On Monday we urged George Osborne to make a clear statement of Tory macroeconomic policy for the recession:
"What the Conservative Party appears to be saying is that only by restoring discipline to the public finances will the Bank of England have the room to make large and sustainable cuts in interest rates. The Tory economic team has decided that further borrowing will make it harder for the Bank’s monetary policy committee to make those cuts. It is not the policy that ConHome would have chosen (we are attracted to the Lilico plan of large but time-limited tax reliefs) but it is a credible policy and needs to be explained."
The Shadow Chancellor has done exactly that today in a robust article for The Telegraph. Read the whole piece here but there are 78 words that really matter:
“The Government should do nothing that makes it more difficult for the Bank of England to cut interest rates. It must be for the independent MPC to make its judgment, but it is a statement of fact that, with interest rates still at 4.5%, there is plenty of scope to stimulate demand with lower rates. A spending splurge, funded by extra borrowing over and above what the recession is already forcing on us will make that less likely.”
Mr Osborne will no doubt roll out more measures that will help families and businesses cope with the recession – building on existing commitments to freeze council tax and introduce a VAT holiday for small firms – but the task of beating the recession has been given to Mervyn King and the Monetary Policy Committee. There will be no big Keynesian tax reliefs or spending increases from the Conservatives.