The UK Economy: time to get angry with a crass political debate
Not a happy day for the UK economy. The Bank of England’s quarterly inflation report forecasts high inflation and weak growth over the “next year or so”. And an analysis from the FT reveals that recovery will remain “muted” due to capacity that has been lost for good in the banking sector. And just to rub salt in the wound, the analysis also concludes that unemployment failed to rise as far as expected not because of anything benign like managers wanting to hang on to skilled workers but because it was the less labour intensive parts of the economy that shrank the most.
Which all got me rather angry suddenly. It’s easy to forget when reading these very high level analyses that high inflation, failure to grow, lost output are all proxies for more hardship, greater joblessness and lives not reaching their full potential. There is real human misery behind all the wonk talk. And my annoyance was directed towards the politicians. But not because one side is introducing supposedly unwarranted cuts or because the other side supposedly overspent but because the level of policy debate about these issues of such importance to millions of peoples’ well-being is conducted in such a narrow, thoughtless fashion.
We currently have two of the main parties (Conservatives and Lib Dems) committed to a very tough austerity programme while remaining vaguely of the view that sorting out the fiscal mess is the best route to growth. However, these two parties aren’t quite as sure as they once were about that and so have falteringly introduced some rather limited pro-growth measures such as technology and innovation centres and an under-capitalised green investment bank .
And we have the remaining main party being deliberately light on wider economic policy while trying to run as the champion of the anti-cuts agenda despite still, theoretically, being committed to a deficit reduction plan which may be less austere than the Government’s but could certainly not be seen as anything other than a major exercise in fiscal consolidation.
Given the possibility that we could face a ‘lost decade’ or more in the UK if we don’t get this right, this really doesn’t seem good enough to me. Surely the country has a right to expect a more serious, honest and reflexive debate than this.
Just to highlight how weak the debate is, there is an obvious and important policy position which is entirely missing because of the political and policy choices being made. It might be called the “German Position” (if that didn’t sound faintly lewd).
This is the argument that the best way to secure the UK’s economic future is to commit to a fiscally conservative position that would require some pretty tough medicine for the public finances. This commitment would be made to keep interest rates low, hold taxes to a reasonable level and because running large deficits is high risk in an unpredictable world. However, because such necessary austerity will damage the economy and create joblessness, and because the global marketplace is ever more competitive, we also need a very bold and proactive growth strategy based upon state investment in new business, a major skills programme and a relentless focus on reshaping tax and regulation to spur innovation.
In short the position is fiscally austere but very pro-active on growth.
Why no-one is taking such a position given it is staring us in the face when we look at the most successful export economy in Europe is baffling and represents a narrowing of political debate on an issue of fundamental public interest. I wouldn’t nearly expect every shade of political opinion to like the approach, and it can certainly be challenged in some respects, but surely there must be a place in public debate for such a stance. But while the Government position remains so undeveloped and the Opposition’s position remains deeply political rather than meaningful, I’m not holding my breath.