Wednesday, 19 November 2008

Dave and Yvette

First of all let me recommend the latest article by Peter Riddell on developments in economic policy. As always, he talks very good sense: The Economy

Yesterday I had Yvette Cooper on Radio 5 attempting to defend government policy. It was a classic series of examples of politicians not answering the question asked. She repeatedly failed to answer a question about why there should be speculation against sterling rather than any other currency.

She also claimed that the Government was able to pump money into the economy now because it had reduced debt. Well, it all depends on what you mean by debt. Do you count all the projects funded under PFI arrangements which will have to be paid back? Do you count the amounts used to nationalise Northern Rock and Bradford and Bingley as well as to buy shares in various banks? To be fair, it should be possible to recoup most of that money when the recession comes to an end.

Dave Cameron has now said that he will no longer stick to Labour expenditure plans should he gain office. I can understand why he needs a 'not me guv' defence against unpopular tax rises and public expenditure cuts.

What he will not say is where the public expenditure cuts will fall other than on 'central government waste'. Now, of course, there is always some waste in such a big operation as government which is why we have a National Audits Office and a Public Accounts Committee. One could save quite a bit of money by not proceeding with the identity cards project. But that wouldn't be enough.

Equally, Yvette Cooper would not specify what combination of tax increases and public expenditure cuts will occur in the future, as they will have to. It's going to be an interesting pre-budget report.

I think that the Government has to give a major fiscal stimulus to the economy. Already the CBI is talking of 9 per cent or 3 million employed by 2010. If no action was taken, the recession could be much worse than those of the early 1980s or early 1980s. But the Government also has to be honest about how it would rebalance the public finances - and so does Dave.

It also applies to Vince Cable as well, except that he is unlikely to be in government, so he can continue to make admittedly very shrewd attacks on policy from the sidelines.

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