It hasn't been a great week or so for the government. There was that reversal of the veto that wasn't a veto on Europe that so upset the Tory backbenchers. And there was the resignation of another Lib Dem minister, this time Chris Huhne, the environment secretary, after he was charged with perverting the course of justice. Then there's the "sircumcision" of Fred Goodwin.
The government hasn't told us whether there are plans for the previously unheard-of Honours Forfeiture Committee to strip gongs from other figures who performed terribly during the recession. Will other bankers get the call from Sir Bob Kerslake, the top civil servant who chairs the committee? If not, why not? Will Mervyn King -- who received a knighthood from the coalition even after failing to spot the biggest financial collapse in a hundred years -- be investigated? Unsurprisingly he is resisting attempts by the Treasury select committee to look into the Bank of England's failures in the recession. Recall that moral hazard nonsense over Northern Rock? Off with his head, I say!
Continuing our trawl through a bad week for David Cameron and co, Stephen Hester, Goodwin's successor as chief executive at Royal Bank of Scotland, was bullied into declining his bonus. RBS should have seen this particular PR disaster coming and acted pre-emptively -- by encouraging senior directors to donate half of their bonus package to charity, say. If they are searching for a suitable charity they should look no further than the Prince's Trust, given the work it does for young people. After all, the downturn has hit young people hardest.
All in all, we have less of an idea today than we did a week ago what the coalition's policies are on Europe, honours and bonuses. And, of course, there is that small matter of the tanking economy. Spin over substance is becoming a developing theme as the economy slows.
I was recently called up by a producer from BBC2's Newsnight who wanted me to come on to the show and discuss the economy. Three hours later, I was told that Newsnight had approached the government to get a minister to come and debate with me but none was forthcoming. This suggests to me that the coalition is increasingly afraid of confronting the data -- or even yours truly. That old canard, that everything is Labour's fault, has passed its sell-by date. It is now the coalition's recession to own as unemployment heads towards three million.
George Osborne has driven the economy into a slump that is as deep as the Great Depression, and longer-lasting, in terms of output. This presents the coalition with a major problem as people start to "eat the data", by which I mean that the recession is starting to become close and personal. Everyone knows a youngster who is trying really hard to find a job and discovering that there simply aren't any openings, despite the government's protestations to the contrary.
Labour needs a bold strategy for growth and jobs that goes further than its five-point plan presented at the beginning of the year. Instead, it needs to provide a different narrative. Deficit reduction when there is no bank lending and no government spending is doomed to failure, as Osborne has illustrated. Labour's new focus should be on a growth plan that gets the deficit down in the medium term, with a set of gateways that determine the speed of deficit reduction. For example, when unemployment falls below 7 per cent, measures such as a tax rise could kick in. This would work much in the way that Charles Evans, president of the Chicago Fed, advocated in a recent speech on monetary policy. This is credible.
So, what would I do to get the economy moving? There are immediate things such as addressing the alarming rise in youth unemployment. In addition, Labour should get behind plans for an infrastructure bank and allow it to lend at least £100bn. Not only is this a growth strategy, it is also a deficit-reduction strategy once tax revenues rise beyond the recession. An infrastructure bank could easily be funded directly by the Bank of England's Monetary Policy Committee through quantitative easing. In any case, the government can borrow at historically low rates of roughly 3 per cent for 30 years and it should do just that. Investing in infrastructure at such low cost would be very smart economics.
Another idea would be to invest in power generation, which would boost the private sector and give a fillip to growth and jobs. Hiring small firms is a great way to overcome capital constraints.
The rising cost of oil has had major effects on people's living standards and we need to make the country more self-sufficient in power as North Sea oil runs out. So why not allow communities to bid for power projects in their locale, with an emphasis on being green and creating jobs? These could be a tide-based system, or a windmill, or a solar power station, or whatever the people decide is most appropriate for their area. Any project would have to include plans to train and employ lots of young people. It would be perfectly reasonable to give particular preference to high-unemployment areas such as the north-east.
A particular strength of this idea is that it is a simple mechanism for also reducing the cost of energy to firms and households. And it would be popular. It could raise the productivity of UK plc, as well as the share prices of UK firms as the cost of energy inputs falls.
In contrast to a policy of austerity, it's hard to see any risks to the downside in this idea: the credit rating agencies and the bond markets would love it. Go for it, Eds.