By Tim Montgomerie
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Over at the New Statesman I'm described as an "economic neanderthal" by the left-wing economist David Blanchflower. My experience is that people usually resort to abuse when they're losing an argument and Blanchflower has been the leading champion of the Ed Balls view that Britain should carry on adding to its debt as if there's no tomorrow.
There's a simple way of explaining why the Blanchflower/ Balls view is fundamentally flawed: You Don't Increase Your Debt In The Middle Of A Debt Crisis. You may think world markets are crazy to worry about debt levels but you are reckless in the extreme – reckless with people's jobs and pensions – if you ignore those markets. Fortunately we have a Coalition that isn't reckless and I praised the Osborne approach in The Sunday Telegraph. This was what provoked Professor Blanchflower's derision:
"The biggest political losers from the global economic crisis are Labour’s two Eds, Balls and Miliband have constantly parroted the line that the Coalition was cutting too far, too fast, and that George Osborne had exaggerated the danger of the deficit that Labour left behind. Crazily, they wanted to put petrol on the fire and increase this country’s borrowing in the middle of a global debt crisis, arguing that Britain was too big to face a Greek-style humiliation. Now, the Chancellor has been vindicated: Labour’s argument is in tatters after Standard and Poor’s downgraded the biggest economy of them all – America. Italy and Spain are paying high interest rates to borrow from international lenders because they don’t have credible plans to balance their books. In sharp contrast, the Coalition has steered Britain into a safe harbour during this storm: hence why we are enjoying historically low interest rates on the international money markets."
At this point in my article my guess is that Professor Blanchflower was so cross that he didn't read any further because he seems to assume that I'm happy with George Osborne's whole economic approach. Not true Professor Flowerpot, you should have read on. I'll call my new friend by this affectionate name because he decided to call me "Timbo". We're clearly going to have a fun relationship.
I've repeatedly said that Mr Osborne hasn't done enough supply-side reform. I said it in my Sunday Telegraph piece and I said it, for example, here. In today's Telegraph George Osborne appears to agree and makes this crucial point: "This crisis provides an opportunity to make some difficult trade-offs in favour of growth that might get parked in the "too difficult" box in calmer times." He's hinting here about overcoming Lib Dem resistance to things he would have implemented some time ago if he'd had a free hand.
Global lenders see Britain as a nation getting to grips with its finances. That's half the job done. The other half is to convince entrepreneurs here and the world economy's footloose businesses that we're a place where you want to invest. On this front Osborne needs to do more but – at least, unlike Professor Flowerpot and Mr Balls – he's given Britain a chance. As Pete Hoskin has blogged, the Darling half-hearted plan to reduce borrowing risked Britain being downgraded. We face difficult years but George Osborne has definitely made them less difficult.