Please, George, not a boring Budget!
With just over a week to go until the most important Budget of this Parliament – and probably the most important day in the political life of the Coalition – there should be a healthy debate about the immediate future of UK macroeconomic policy. I spent this morning at a Parliamentary breakfast organised by the Federation of Small Businesses to discuss the Budget. Last week, I was at the EEF manufacturing conference. Recent TUC events have included a seminar with Michael Heseltine, while another with top US economist Robert Reich is planned for the near future.
The UK could be on the brink of a triple dip recession and Coalition differences are barely constrained by collective Cabinet responsibility. Into this febrile atmosphere, step Janan Ganesh, FT contributor and biographer of the Chancellor, George Osborne. In today’s FT (£), Ganesh calls for a “boring” Budget. As I read on, intrigue turned to disappointment.
I know the FT website operates a paywall, so let me summarise. A boring Budget would be an honest Budget, because it would recognise that there is no “magic bullet for growth”. The economy is sicker, with productive capacity more deeply dented, than anyone realised even at the worst of the crash. Previous growth projections, which provided the basis on which past Budgets have been conducted, “now look like the world of dark comedy”. Any serious loosening of fiscal policy would “imperil any goodwill the UK has earned in financial markets in recent years”. And my favourite line: “Almost nobody who implores [the Chancellor] to go all out for growth means it.”
Let’s start where we agree. “Dark comedy” is a good description of previous growth projections. And there is, indeed, no “magic bullet for growth”. The goodwill of the financial markets is a secondary issue, in my view. I have blogged before about the dangers to democracy of elected politicians not being prepared to do what is necessary for the economy out of fear of upsetting the markets and the TUC’s call for more economic democracy is an important development in our thinking in this respect.
But I cannot accept that those calling for the Chancellor to go for growth do not mean it. Ganesh follows this comment by listing a slew of so-called growth policies that attracted only lukewarm support, including the tax cut for high earners, Adrian Beecroft’s deregulation agenda and easing immigration controls, adding that “Only the libertarian right… consistently urges Mr Osborne to let the market romp on in all areas”. I guess if you believe that the market “romping on”, tax cuts for the richest and removing hard-won employment rights equate to a growth policy, many have been lukewarm. Thank heavens for that.
But what about those of us who believe in a real growth policy? What about investment in science, proper support for apprenticeships, an intelligent industrial strategy, developing a green revolution, smarter procurement? This is the Budget in which the Chancellor will respond to the Heseltine Review, ‘No Stone Unturned’. How much of Heseltine’s radicalism will be adopted and how much will be quietly dropped or ignored? There’s no end of growth policies that the government could adopt if it has the political will. There’s no magic bullet for growth – Ganesh is right about that. What there is instead is the long, hard grind of rebalancing the economy and building sustainable industries. That won’t happen overnight. But the Chancellor could take the first steps next Wednesday. Now that would be interesting.