When Cameron came to power and appointed Osborne they pledged economic recovery based on certain principles. The first was the economy would be re-balanced away from housing and the financial sector. Second it would be export led, third that government spending would be cut and the deficit eliminated over a parliament, and finally government borrowing would fall. None of this has happened. Yet yesterday he said that the economy was so under control that he could sanction loads of infrastructure renewal paid for my more borrowing.
Every time this coalition government mentions the economy it adds the prefix that it is clearing up Labour’s mess. Whether it is fair to do this does not matter, for this government has created new messes of its own. It has derided the notion that Labour, if given power again, would borrow more to boost growth. ‘Oh tut tut look where that got us!’
Yet this is exactly what Cameron and Osborne are now doing. They have cut and slashed and re-organised ( too much of the latter), but they have not managed to avoid a housing boom and the spiralling cost of benefits because they have inaugurated a low wage economy with high housing and energy costs requiring government subsidy to low earners who are actually working but rely on benefits and food banks to survive. So although structural expenditure has been cut, running costs have gone up. Moreover the tax base has narrowed because earnings are so low, cutting the government’s income stream and leaving the deficit reduction on hold. The Treasury is borrowing close on £100 billion per annum, yes per annum, because it has not got the income to pay for what it spends.
So what has happened to the Tory sniffiness about borrowing to invest to grow? It has been binned, because the only way to push up revenue is to stimulate growth. This is what Ed Balls told them to do in the first place. There can be no greater humiliation for the Tories than that.