Ditch the austerity rhetoric, Britain needs growth

19 08 2010

If, as opinion polls suggest, there is a majority in this country who accept that the Coalition Government’s austerity drive is necessary, then this would be one of the worst developments in the UK for some time. Why? Because it would imply that collectively we have turned our back on seeing growth as the way out of our problems.

An austerity mentality is the last thing we need at the moment. Penny pinching will not solve the problem of where the UK’s next economic impetus is going to come from. Businesses in the UK are sitting on piles of cash. The trend in results from Britain’s blue chip companies in recent months has been hugely increased profits, not just in the financial sector, but even in areas which apparently have been struggling such as aviation. These businesses need to feel that investing that cash in productive activities is the way to go, not storing it up like some 18th century miser, or perhaps worse, waiting for the next speculative bubble to erupt so they can pile in for more short term profiteering.

There are of course clear limits as to what this government, any government, can do to grow the economy, short of taking control of industry and investment directly. But political leaders are there to lead, to act as the collective voice for the aspirations of the country. By that measure the main aspiration of this country appears to be to stop a tiny minority of disabled people from ‘scrounging’. How lofty and inspiring!

The Coalition’s main claim to policy success in its first hundred days has been yet more reorganisation of education and the NHS, following on from years of New Labour tinkering. In those areas of the economy which desperately require leadership from the top to make things happen, such as investment in nuclear power and other large scale energy projects, it has vacillated.

Undoubtedly the Coalition’s biggest success so far has been to present public sector cost cutting as essential. But while everybody agrees that ‘scroungers’ and ‘bureaucrats’ should be cut, the logic of the 25% of cuts demanded from government departments is that 1 in 4 teachers will have to go, , one in four trains, one in 4 doctors if the ring fencing around the NHS is removed, and so on. Cameron and Clegg are fooling themselves if they think that most people are prepared to accept deterioration of public services and personal sacrifice without objection.

The Coalition is now worried enough about the success of its own austerity rhetoric that it is trying to row back a little. Nick Clegg said in a speech this week that the Coalition is ‘not just about cuts’. If the Coalition wants to avoid years of political misery all round it needs to ditch the austerity rhetoric and set some positive economic objectives, with as much government back up as possible. Economic growth will lift us all out of the mess we are in.

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8 responses

5 09 2010
John Whitley

You seem to present it as an either/or question. Intelligent money will say we need both. That is, a clear, imaginative and unambiguous strategy of state-primed economic growth as well as a hard look at what state expenditures we can do without. Both need to be pursued as a single project.

2 10 2010
Neil Craig

You are wrong on this because cutting the 50%+ of the economy that is negatively productive government spending is a necessary, though not sufficient, condition for growth. Printing money, pretending it is really wealth & blowing it on government workers & their friends cannot produce real growth.

We also need to stop government criminalising every attempt at producing actual growth from building houses to building nuclear power stations to promoting GM foods to investing £1 billion in Aberdeenshire.

If China can manage 10% growth we can do better any time the politicians will end their blood sucking.

15 10 2010
Pete

I’m very worried about cutting costs too fast and too deep – just look at what’s happening in Ireland!

20 10 2010
Neil Craig

Actually since Britain’s currency has dropped 20% they are still growing faster (well falling slower) than us. Obviously British mainstream media reporting of this, because it avoids mentioning Irish successes, avoids mentiong that.

21 10 2011
James.

We need to have a more balanced economy. When the finance sectors were doing well the Labour Government allowed British manufacturing to decline in the belief that we no longer needed manufacturing. How wrong they were.

Now we hear words such as “we need to start making things again”. This makes my blood boil as nothing was done during the boom to help ailing British manufacturing companies and the ones that were doing well took their jobs and production overseas.

But what about the British car industry they say, it is doing very well. What British car Industry? They provide jobs but lets not forget that they are all owned by non British companies which means that the profits go abroad.

21 10 2011
scepticscot

“They provide jobs but lets not forget that they are all owned by non British companies which means that the profits go abroad.”

Actually the profits taken abroad is tiny fraction of the amount that our government gets in corporation tax, rates, nat insurance etc.

Let alone what the people get in wages. You see various sorts of idiot saying they would be happy to see our financial industry going to Switzeralnd, Dubai and Singapore but they never say where they want to raise the replacement money (or obviously say they want government to have less to spend)

23 10 2011
James

So the stock markets are also a tiny fraction of what the government takes as well?

23 10 2011
scepticscot

Yep.

Since half the moneyspent in the economy is government spending it could hardly be otherwise.

Or does somebody know better?

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