Nick Clegg: going for growth?
On the morning that the UK saw unemployment rise by 80,000 Nick Clegg has given a speech on growth. He started by claiming that the Government’s strategy was about more than tax cuts and de-regulation, stating that:
Our critics say that all this government is capable of is cuts. That, beyond lowering a few business taxes, reducing a bit of red tape there is little else we are willing or able to do. That is absolutely wrong.
So it seems fair to question whether the speech did in fact indicate that his Government was prepared to take any further significant action.
The speech referenced ‘international cooperation’, ‘no deviation on deficit reform’, banking reform and retaining loose monetary policy. It re-stated the Government’s intention to ‘match the plans of the previous Government for capital spending’, talked about ‘protected’ science budgets (which are still being cut by 9% in real – as opposed to cash – terms), the Regional Growth Fund (welcome but again a cut of around two thirds in regional spending) and the Green Investment Bank, which is not yet even on the statute book.
What was new?
Apparently Vince Cable has been asked to ‘do some work on how we create the environment and incentives for business to free up new capital now’. Good luck to him, as business investment is desperately needed. But if he can find an answer to the problem of how to get companies to invest while confidence is falling and growth is stagnant he’ll be working a fairly impressive miracle.
Clegg also told us that the Government will go:
through the nation’s capital spending plans to hand-pick up to 40 of the biggest infrastructure projects, the ones most important to growth, which will be given new special priority status.
Again this is hard to argue against, but it’s also difficult to see how speeding up the same amount of infrastructure spending can offset the economic impact of the sharpest overall public spending cuts in decades.
So perhaps the most significant new announcement was the Deputy Prime Minister’s recognition that:
You have to think about demand too. Our troubles have very much been a demand crisis.
With government spending now falling sharply, consumers facing the greatest living standards squeeze in years, the labour market weakening and global demand declining (further limiting our exports) it was a shame that the he had nothing to say about where it would come from.