Davis's call for faster cuts is economically reckless

An accelerated cuts programme would prolong the recession.

The most notable section of David Davis's speech on the economy this afternoon, provocatively entitled "There is an alternative: why the government needs a growth strategy", was that on the spending cuts. Davis's contention is that George Osborne, rather than going "too far, too fast", has cut too slowly. He pointed out that that deficit was £125bn last year and challenged Keynesians to explain why "a fiscal stimulus of this size is not already making our economy grow."

It's an argument that many on the Tory backbenches will sympathise with but it's also hopelessly misconceived. The deficit that Davis highlights is not the result of Osborne borrowing for growth but of a collapse in tax receipts caused by the recession and a higher-than-expected benefits bill (the cost of failure, in other words). And while it's true that the cuts to current spending have been more modest than many claim (current spending is down 2.9% or £11.5bn on 2009-10 levels), the cuts to capital spending, the most valuable spending in growth terms, have been far larger, with investment down 47.9% (£24.4bn) in the last two years.

These cuts go some way to explaining why Britain, with the exception of Italy, is the only G20 country to have suffered a second recession. When consumer spending is depressed and businesses are hoading cash, the government must act as a spender of last resort and stimulate growth through tax cuts and higher spending. If it fails to do so, it crashes the economy, which is exactly what has happened.

Davis also underestimated the damage that faster cuts would have done. An accelerated cuts programme, with even greater job losses (393,000 public sector jobs have been cut so far), would likely have tipped the economy back into recession even earlier.

Former Conservative leadership candidate David Davis. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

Photo: Getty
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Jeremy Corbyn may be a Eurosceptic, but he still appeals to the values of many Remainers

He reassures Labour MPs defending majorities in heavily pro-EU areas that things will be OK.

There are two facts about Brexit that everyone seems to forget every few weeks: the first is that Jeremy Corbyn is a Eurosceptic. The second is that the first fact doesn't really matter.

The Labour leader's hostility to the European project is back in the news after he told Andrew Marr that the United Kingdom's membership of the single market was inextricably linked with its EU membership, and added for good measure that the “wholesale importation” of people from Eastern and Central Europe had been used to “destroy” the conditions of workers, particularly in the construction industry.

As George Eaton observes on Twitter, Corbyn voted against the creation of the single market in 1986 (and the Maastricht Treaty, and the Lisbon Treaty, and so on and so on). It would be a bigger shock if the Labour leader weren't advocating for a hard exit from the European Union.

Here's why it doesn't matter: most Labour MPs agree with him. There is not a large number of Labour votes in the House of Commons that would switch from opposing single market membership to supporting it if Corbyn changed his mind. (Perhaps five or so from the frontbenches and the same again on the backbenches.)

There is a way that Corbyn matters: in reassuring Labour MPs defending majorities in heavily pro-Remain areas that things will be OK. Imagine for a moment the reaction among the liberal left if, say, Yvette Cooper or Stephen Kinnock talked about the “wholesale importation” of people or claimed that single market membership and EU membership were one and the same. Labour MPs in big cities and university towns would be a lot more nervous about bleeding votes to the Greens or the Liberal Democrats were they not led by a man who for all his longstanding Euroscepticism appeals to the values of so many Remain voters.

Corbyn matters because he provides electoral insurance against a position that Labour MPs are minded to follow anyway. And that, far more than the Labour leader's view on the Lisbon Treaty, is why securing a parliamentary majority for a soft exit from the European Union is so hard. 

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