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.

Photo: Getty
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Who will win the Copeland by-election?

Labour face a tricky task in holding onto the seat. 

What’s the Copeland by-election about? That’s the question that will decide who wins it.

The Conservatives want it to be about the nuclear industry, which is the seat’s biggest employer, and Jeremy Corbyn’s long history of opposition to nuclear power.

Labour want it to be about the difficulties of the NHS in Cumbria in general and the future of West Cumberland Hospital in particular.

Who’s winning? Neither party is confident of victory but both sides think it will be close. That Theresa May has visited is a sign of the confidence in Conservative headquarters that, win or lose, Labour will not increase its majority from the six-point lead it held over the Conservatives in May 2015. (It’s always more instructive to talk about vote share rather than raw numbers, in by-elections in particular.)

But her visit may have been counterproductive. Yes, she is the most popular politician in Britain according to all the polls, but in visiting she has added fuel to the fire of Labour’s message that the Conservatives are keeping an anxious eye on the outcome.

Labour strategists feared that “the oxygen” would come out of the campaign if May used her visit to offer a guarantee about West Cumberland Hospital. Instead, she refused to answer, merely hyping up the issue further.

The party is nervous that opposition to Corbyn is going to supress turnout among their voters, but on the Conservative side, there is considerable irritation that May’s visit has made their task harder, too.

Voters know the difference between a by-election and a general election and my hunch is that people will get they can have a free hit on the health question without risking the future of the nuclear factory. That Corbyn has U-Turned on nuclear power only helps.

I said last week that if I knew what the local paper would look like between now and then I would be able to call the outcome. Today the West Cumbria News & Star leads with Downing Street’s refusal to answer questions about West Cumberland Hospital. All the signs favour Labour. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.