Austerity versus Growth
Interesting stuff today.
As was debated in the comments to yesterday’s post, there is an urgent need for a public debate on how we, as a country, plan on closing the fiscal deficit.
It looks like we are finally having that debate. As readers will be aware, I favour modest spending cuts coupled with tax rises. The Tories, I suspected, favoured vast spending cuts.
“We are going to increase the resources for the NHS, we are going to increase resources for international development aid, we are going to increase resources for schools,” he said.
“But that does mean over three years after 2011, a ten per cent reduction in the departmental expenditure limits for other departments. It is a very tough [Humphrys interrupts here]…spending requirement indeed.”
So that’s 10% off police, welfare, transport, defence for starters.
What’s more ConHome is already attacking Lansley from the right saying:
Unless the Conservatives get to grips with the size of the state – and that includes the size of the NHS – those private sector workers will get very angry indeed.
Cameron is now in a difficult position – he has the ‘moderate’ wing of his party calling for big cuts in spending and the ‘hardliners’ calling for savage cuts in spending. Meanwhile the leadership talk of ‘tough choices’ without ever specifying what they mean.
Osborne can talk up that the Tories as the ‘safe choice’ and claim spuriously that the markets are backing him, all he wants.
Osborne seems to relish the role of ‘safe choice’, but the ‘safe choice’ for who exactly? Certainly not for users of public services.
We had ten years of easy growth during which the city, and the property market, provided enough tax revenue for Britain to invest in public services without raising the tax burden substantially.
All political parties became complacent. The Tories spoke of sharing the proceeds of growth whilst Labour assumed it was possible to spend and not tax. This reminds me of the 1950s, when politicians, like today, assumed the business cycle was conquered. Crosland wrote in the Future of Socialism:
I no longer regard questions of growth and efficiency as being, on a long view, of primary importance to socialism. We stand in Britain on the threshold of mass abundance.
Clearly he was wrong.
There is now a choice. The last three elections have to some degree or other been fought on the grounds of ‘Labour investment versus Tory cuts’. At the next election this choice will be real. Here we are then on a traditional political economy debate about the size of public spending. Battle lines are drawn. I know which side I’m on.
This is Brown’s ideal territory and he did very well at PMQs today. Now he should go further, we stop to stop talking about a industrial policy and get on with it.
We have one year in Government until the next election. Let’s use it.
Let’s fight the recession with Government spending. Let’s do our upmost to combat unemployment, especially youth unemployment. Let’s get an industrial policy up and running – Government backed venture capital funds for start ups in growth industries, Government backed loan funds, Government backed training programmes – all aimed at rebalancing the economy towards green technology, pharmaceuticals, advanced manufacturing, renewable and technology & communications. We already have a world beating companies in these areas, let’s build upon them.
We have been radical with the banks. More radical than many thought possible. Now it’s time to radical for the economy as a whole.
Let’s make ourselves the ‘do something party’. Now is the time for action. And now is the time to lay out a vision of Britain after the recession, a Britain with world class public services and world beating industry.
The choice is clear – the politics of austerity or the economics of growth.