Guest Blog - Thursday, March 14, 2013 16:38 - 0 Comments

Time to change track and swallow your pride George

By Jeremy Cook

It’s never a nice feeling when you’re wrong. That slow realisation that you may be mistaken, that your position is in fact incorrect when the facts are laid out in front of your eyes can be painful. However, when you do come to the conclusion that the sky is not as blue as you originally told yourself, and probably others, it’s important to admit it and move forward on a new path.

I’ve been wrong before and I look forward to being wrong again. Learning is, after all, driven by a desire to avoid later pitfalls.

One thing that I have been wrong on recently is in backing the UK government’s austerity plans that have been part of our fiscal landscape since 2010. It has been clear for a fair while now that the prescribed ‘medicine’ is now doing more harm to the ‘patient’ than the disease it set out to combat, to use the oft-cited analogy.

I think we can all agree that the level of debt and deficit within government and consumer accounts needs to be reduced in the long-term. Debt is no gift to leave to future generations, as Ralph Waldo Emerson said; ‘a man in debt is so far a slave’.

Osborne’s first mistake was tying the perception of his performance to a largely meaningless measure of financial security in the form of our credit rating, and not to something more tangible like GDP or unemployment. The Bank of England has a mandate to target inflation and their policy tool-kit is set up to directly allow for adjustments to be made to the economy depending on whether its velocity needs to be slowed or quickened.

The Bank of England has sacrificed itself and the pound on the altar of loose monetary policy throughout the past 3 years, with little to no success in promoting growth. It’s time for the government to take over the hard yards and give British industry a helping hand.

The Moody’s downgrade has been hailed as further evidence that the UK should ‘double down’ on its deficit reduction efforts. This would be true had the ratings agency not stressed that the greatest issue the UK faces at the moment is a lack of short and medium term growth.

I’m not asking for huge amounts of infrastructure spending with Chinese ‘ghost towns’ and ‘bridges to nowhere’ for the sake of occupying a stagnant construction industry, but rather I’m suggesting that a relaxation of the spending cuts through the next two years could provide the breathing space the UK economy needs. The fact that we have stopped sinking doesn’t mean we haven’t stopped drowning.

Mr Osborne has the perfect opportunity to say to his party, the rest of the House of Commons, the country and the markets on Wednesday, that the UK is going to start growing again. He has the power to do so and it seems that it is nothing but pride that stopping him from changing course. And we all know what pride comes before…