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Davis says the UK economy needs shock therapy and urges the Coalition to adopt a clear roadmap to a very different system of tax, regulation, banking and energy policy

By Tim Montgomerie
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David Davis will today urge the Coalition to be much bolder in its economic policies. He will say that the problems in the Eurozone should not be used as an excuse for the "pretty dire" economy. He will say that "the parlous circumstances should not be an excuse for inaction, but rather a spur to dramatic action".

NewAssaultWatching George Osborne on the TV yesterday and reading David Cameron in the Mail on Sunday it is clear that both have returned from the summer recess with more tempo and a greater sense of urgency. Will that tempo translate into practical results however? Allister Heath at City AM is not hopeful. He calls the Coalition's latest growth plan "another damp squib". It is far from clear that the Coalition's latest efforts will even pass. The Daily Telegraph declares war this morning on the Chancellor's renewed attempt to shake up planning laws.

In his speech this lunchtime David Davis will back the Chancellor's Plan A for Austerity but will call for a Plan C for Competiveness. He will focus on tax simplification and tax reduction (partly financed by faster spending cuts but also by belief in the dynamic effects of lower taxes); greater competition in the banking sector; a new energy policy that puts economic needs before green objectives; freer trade; infrastructure investment (including greater airport capacity but no HS2); and deregulation - he identifies red tape as the number one economic problem.

The former Shadow Home Secretary - and a businessman before entering parliament - will argue that the biggest ingredient missing from the Government's economic programme is "high drama". Noting Margaret Thatcher's shock therapy to the UK economy and Germany's welfare and labour market reforms of the last decade, it is not enough, he will argue, to see economic reform as an entirely technical discipline. Economic reform and a growth programme must also have a psychological effect. The scale of the economic reforms must galvanise consumers and investors into believing that something tangible and dramatic is happening. No "pussyfooting", in other words. Actions do not have to have immediate tangible effects, he says, but if they add up to a roadmap to a better economic destination they will start to reshape the decisions of domestic and British businesses. The Chancellor has succeeded in reshaping some investment decisions. Last week's decision by WPP to return to Britain - following changes to corporation tax - is a real feather in the Coalition's cap but the overall verdict of business has been very downbeat with most respondents to a recent IoD survey giving very low marks to the Government's growth strategy.

Some defenders of the Coalition have been attacking "Right-wing" economic prescriptions but 93% of Tory members think "backbench Tory MPs are right to campaign for a simpler tax system and more deregulation". Friends of George Osborne would be wiser to acknowledge that he has to be a Coalition rather than Conservative Chancellor. This would be more persuasive than insisting rather unconvincingly that he is doing all he can possibly do. 71% of party members do agree that "George Osborne's ability to deliver a good growth policy is seriously limited by the nature of the Coalition". In yesterday's YouGov poll for The Sunday Times, 61% of all voters also agreed that "being a coalition between two parties makes it more difficult for the government to come up with an economic strategy". If David Laws returns to the frontbench in the imminent reshuffle we can hope that progress on supply-side reform becomes a little less difficult.

> David Davis gives his speech at lunchtime and we will publish the full text soon after then.


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