeper.
The IMF is among those who feel higher public investment could have a greater effect on growth than anything else the government might do on the spending side, and might even pay for itself.
Cable says the ideas that this investment can’t actually be made to happen quickly enough to make a significant difference to growth in the short term, or that the higher borrowing might scupper the government’s deficit plans, and dent its market credibility, can be countered.
Businesses can react quickly to government moves and investment could lead to greater government assets, helping its deficit position, he says.
Judgement. That key word.
And judgement is currently being exercised by a government whose leader also feels the need to throw Margaret Thatcher’s name into the mix to bolster his argument.
The savage cuts of the early 1980s seriously damaged the economy of parts of Britain for decades. I don’t think Mr Cameron has the stomach, or more importantly, the majority, for that kind of behaviour.
And does Mr Cameron really believe that economic conditions then and 30 years later, in the longest recession in living memory, are the same?
Or was he really preaching to an increasingly restive choir within the Conservative Party who feel they now need to question his judgement?
One thing’s for sure, it’s we ordinary taxpayers who are paying the price for his dogma.
● The prime minister had a rap on the knuckles from Robert Chote of the Office for Budget Responsibility over his big, setpiece speech.
Mr Chote wrote a letter ticking off Mr Cameron for suggesting that the OBR didn’t think spending cuts and tax rises had any effect on the pace of the recovery.
The watchdog, he added, was “absolutely clear that the deficit reduction plan is not responsible, in fact, quite the opposite”.
But Mr Chote wrote: “For the avoidance of doubt, I think it is important to point out that every forecast published by the OBR since the June 2010 Budget has incorporated the widely held assumption that tax increases and spending cuts reduce economic growth in the short term.
“To summarise, we believe that fiscal consolidation measures have reduced economic growth over the past couple of years.”
Oh dear – really a week to forget for the PM.
A force to be feared
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