Apparently, Cameron
is worried that the election of Hollande in France might give people the
impression that ‘growth’ is an alternative to ‘austerity’. I can see why that might worry him – an alternative
narrative is clearly proving attractive, and that attraction is not limited to France.
Whether Hollande’s
actions will live up to his rhetoric is yet to be seen; it’s not only in the UK
that politicians exaggerate the differences between them at election times in
order to do exactly the same once safely in office. And whilst the rhetoric of the Labour Party
in the UK might at times sound as though they are going to follow a similar
narrative to that espoused by Hollande, the policy differences between the UK
Government and Her Majesty’s Loyal Opposition are a great deal less significant
than the rhetoric might suggest.
As I understand the
Labour Party’s policy, it is that the cuts should be slightly smaller and made
slightly more slowly – that’s a long way short of a positing growth as an
alternative to austerity. The real
difference between government and opposition amounts to little more than
tinkering on the fringes. So Cameron is right to be worried electorally, but if he sincerely believes that the policies being followed are the right ones, then he probably has little to fear in economic terms from a change of government.
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4 comments:
Cameron should note the Sarkozy v Hollande debate was not just about right v left. The austerity v growth debate in France was notable in the business community. They swapped sides, pressing for growth. Cameron's problem is not 'her majesty's opposition' but a growing realisation in the UK business community that there are no rewards in austerity.
For the fist part of 2012 trade balance in France was falling, flooring at -15bn€ deficit. This set alarm bells ringing. The UK already has a -23bn€eq trade balance. . Whilst the UK media and political debate is focusing on the small basket case, Greece, the UK should really be comparing itself with +28bn€ trade surplus Germany. The EuroZone can trade out of the recession, the UK under current austerity, cannot.
http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/6-16052012-AP/EN/6-16052012-AP-EN.PDF
It's not the size of the debt that's important but the means you have to pay it back.
The fiscal policies being pursued in the UK - and in most of europe under Merkel - are half baked - in that they cut the spending, but they do not increase the taxes - especially on the rich. Not only is this unfair, but it is blatantly idiotic. Growth and austerity can live side by side, but it would take a bit more imagination that Gideon and his treasury cronies can muster to realise that.
The issue is more of what we spend on as well as how much. The reality is that we have social services in all its forms that we just cannot afford and should not be spending if previous decisions were made with a longer timescale.
Government spending on Capital Projects if sensibly employed leave behind assets that last for many years and add to the efficiency of UK PLC such that dividends are reaped every year during that period.
The emphasis during the latter years years of the Labour regieme was on putting more pounds into the pockeds of the deserving and undeserving poor whilst still allowing immigration to take up the unskilled jobs were being generated. The resultant underclass is now being attacked, and are victims as much as the cause of the problem. We kid ourselves that investment in new hospitals and schools will pay dividends in the future. They will to a point, but look at many of the countries above us in the PISA tables and you will see that its not just about the amount of money spent.
The no brainers to me have been staring us in the face for many years, but as they are not voter friendly like free prescriptions and bus passes they have been relegated to the unaffordable list.
If on a UK and Welsh level we had bitten the bullet and built a barrage and an M4 that avoided the Bryn-Glas tunnel bottleneck the future of Wales at least would be far brighter. These investments in one form or another will have to made one day, postponing them has only made the choices in all their forms thay will have to made to make them happen all the harder.
Nigel,
In principle, I don't disagree with your statement that we need capital spending on infrastructure projects to stimulate the economy rather than revenue spending. It worries me that some politicans continually call for a reduction in VAT as though that will lead to growth. It would be a popular move, of course, and would ease the pressure on indebted households, but it's more likely to lead to a paying down of debt than to an econmic stimulus.
We would disagree, however, on the projects to go for. I'd agree that we sould spend on developing renewable energy in the Severn estuary, but I don't think the barrage is the way to do it. Nor do I think that avoiding the Bryn Glas tunnels is the best way of improving infrastructure. I think there are other ways of spending the same capital which would deliver more growth and jobs, more sustainably, and more geographically dispersed across Wales.
But, as I say, on the point of principle, we are in agreement.
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