By Tim Montgomerie
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My initial verdict on last week's Autumn Statement was that it was full of some clever politics but was disappointing on an economic front. That view has hardened since. We may have a stronger economic punch than Labour but do we have an economic punch that is big enough to flourish in a very competitive world economy?
Readers of ConHome may not have been surprised that the deficit will still be £73 billion at the end of this parliament – we had plenty of advance warning – but we should still be . The deficit is the Coalition's central project. The Coalition was going to eliminate it. It isn't even going to come close to doing so. Debt will still be rising at the end of this parliament and will be rising into the next. For years to come British taxpayers will be paying tens of billions of pounds in debt repayments to Chinese, Middle Eastern sovereign wealth funds and other overseas creditors. They will use that money to invest in their own universities, infrastructure and to keep their taxes low. Today's low interest rates won't last forever. Britain's wealth creators and entrepreneurs will be more heavily taxed in order to service today's debts – if they choose to stay here and not take their ideas and talents to more lightly taxed jurisdictions.
There are, of course, many reasons why the deficit reduction programme has been knocked off course. International economic conditions have been a big explanation. But right from the start the Coalition has let a crisis go to waste. It has made serious mistakes. It has failed on both sides of StrongAndCompassionate.com's Double Lock. It has failed to do enough to create prosperity and it has failed to do enough to convince people that any prosperity will be shared.
- Neither the Coalition nor the Chancellor ever had a fireside chat with the nation and explained that the deficit wasn't our only problem. It should have focused on Britain's demography and the chronic uncompetitiveness of the developed European economies and that the rise of the East meant Britain had to fundamentally re-gear. A ten year plan should have been set out to restore Britain's economy. It should have had bold components. A new hub airport or Heathrow expansion. The creation of a so-called 'Bad Bank'. Counter-cyclical banking regulatory policies. Rapid moves to exploit shale gas. Sunset clauses on tax rises. The privatisation of roads and experiments in co-payment across the public sector. Top-to-bottom reform of Whitehall. And most of all; Wisconsin-style public sector pay and union reform (if necessary endorsed by a nationwide referendum). We could have presented an image of Britain's future to the world that would have been such a contrast with gridlocked America and our €uro-paralysed neighbours. Voters wouldn't have liked many of the individual policies but they would have bought 'a big Great Britain plan'. On the doorstep every voter I meet knows that something is deeply wrong but they don't have any sense that any politician in the country has a plan that is as big as the challenges. The British people are patient but at some point they will become angry if they come to believe that we didn't use these years to dig deep and make the necessary reforms.
- If much of the first major error could perhaps be blamed on the Liberal Democrats (although I'm not convinced Cameron and Osborne would have been economic radicals if they'd won in 2010) the Coalition's second major error is probably at least as much the Tory Party's fault. We have failed to do all we should have done to convince voters that we really are all in this together. The protection of wealthier pensioners has been the biggest ducked decision and entirely politically-motivated. Families on very modest means are absorbing cuts but some very prosperous pensioners have been left untouched. The retirement age should have been linked to life expectancy. There has been no rebalancing of the tax system. A government interested in justice across the generations would have reduced taxes on jobs but raised them on high value properties and pollution. There should have been major relocations of public sector capacity to the North of England. The anachronistic Barnett formula should have been abolished and the savings ploughed into the poorest communities in urban Britain. We should have cracked down on NHS tourism. We should have frozen our contribution to the EU until further notice.
I am not, of course, suggesting that the Coalition isn't doing or hasn't done many good things. The education, welfare, localist, transparency and corporation tax reforms are the flagship reforms. But has it done all it could to build the foundations for future prosperity and for social justice? No and no. We have a government that is far too ordinary in times that demanded something extraordinary.
> If this is all too gloomy for you, Treasury Minister Greg Clark MP sets out a more positive account of the Government's economic record on today's Comment pages.