Coffee House

The coalition’s growth bargain

9 September 2012

4:36 PM

9 September 2012

4:36 PM

The contents of the coalition’s grand bargain on growth will become clearer this week. On Monday, Michael Fallon will announce plans to scrap half of all existing regulation, and then later in the week Vince Cable will detail the changes the coalition will make to employment law. This combined with the planning reforms announced last week and the expected initiative on mini-jobs is the Tory supply side of the bargain.

But there’s also an interventionist Liberal Democrat side to it, with the coalition announcing this week that it is adopting an industrial strategy. This is something that Vince Cable and his Tory deputy David Willetts have been pushing for over the last year or so. Cable also looks to set to get his way on a small business bank; there’s growing optimism among Liberal Democrats that that they’ll be able to announce it at their conference in a fortnight’s time.

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This is all in stark contrast to a few months ago when the two sides of the coalition were blocking each other’s growth policies. I’m told that the continuing recession has broken this log jam, as one minister puts it ‘they’ve been spooked into action.’

How much difference these policies make remains to be seen. But the coalition is in a better place on growth than it has been for some time. It, at least, has some sort of strategy now.

At the top of government, they believe that the next set of GDP figures will show that Britain is out of recession. They hope that this will give their drive for growth some momentum and help turn the political tide. If they’re right, then the political pressures on the coalition will begin to ease. But if they are wrong, these pressures will become far more acute.

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Show comments
  • Daniel Maris

    “At the top of government, they believe that the next set of GDP figures will show that Britain is out of recession.” Our GDP ought to be growing if we are adding 250,000 people extra to the country each year. But what is happening to per capita GDP? Will that be growing.

  • James102

    Is that half the regulations that are not from the EU? What
    does that amount to?

    • Daniel Maris

      Half of one per cent is half a per cent I believe.

    • rubyduck

      As they have bugger all to lose, maybe, just maybe, they could consider putting two fingers up to the EU …

    • rubyduck

      As they have bugger all to lose, maybe, just maybe, they could consider putting two fingers up to the EU …

  • David Ossitt

    “Michael Fallon will announce plans to scrap half of all
    existing regulation, and then later in the week Vince Cable will detail the
    changes the coalition will make to employment law.”

    Sod that for a game of soldiers.

    Scrap half of all existing regulation, how about scrapping
    90% and as for Vince Cable well he should be told exactly what is required and
    one or both of his new junior ministers should implement that which is needed,
    he (Vince Cable) should be policed at all times.

  • http://twitter.com/jayuux jason green

    ” It, at least, has some sort of strategy now.”

    Really? Perhaps you’d like to share it with us.

  • http://twitter.com/rlpkamath Rahul Kamath

    This is some real wishful thinking. What was clear to me from Vince on the Marr Show is that while he and the Tories agree on the broad strokes (less regulation etc. motherhood and apple pie), they certainly don’t agree on the means. Fallon wants to pursue the implementation of Beecroft whilst Vince wants to remove immigration restrictions. Neither supports the other’s positions. Unless there is more compromise, we are faced with more paralysis in government and half-arsed policies such as the cable investment bank or the conservatory planning easement.

  • telemachus

    Some of this may give a little growth by 2015
    But what about now
    Why no big stoke of massive infrastructure projects to pump prime growth and reduce welfare to boot.
    We need courage
    We need Balls

    • Hexhamgeezer

      No – You need Balls

      • The Crunge

        We need a cause of the problem to solve the problem. A curious logic indeed.

        • Hexhamgeezer

          I was addressing the troll. The software seems to have cast me adrift.

          • The Crunge

            Apologies. Keep up the good work!

    • itdoesntaddup

      You shouldn’t put Balls up. Redwoods grow consistently over the long term.

      • telemachus

        They are the largest and among the oldest living things on Earth and stood as silent witnesses……
        Especially during the Welsh National Anthem

    • The Crunge

      As ever, a truly fatuous contribution. Ill considered assertions with no supporting evidence. To answer your question, for the benefit of sensible participants, there is no money for a ‘Stoke’. We cannot borrow the money because this would produce a dramatic deterioration of the Uk’s perceived creditworthiness leading to rising interest rates. These rates will trigger a slew of defaults in the housing market, industry etc and the negative impact on growth would considerably outweigh the dubious benefits of more government spending on infrastructure however worthy. Consigning the UK economy to the co-author of so many of our economic woes (banking regulation, ludicrous growth estimates etc) would not be the choice of a sane electorate. Has it not occurred to you that if the measures you propounded had a scrap of validity, Osborne would have jumped at the chance? No because like most leftist fantasists debt is merely an irritating abstract concept which can be safely ignored and the siren voice of Ed Balls claiming that a painless solution is just a vote away is sensible proposition to the socialist mindset. Meanwhile back on earth……

      • telemachus

        Times have moved
        The markets have seen the folly of trying to give fiscal balance by axing capital projects
        They will applaud a capital stoke as it will lead to a long term fall in benefits payout
        Me earth is your earth and would be infinitely better with a chancellor with an ounce of sense and proven charisma

        • The Crunge

          I’m sorry but which bit of ‘cannot borrow’ do you not understand and what do you know of ‘markets’? You have simply ignored my rationale and resorted to ludicrous sloganising. As if the capital markets care a jot for charisma. I particularly enjoyed your final sentence; a model of meanigless sentimental vacuity. You should be ashamed, utterly ashamed of your your inability to frame a sensible argument and make a valid contribution to a complex debate.

          • telemachus

            Sorry chum
            The coaltion grabbed headlines by axing capital growth instead of reducing recurring spending
            In so doing they aggravated the deficit by triggering increase in benefits to the unemployed.
            Cannot borrow is a relative term. Clearly the UK can borrow on good terms.
            OK then do it
            Use the capital to trigger infrastructure to pump prime growth
            The growth then reduces the deficit
            Which bit of this impeccable logic have you difficulty with
            I do not slogan. I deeply care for my country that is going down the pan

            • The Crunge

              Firstly, I am not your chum. Your first sentence manages to be illiterate and to the extent that I, a mere economist, can fathom is factually incorrect. The second sentence is consequently also factually inaccurate. I have explained why a material increase in borrowing is untenable and accept that you are simply unable to comprehend the concepts of creditworthiness and risk. The benefits to growth of infrastructure spending are impossible to quantify but are almost certainly not the panacea you imagine. Accordingly, your ramblings are neither logical or impeccable. Your feelings toward your country are irrelevant in an economic argument.

            • Mike

              Building infrastructure projects has a long history of failure post 1945.
              1. What projects will benefit the UK? Constructing small railway lines and opening up old stations to improve connectivity may be of more benefit than H2S.
              2. Much of the UK outside of SE England lacks peole with advanced technical and entrepreneurial skills aprt from a few companies such as Rolls in Derby. 24% of R and D in SE England outside of London- e.g satellite and pharmaceutical industries.
              3.Many large projects take years to design and pass through planning, T5 at Heathrow is a good example.
              4. The lack of skilled staff will probably pull in immigrants.
              5. Most of top university R andD is located SE of Line from Cambridge through Oxford to Southampton.
              6.Most arts and humanities expenditure outside of Russell Group Universities is a waste of money and time.
              7. 20-30% of thosing leaving school lack basic literacy and numeracy.
              8.We need to create the technical education and training of Germany. This could be assisted by closing down arts and humanities education outside of the Russell Group Universities and spending money on craft training for the 16-21 years old.
              9. We need to examine how continental European countries award government countries and follow likewise.
              10.We need to examine how Germany enables employees to be hired on short term contracts.
              11. If we want to create a manufacturing industry similar in size to Germany’s, we need a similar sized and skilled workforce.

    • rubyduck

      You mean a spot of GDP massaging a la Brown ?

    • rubyduck

      You mean a spot of GDP massaging a la Brown ?

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