On the 28th October the coalition produced a White Paper “Local growth: realising every place’s potential”
My friend John Cole, like me a retired teacher of economics and also a lifelong Liberal/Liberal Democrat has written a detailed critique for his colleagues which begins with the following paragraphs:
I approached reading this white paper in the hope that it would give me confidence that the coalition had a sound and credible route map towards economic recovery and sustainable growth. Whilst there are many good ideas in the paper, I remain unconvinced that the coalition is going to have the UK economy in a far better place in five years time. In short, it is a curate’s egg of a white paper – good in parts but with, in my view, some woeful deficiencies.
The main shortcoming is the total reliance on “supply side” measures. There is much talk of incentives to invest and to build. Inward investment will be attracted. The planning system will be totally reformed, streamlined and barriers to development reduced. The workforce will be up-skilled and those on benefits will be incentivised to work. In the North East and other non-metropolitan regions public sector jobs will be cut but new jobs, created by the private sector, will more than take up the slack and the economy will be re-balanced. All will be hunky-dory.
What is totally absent is any reference to the “demand side”. Firms will only invest and produce if they confidently expect there to be a demand for the final product, be it a good or service. “Confidence” is the key word. At present business confidence is low, as is consumer confidence. After the binge spending of most of this decade individuals and corporations are now retrenching. If firms are disinclined to expand because of thin order books, the new jobs will not emerge. In a wiser age governments would step in with counter-cyclical policies, in this case to boost demand by increasing government spending – pump-priming expenditure which could be reduced as the economy moved into a private-sector sustained growth. Such counter-intuitive thinking would appear to be beyond not only “The Daily Mail” but George Osborne. It should not be beyond the grasp of Liberal Democrats with our Keyenesian lineage.
And so say all of us.