Economists are often accused of using statistics in much the same way that a drunkard uses a lamppost – more for support than illumination. And it may very well be that the latest numbers from the Office for National Statistics, indicating that the UK is “officially” back in recession – are used more in the foggy war of day-to-day political combat than they are in calmly and coolly analysing what the government might do to actually nurse the economy back to health.
Certainly, the coalition now seems to meekly accept that it is at the mercy of events rather than being the master of them. Danny Alexander grimly told the BBC on Wednesday night that the government had no magic wand to wave to solve the problems in the British economy, as if this somehow absolved him of responsibility. But nobody is expecting magic. We don’t want conjuring tricks. We are simply expecting some hard-headed, bold and radical initiatives, combined with a recognition that a half-hearted effort to get the public finances under control over the next five years or so is not the only tool at their disposal.
The first priority must be a reduction in public spending, not just sticking to “Plan A” but redoubling efforts in this area. The coalition’s fiscal retrenchment has been feeble and barely merits the label of an “austerity package”. It now looks likely that government spending will about flatline in real terms between now and the next general election – the great unknown factor being whether welfare spending will fall as people are incentivised to enter the workforce or whether it rises as economic growth fails to materialise. Siren voices from trades unions and others, arguing that the way to get out of the hole is for the government to simply give people more money and then watch them spend it must be emphatically resisted. If governments handing out large amounts of money they don’t have was the route to economic salvation, we wouldn’t have got into this mess in the first place.
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