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What type of growth does George Osborne want? The risky hare, or the reliable tortoise?

By Mark Wallace
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Tortoise and the HareAs I wrote yesterday, 0.6% growth is good news, but it must be handled carefully by the Chancellor. It also raises the larger question of what kind of growth the Coalition wants. 

Is any growth, regardless of narrowness of base or sustainability, desirable? Or does George Osborne still seek a rebalancing of the economy by region and by sector - preferring expansion in the North and the Midlands to another South East boom, and favouring new manufacturing jobs over those in financial services?

There will always be a contest in the minds of politicians between tortoise growth, which may be slower but brings wider benefits and longer term stability, and hare growth, which happens swiftly and can be boasted about in the headlines before an election comes around.

We now know that Blair and Brown embodied the hare, and the nation is still paying the price. Once upon a time, Osborne regularly allied himself with the tortoise - but that particular theme has fallen silent of late.

In fact, looking at this week's announcements one would assume that hare growth is back in fashion.

The Chancellor extended Help To Buy, which as Graeme Leach of the Institute of Directors warns looks dangerously like deliberate inflation of a new housing bubble.

Meanwhile, Vince Cable attacked a so-called "Capital Taliban" in the Bank of England for encouraging banks to strengthen their balance sheets rather than lend more. The days when St Vince was a sage warning of the risks of banks over-leveraging themselves are apparently now a mere footnote in his gospel, replaced by a view that strong balance sheets are a menace to economic performance.

Osborne pays lip service to the idea of broad-based growth in today's Times (£), stating that his mission is to ensure growth is shared with the North and the low paid. But that doesn't change the fact that his most-trumpeted policy, Help to Buy, is targeted at South East homebuyers, rather than the North or the poor.

We all want lots of economic growth, for obvious reasons. But it's a valid conservative question to explore the type of growth we want - for electoral as much as economic reasons, we ought to have learned the lessons of Labour's disastrous claims to have ended boom and bust.

Putting in place the conditions for long term, sustainable growth (such as supply side reforms in the housing market, and a shale gas revolution to create engineering jobs in the North West and cut energy costs for manufacturers) must be preferable to sparking a short term boom only to see it blow up in our faces. 

0.6% quarterly growth is far from the fastest expansion the British economy has ever seen, and I'm sure the Chancellor would like to see more. Indeed, supply side reforms have the capacity to drive growth higher. But even if the economy continues at the current pace, it is worth considering that it would mean GDP finally exceeds pre-crash levels in six quarters' time - just before the 2015 election.

Returning the country to real growth, and on a safer footing? That isn't a bad message to be able to sell.


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