Six reasons why Cameron is wrong on the economy

It is increasingly clear that the PM is out of his depth and out of touch. This is "nothing for noth

In a speech on the economy yesterday that was 2,235 words long, an out-of-touch David Cameron only mentioned jobs and unemployment once each. He didn't mention the young at all in a week when youth unemployment hit the million mark. It is becoming increasingly apparent that Cameron is a) totally out of his depth when it comes to the economy; b) has no clue what to do to fix the problem; c) has little sympathy for those who are less fortunate than he is. He just doesn't care. Cameron has failed to recognise that his government's economic policies are in complete disarray, and all he can do is resort to spin and obfuscation. Austerity in the UK has failed.

The part of the speech that really struck me was this:

[T]here are some who seriously try to argue that additional spending and borrowing will actually lead to less debt in the end ... despite the fact that no evidence supports this assertion. These arguments are just a way of avoiding difficult decisions ... the kind of something for nothing economics that got us into this mess ... which is why no indebted European country is taking that path. Nor are there any major European opposition parties in high deficit countries arguing for additional borrowing -­ except here in Britain.

It is about time we put this joker straight.

1) Actually, additional spending would stimulate growth and that would increase tax revenues, as it did in the US under the Clinton boom. In case you haven't noticed, Dave, your pal Osborne slashed spending and raised taxes, which increased borrowing. That is why you are in such a mess. What if the government borrowed £100bn that was funded by the MPC through QE, and used the money to say, build ten nuclear power stations. That would lower the cost of fuel, employ people and help masses of small and large firms. It would raise productivity and in the long-run lower our debts, wouldn't it? If not, why not, Prime Minister?

2) There is an enormous amount of evidence to suggest that fiscal and monetary stimulus can increase growth. There is actually no evidence from anywhere in the world to support the ideology you have been following of an expansionary fiscal contraction, especially when it is not possible to lower interest rates. Such a view is "oxymoronic", as Larry Summers has said.

3) These arguments are not a way of avoiding making difficult decisions. They are what has to happen, because your government made the wrong decisions by imposing austerity before the recovery was fully established. You can't blame the eurozone, as it was clear when you formed your government that there were major downside risks to UK recovery from the European periphery and European banks. You just chose to look the other way and go forward with your mistaken policies, wilfully disregarding the potential dangers for the British people.

4) "Something for nothing economics" is a nice phrase but is totally meaningless. If I recall, Dave, you matched Labour's spending plans, supported deregulation and opposed rescuing the banks. It looked like you may have to do the latter if things continue the way they are. Lloyds and RBS are in trouble again. What you did was slash and burn hoping for growth, but you killed off the tender shoots of recovery. The policies you have undertaken without a growth plan is "nothing for nothing economics".

5) "No indebted European country is taking this path." Well, actually, most other European countries grew faster than the UK did over the last twelve months. GDP growth was as follows. Belgium 1.8 per cent; Germany 2.6 per cent; France 1.6 per cent; Netherlands 1.1 per cent; Austria 2.8 per cent; Finland 2.8 per cent; and the UK 0.5 per cent. The eurozone is headed into recession because they are stuck in monetary union. Portugal this week went to the IMF and asked for more stimulus as austerity has failed there too. Austerity doesn't work when banks aren't lending and your major export market is heading into depression. The German central bank, the Bundesbank, today cut its 2012 growth forecast to between 0.5 per cent and 1 per cent, from a June prediction of 1.8 percent. It said a "pronounced" period of economic weakness can't be ruled out if the crisis worsens.

6) "Nor are there any major European opposition parties in high deficit countries arguing for additional borrowing -­ except here in Britain". Denmark has lower bond yields than the UK and lower unemployment, and its new government is introducing more fiscal stimulus. These other countries would do this if they could, but they are stuck in a fiscal and monetary straightjacket. That is why there is talk of the eurozone breaking up.

Dave, you are in a big mess on the economy. What are you going to do if the crisis worsens, as it looks like it might? Panic, I guess.

David Blanchflower is economics editor of the New Statesman and professor of economics at Dartmouth College, New Hampshire

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The government has admitted it can curb drugs without criminalising users

Under the Psychoactive Substances Act it will not be a criminal offence for someone to possess for their own consumption recreational drugs too dangerous to be legally sold to the public.

From Thursday, it may be illegal for churches to use incense. They should be safe from prosecution though, because, as the policing minister was forced to clarify, the mind-altering effects of holy smells aren’t the intended target of the Psychoactive Substances Act, which comes into force this week.

Incense-wafters aren’t the only ones wondering whether they will be criminalised by the Act. Its loose definition of psychoactive substances has been ridiculed for apparently banning, among other things, flowers, perfume and vaping.

Anyone writing about drugs can save time by creating a shortcut to insert the words “the government has ignored its advisors” and this Act was no exception. The advisory council repeatedly warned the government that its definition would both ban things that it didn’t mean to prohibit and could, at the same time, be unenforcable. You can guess how much difference these interventions made.

But, bad though the definition is – not a small problem when the entire law rests on it – the Act is actually much better than is usually admitted.

Under the law, it will not be a criminal offence for someone to possess, for their own consumption, recreational drugs that are considered too dangerous to be legally sold to the public.

That sounds like a mess, and it is. But it’s a mess that many reformers have long advocated for other drugs. Portugal decriminalised drug possession in 2001 while keeping supply illegal, and its approach is well-regarded by reformers, including the Liberal Democrats, who pledged to adopt this model in their last manifesto.

This fudge is the best option out of what was politically possible for dealing with what, until this week, were called legal highs.

Before the Act, high-street shops were free to display new drugs in their windows. With 335 head shops in the UK, the drugs were visible in everyday places – giving the impression that they couldn’t be that dangerous. As far as the data can be trusted, it’s likely that dozens of people are now dying each year after taking the drugs.

Since legal highs were being openly sold and people were thought to be dying from them, it was obvious that the government would have to act. Until it did, every death would be blamed on its inaction, even if the death rate for users of some newly banned drugs may be lower than it is for those who take part in still-legal activities like football. The only question was what the government would do.

The most exciting option would have been for it to incentivise manufacturers to come up with mind-altering drugs that are safe to take. New Zealand is allowing drug makers to run trials of psychoactive drugs, which could eventually – if proved safe enough – be sold legally. One day, this might change the world of drug-taking, but this kind of excitement was never going to appeal to Theresa May’s Home Office.

What was far more plausible was that the government would decide to treat new drugs like old ones. Just as anyone caught with cocaine or ecstasy faces a criminal record, so users of new drugs could have been hit with the same. This was how legal highs have been treated up until now when one was considered serious enough to require a ban.

But instead, the government has recognised that its aim – getting new drugs out of high-street shop windows so they don’t seem so normal – didn’t depend on criminalising users. A similar law in Ireland achieved precisely this. To its credit, the government realised it would be disproportionate to make it a criminal offence to possess the now-illegal highs.

The reality of the law will look chaotic. Users will still be able to buy new drugs online – which could open them to prosecution for import – and the law will do nothing to make drugs any safer. Some users might now be exposed to dealers who also want to sell them more dangerous other drugs. There will be few prosecutions and some head shop owners might try to pick holes in the law: the government seems to have recognised that it needed a better definition to have any chance of making the law stick.

But, most importantly for those of us who think the UK’s drug laws should be better at reducing the damage drugs cause, the government, for the first time, has decided that a class of recreational drugs are too dangerous to be sold but that it shouldn’t be a crime to possess them. The pressure on the government to act on legal highs has been relieved, without ordinary users being criminalised. For all the problems with the new law, it’s a step in the right direction.

Leo Barasi is a former Head of Communications at the UK Drug Policy Commission. He writes in a personal capacity