If government spending and borrowing stopped a recession and built a strong economy, the UK would be doing well today. Never has so much money been hurled at the problem, and never has so much been borrowed in such a short time. Yet the more they borrow the more unemployment rises. The more they spend, the more is wasted.
As so often in the British political debate there is no disagreement about what we want to do. All sensible politicians and parties want to end the banking crisis, stabilise the economy and start to get people back to work. We all want the conditions in which business can flourish and people can earn good money for their work. The government’s attempt to draw a contrast between “Labour investment” and “Tory cuts” is one of the more stupid misrepresentations.
In private most Labour politicians accept that somehow, sometime the massive public deficit has to be brought under control. Indeed, Labour’s own spending plans beyond 2010 imply reductions in spending to start to curb the deficit. In public and private Conservatives say they have no wish to sack teachers or nurses, and wish to run good quality core public services. This week Conservatives have been calling for better equipment for troops committed to Afghanistan despite the spending crisis.
There could be more agreement than crude spin doctor driven politics allows. The Treasury itself accepts that there is waste and inefficiency in public spending. This so far has been a very lop sided recession, with manufacturing taking the biggest hit and the public sector getting the extra money and jobs. There is the danger now that too much borrowing by the public sector will drive interest rates up again, damaging prospects elsewhere. Borrowing is just a deferred tax increase. At some point the debt has to be repaid.
The issue is how we can do more for less in the public sector. The answer is not difficult. Many of the techniques that are second nature to private business have not been adopted in the large public sector empires. There are too many layers of government, too much complexity, too many codes, rules and regulations. We could begin by removing unelected regional government, scrapping much of the instruction and prescription that Whitehall visits on Town Hall and scrap large centralised computer schemes that are often over budget and much delayed. Scrapping ID cards and the ID computer would be especially popular with many.
Last week the Bank of England raised the possibility that printing £125 billion to buy up government debt was enough. The interest rates the taxpayers have to pay when the government borrows more rose, as you might expect. It was chilling reminder of what might be to come, as they try to get our economy back to normal. It is still grossly out of shape. Much more work is needed to get us fit and well again.