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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Emmanuel Macron can win - but so can Marine Le Pen

Macron is the frontrunner, but he remains vulnerable to an upset. 

French presidential candidate Emmanuel Macron is campaigning in the sixth largest French city aka London today. He’s feeling buoyed by polls showing not only that he is consolidating his second place but that the voters who have put him there are increasingly comfortable in their choice

But he’ll also be getting nervous that those same polls show Marine Le Pen increasing her second round performance a little against both him and François Fillon, the troubled centre-right candidate. Her slight increase, coming off the back of riots after the brutal arrest of a 22-year-old black man and Macron’s critical comments about the French empire in Algeria is a reminder of two things: firstly the potential for domestic crisis or terror attack to hand Le Pen a late and decisive advantage.  Secondly that Macron has not been doing politics all that long and the chance of a late implosion on his part cannot be ruled out either.

That many of his voters are former supporters of either Fillon or the Socialist Party “on holiday” means that he is vulnerable should Fillon discover a sense of shame – highly unlikely but not impossible either – and quit in favour of a centre-right candidate not mired in scandal. And if Benoît Hamon does a deal with Jean-Luc Mélenchon – slightly more likely that Fillon developing a sense of shame but still unlikely – then he could be shut out of the second round entirely.

What does that all mean? As far as Britain is concerned, a Macron or Fillon presidency means the same thing: a French government that will not be keen on an easy exit for the UK and one that is considerably less anti-Russian than François Hollande’s. But the real disruption may be in the PR battle as far as who gets the blame if Theresa May muffs Brexit is concerned.

As I’ve written before, the PM doesn’t like to feed the beast as far as the British news cycle and the press is concerned. She hasn’t cultivated many friends in the press and much of the traditional rightwing echo chamber, from the press to big business, is hostile to her. While Labour is led from its leftmost flank, that doesn’t much matter. But if in the blame game for Brexit, May is facing against an attractive, international centrist who shares much of the prejudices of May’s British critics, the hope that the blame for a bad deal will be placed solely on the shoulders of the EU27 may turn out to be a thin hope indeed.

Implausible? Don’t forget that people already think that Germany is led by a tough operator who gets what she wants, and think less of David Cameron for being regularly outmanoeuvered by her – at least, that’s how they see it. Don’t rule out difficulties for May if she is seen to be victim to the same thing from a resurgent France.

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