Cameron needs to invest in Britain before the world will

The PM's plea for the world to "invest" is the cry of a desperate man.

After yesterday's stunningly bad GDP figures, David Cameron's plea for the world to "invest in Britain" can't help sounding desperate. The world might reasonably ask why it should spend money in a country that, Italy aside, is the only G20 member to be in recession. Cameron needs to invest in the UK before anyone else will.

The problem for the Prime Minister is that he tied his hands in advance by perpetrating the myth that even a small stimulus would "bankrupt" Britain. The truth, as Jonathan Portes wrote on The Staggers last week, is that there is no evidence that borrowing for growth (in the form of tax cuts and higher infrastructure spending) would trigger a bond market revolt. As even the IMF stated in its recent assessment of the British economy:

Further slowing consolidation would likely entail the government reneging on its net debt mandate. Would this trigger an adverse market reaction? Such hypotheticals are impossible to answer definitively, but there is little evidence that it would. In particular, fiscal indicators such as deficit and debt levels appear to be weakly related to government bond yields for advanced economies with monetary independence.

The coalition's decision to cut net investment by 47.9 per cent was a political choice, not an economic necessity.

Cameron and George Osborne are fond of pointing out that we can borrow at the lowest rates in our history (largely owing to our non-membership of the euro and the Bank of England's quantitative easing programme) but they have done nothing to take advantage of this fact. The result, with consumer spending depressed and businesses hoarding cash, is that growth has collapsed. Now, as I pointed out yesterday, Britain's AAA rating is in danger. A downgrade probably wouldn't lead to a rise in borrowing costs (as the experience of the US demonstrates) but it would be politically disastrous for Osborne. The Chancellor, ignoring advice to the contrary, chose to make our AAA credit rating the ultimate symbol of fiscal "credibility". Without it, he has none.

David Cameron called on international businesses to "invest in Britain, partner with Britain". Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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Labour tensions boil over at fractious MPs' meeting

Corbyn supporters and critics clash over fiscal charter U-turn and new group Momentum. 

"A total fucking shambles". That was the verdict of the usually emollient Ben Bradshaw as he left tonight's Parliamentary Labour Party meeting. His words were echoed by MPs from all wings of the party. "I've never seen anything like it," one shadow minister told me. In commitee room 14 of the House of Commons, tensions within the party - over the U-turn on George Osborne's fiscal charter and new Corbynite group Momentum - erupted. 

After a short speech by Jeremy Corbyn, shadow chancellor John McDonnell sought to explain his decision to oppose Osborne's fiscal charter (having supported it just two weeks ago). He cited the change in global economic conditions and the refusal to allow Labour to table an amendment. McDonnell also vowed to assist colleagues in Scotland in challenging the SNP anti-austerity claims. But MPs were left unimpressed. "I don't think I've ever heard a weaker round of applause at the PLP than the one John McDonnell just got," one told me. MPs believe that McDonnell's U-turn was due to his failure to realise that the fiscal charter mandated an absolute budget surplus (leaving no room to borrow to invest), rather than merely a current budget surplus. "A huge joke" was how a furious John Mann described it. He and others were outraged by the lack of consultation over the move. "At 1:45pm he [McDonnell] said he was considering our position and would consult with the PLP and the shadow cabinet," one MP told me. "Then he announces it before 6pm PLP and tomorow's shadow cabinet." 

When former shadow cabinet minister Mary Creagh asked Corbyn about the new group Momentum, which some fear could be used as a vehicle to deselect critical MPs (receiving what was described as a weak response), Richard Burgon, one of the body's directors, offered a lengthy defence and was, one MP said, "just humiliated". He added: "It looked at one point like they weren't even going to let him finish. As the fractious exchanges were overheard by journalists outside, Emily Thornberry appealed to colleagues to stop texting hacks and keep their voices down (within earshot of all). 

After a calmer conference than most expected, tonight's meeting was evidence of how great the tensions within Labour remain. Veteran MPs described it as the worst PLP gathering for 30 years. The fear for all MPs is that they have the potential to get even worse. 

George Eaton is political editor of the New Statesman.