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.

Grant Shapps on the campaign trail. Photo: Getty
Show Hide image

Grant Shapps resigns over Tory youth wing bullying scandal

The minister, formerly party chairman, has resigned over allegations of bullying and blackmail made against a Tory activist. 

Grant Shapps, who was a key figure in the Tory general election campaign, has resigned following allegations about a bullying scandal among Conservative activists.

Shapps was formerly party chairman, but was demoted to international development minister after May. His formal statement is expected shortly.

The resignation follows lurid claims about bullying and blackmail among Tory activists. One, Mark Clarke, has been accused of putting pressure on a fellow activist who complained about his behaviour to withdraw the allegation. The complainant, Elliot Johnson, later killed himself.

The junior Treasury minister Robert Halfon also revealed that he had an affair with a young activist after being warned that Clarke planned to blackmail him over the relationship. Former Tory chair Sayeedi Warsi says that she was targeted by Clarke on Twitter, where he tried to portray her as an anti-semite. 

Shapps appointed Mark Clarke to run RoadTrip 2015, where young Tory activists toured key marginals on a bus before the general election. 

Today, the Guardian published an emotional interview with the parents of 21-year-old Elliot Johnson, the activist who killed himself, in which they called for Shapps to consider his position. Ray Johnson also spoke to BBC's Newsnight:


The Johnson family claimed that Shapps and co-chair Andrew Feldman had failed to act on complaints made against Clarke. Feldman says he did not hear of the bullying claims until August. 

Asked about the case at a conference in Malta, David Cameron pointedly refused to offer Shapps his full backing, saying a statement would be released. “I think it is important that on the tragic case that took place that the coroner’s inquiry is allowed to proceed properly," he added. “I feel deeply for his parents, It is an appalling loss to suffer and that is why it is so important there is a proper coroner’s inquiry. In terms of what the Conservative party should do, there should be and there is a proper inquiry that asks all the questions as people come forward. That will take place. It is a tragic loss of a talented young life and it is not something any parent should go through and I feel for them deeply.” 

Mark Clarke denies any wrongdoing.

Helen Lewis is deputy editor of the New Statesman. She has presented BBC Radio 4’s Week in Westminster and is a regular panellist on BBC1’s Sunday Politics.