Public spending debate: the UK economy will be left behind if this continues
Public debate in Britain has very rapidly become dominated by an obsession with cutting state spending. Not only has Cameron made the notion of swingeing cuts to reduce public debt his sole offer to the electorate, David Davis has now waded in with a list of bits of the public sector to chop.
We should be very worried that while UK politicians go into short-term penny-pinching mode, other countries are developing a vision which will make them the new, innovative, competitive economies of the future. Obama, of course, has already won Congress approval to invest billions in modernising and decarbonising the US economy, while Sarkozy yesterday outlined ambitious plans costing £31 billion to turn Paris into the green metropolis of the future with innovative transport systems, city forests, and new housing.
Of course, the public finances need to remain sustainable but if political debate becomes so narrow that we end up cutting for its own sake while losing sight of the bigger picture, other more visionary economies will become increasingly attractive to investors and will create more productive companies.
The UK’s political leaders need to recognise that we will soon be entering a new economic era where being a low tax, low regulation, low skilled economy will no longer cut it in the global economy. The heyday of finance capital and making money from money is now dead. The Government, of whichever stripe, will need to do all they can to make the UK a magnet for innovation, diversity and experimentation not in derivatives and securities but in green products, IT and new services. We won’t do that if we spend the next five years talking about nothing but how to restructure Winter Fuel Payments to save a few million.