As Paul Goodman suggests, there is something
significant about Liam Fox’s article for the Daily Telegraph this morning. It’s
not that we haven’t heard similar from the former Defence Secretary before — we have. It’s more that his economic prescriptions are being made, we learn from the Sun,
with the ‘explicit approval’ of his buddy George Osborne.
And what are those prescriptions? Well, the main one is for further spending cuts, and Fox also waxes enthusastic about greater deregulation and about protecting the defence budget (at the expense
of international aid). He also has some firm advice for the Lib Dems. ‘They make up only one sixth — not one half — of the Coalition,’ he writes, ‘and must expect that
Conservative economic ideas will be dominant.’
This doesn’t mean that Osborne will implement these policies, of course — but it’s telling nonetheless. A couple of days on, the double-dip is feeling even more like a political turning
point. As I’ve written before, weak growth means something particularly
nasty for the Chancellor: a slower pace of deficit reduction, and a threat to our credit rating, on which he has placed so much stock. As a result, he will surely be tempted to do more to stem the
Exchequer’s borrowing, perhaps including more cuts.
At the beginning of this year, one Downing Street adviser said to me that ‘in the face of a eurozone collapse, even measures such as cutting the 50p rate would be like bringing a peashooter
to a gunfight.’ The longer Europe’s woes continue, and our own growth stumbles alongside it, the more pressure there will be for Osborne to be radical on tax and spending and other growth
measures. Whether that other ‘sixth’ of the coalition will agree with his solutions is another matter entirely.