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Away from Hackgate there is the small matter of the British economy

By Tim Montgomerie
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On the front and business pages of The Sunday Times there's a prediction that Britain may drop into negative growth again when the latest quarterly statistics are published later this month. The newspaper's Robert Watts quotes (£) various City experts predicting growth of something between -0.2% and +0.2%. Even sluggish growth numbers will produce fresh questions about George Osborne's economic strategy. Ed Balls will be on the TV again, urging that Britain abandons the Coalition's deficit reduction strategy. The government would sink if it did. It would never be believed again on any subject. It is right to stay on its internationally modest* and internationally affirmed** cuts strategy. That doesn't mean that Osborne's economic strategy is perfect. It has three significant flaws...

  1. The first big flaw is that Osborne has no narrative for his economic policy. We haven't had a big, bird's eye view account of what is likely to happen over the next few years. At the time of the budget I told a senior Treasury minister that I feared too much time had been spent responding to immediate issues like petrol duty and not enough time preparing the nation for the long road ahead. I was told that the nation had had enough "cod liver oil". Perhaps voters do feel they've suffered enough but that doesn't mean they won't suffer a lot more yet with rising prices, rising taxes and rsing mortgage rates. It's incredibly important for George Osborne to look in charge of events - rather than looking like he reacts to them. If a surgeon tells you that once he's treated you, you'll be okay but the convalescence period will be long and sometimes painful you'll be less worried about the aches and pains that follow the procedure. Osborne has never painted a big picture. The Tory press machine jumps on any data it can find as proof that the Coalition's strategy is working in one sign that there's too much tactics, too little strategy at play.
  2. The second flaw is the absence of adequate supply side measures. Ed Balls wants Plan A scrapped. No fiscal conservative can countenance more borrowing but we need more than Plan A. We need more than a deficit reduction strategy. We need what Fraser Nelson has called Plan A+; a package of growth measures that will help Britain survive in the fiercely competitive global economy. On schools, apprenticeships, welfare reform and an overhaul of planning the government is doing important things to prepare Britain for the future. On regulation of the CIty, tax reform, energy policy, modernisation of trade union laws and red tape the government is far too cautious.
  3. The third flaw is a weak approach to the €urozone. Paul Goodman has provided a masterful explanation of why Cameron and Osborne don't want to be seen as the people who pulled the plug on the €uro but do we really have to champion the pro-€uro, pro-bailout Christine Lagarde as head of the IMF? At some point €urozone leaders won't be able to kick the can any further down the road. Osborne needs to be ready for that crisis moment. It might be his last chance to get the Liberal Democrats to sign up to an emergency growth agenda. That moment of crisis for the European economy should be a time when we find every way of telling the world that Britain, at least, is open for business.

* By internationally modest I mean we are cutting at the same rate as other European nations and less than proposed by Obama.
** By internationally affirmed I mean that the UK is cutting its deficit by a combination of tax rises and spending cuts in line with accepted practice. This graph is visual proof that it is the deficit denying Labour Party, not George Osborne, that is internationally isolated.


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