By Paul Goodman
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As Peter Hoskin suggested on this site earlier this week, that the economy grew rather shrunk in the last quarter is a dash of cheering colour on the canvas – and there is more around if one cares to look, particularly at the buoyant employment figures – but the backdrop against which it was set is bleak. It is taking the economy longer to recover from recession than it did in the 1930s. It is impossible to know how much bad debt is still swirling around the banking system. And it may be that growth rates of the kind that Britain has experienced in the recent past won't return for the foreseeable future.
Houses can't always be built quickly, no new nuclear power stations are likely to go up soon, a decision about airport expansion has been deferred until after 2015 and HS2, like it or loathe it, won't be up and running by the next election. In short, no new action that George Osborne takes between now and 2015 is likely to make much short-term difference to the economy. The main right-of-centre alternative to his programme is Plan A on steroids – faster scaleback of public spending and deeper tax cuts, combined with radical supply-side action. (Michael Fallon has been making a bit of a start in this regard.)
This would mean a change of Chancellor, which won't and shouldn't happen, since such a move would destabilise an already fragile Government: for better or worse, the Cameron leadership is sustained by the Prime Minister's relationship with his Chancellor. But these cramping realities shouldn't prevent others from setting out what needs to be done. I've written in the recent past about Liam Fox's ambiguous relationship with Osborne, and whether or not his various entries into the speech-making ring are helpful to the Treasury rather than otherwise.
Whatever one's view, Fox – like David Davis and John Redwood in the older generation of Conservative MPs and the Free Enterprise Group in the younger one – is making a solid argument about the economy, arguing that it is over-taxed and over-regulated, and that only a revival of Thatcherite aspiration and opportunity can revive it. On the tax side, Fox called today for an end to "the iniquitous multi-taxing of the same money. It is not right to tax people’s income and then their savings on that income; to tax the movement of assets through capital gains tax and stamp duty and then tax them again through inheritance tax if they have the audacity to die."
On the spending side, Fox wants "to freeze public spending for at least three years and probably more. Such a move would, in that time, see baseline spending totals £70.4 billion lower than today." That may sound at first hearing like an equal shearing of all departments, but this isn't what the former Defence Secretary means at all. "One of our brightest young councillors, Harry Phibbs, has been leading the argument calling for sales of government land, a rethink of the size and structure of Whitehall and the civil service, as well as a radical deregulation programme," Fox told his midlands audience.
He was clearly referring to our Local Government Correspondent's article of earlier this year, in which Harry called for the abolition of two departments for starters – Culture, Media and Sport, and the Business Department (which was the Business Secretary's own policy when he was in opposition). I differ from Harry on a lot of the specifics, but believe his basic approach is right: it's better to try to work out what government should and shouldn't be doing in the first place, rather than cut crudely across budgets because one has shirked doing. Since the electoral consequences of spelling out such change would be perilous, particularly in the midlands and northern marginals, this looks like a project which should be planned now but effected later.