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David Laws’s defence of spending cuts doesn’t stand up

The former cabinet minister is wrong to argue that the cuts will enable a strong recovery.

If the coalition is ever in need of a hagiographer, it need look no further than David Laws. The former chief secretary to the Treasury has penned an embarrassingly uncritical defence of the government's spending cuts for the Guardian.

He declares that 2011 is likely to be the year that "recovery is entrenched". What he fails to mention is that, thanks to the coalition's doctrinaire spending cuts, it will be an anaemic recovery at best, with growth proceeding at a slower pace than in the recoveries of the 1970s, 1980s and 1990s (judging by the Office for Budget Responsibility's own figures).

Elsewhere, Laws credits the decision to begin cutting spending last year with enabling higher-than-expected growth. In fact, the strong growth Britain experienced in 2010 was largely the result of the last Labour government's fiscal stimulus. As the Times's Anatole Kaletsky (£) wrote in October:

The trouble is that monetary and fiscal policies take a long time to work their way through the economy – typically, one to two years. Yesterday's robust growth figures reflect last year's decisions by the Bank and the previous government. They tell us nothing, and indeed may mislead us, about how the new government's fiscal measures will interact with the Bank's monetary policies in the years ahead.

Yet Laws makes no mention of the fiscal stimulus: a policy opposed, after all, by his Conservative allies.

He notes that the "Lib Dem-inspired increase in the personal income-tax allowance will boost the incomes of basic-rate taxpayers", but fails to add that the gains are meagre compared to the losses from the coalition's tax rises and welfare cuts. The decision to raise the income-tax threshold to £7,475 will benefit low-to-middle-income earners by roughly £170 a year.

But, as Gavin Kelly pointed out in a recent piece for the NS, this is not enough to offset the rise in VAT (which will cost each household approximately £520 a year), let alone the far larger tax-credit cuts.

Laws gives the appearance of someone who has never read any of the arguments against his position. His return to government is surely imminent.