George Osborne would still get wet in a thunderstorm with an umbrella... but I'd prefer he had one

By Tim Montgomerie
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Today's negative growth figures are disappointing but not surprising. We are not yet in double dip territory but as Andrew Lilico has pointed out, double dips are not uncommon features of recovery cycles. The unique factor now, of course, is that the troubles in the €urozone are casting a long shadow over not just the British recovery but the whole world. A senior Tory was quick to remind me of this fact after I tweeted this then this earlier.

I don't question the fact that €uro-woes are the big fact of today's economic crisis but I am worried that the Government is (1) using that fact as an excuse for a lack of supply-side action and (2) Downing Street's policy towards the €uro is deeply flawed.

On (1), nothing will stop you getting wet in a terrible thunderstorm but that doesn't mean we should go out into that thunderstorm with insufficient protection. The Chancellor's deficit reduction strategy is the most important protection. By reducing borrowing we are keeping interest rates low and that's British business' top demand*. But what about other protections? The troubles in the €urozone and political paralysis in America could have been an opportunity for Britain to stand out as the place for footloose global investors. The Coalition is taking tough decisions for Britain's long-term economic competitiveness. Lower corporation tax. Welfare reform. Michael Gove's schools policies. A more sensible retirement age. An overhaul of the planning system. It's a considerable list. But what about for now and this economic emergency? Taxes have gone up too fast and spending cuts have been too slow and timid. Chris Huhne's energy policies are hurting the hope of a manufacturing revival. Uncertain and inconstant policies towards the banking sector are undermining the possibilities of bank lending. We have accepted even more EU red tape. Again and again ConHome has called for more ambitious supply-side policies. Again and again the Government has brought a penknife to a swordfight.

On (2) if the €urozone is such a problem why are we supporting its continuation? David Davis and Boris Johnson have already spoken for most Tories in regretting the Government's belief that the €uro should be preserved. Europe's recovery begins when the €urozone is reformed. Yes, it will be initially painful but essential surgery always is.

George Osborne is right on the deficit. He is the political genius behind the welfare and immigration caps. But he's been disappointing on growth policy and time is running out for him to rectify that.

* Over on Comment Nadhim Zahawi notes that the IMF thinks Britain is better-placed than most of our competitors.