Agreeing With Nick

This seems to be a week for my making confessions. Yesterday it was my weakness for the elfin charms of Yvette Cooper. Today I have to admit that I find myself agreeing with Nick Clegg.

Now there was a brief time, back in 2010 during the election campaign, when agreeing with Nick was quite trendy. The party leaders did it during their first debate. It became a catchphrase, although if you had rushed it out on T shirts you would probably have lost your shirt since it was a phenomenon that was quite short lived.

Back then I too agreed with Nick, or at least one specific part of the Lib Dem manifesto. I thought then, and I still think now, that their plan to take the very low paid out of tax altogether is a sensible and potentially transformative one. I had in fact been arguing for such a scheme for some time. It ought to be the first instinct of any self respecting Tory.

Those on the left arguing that the government should abandon its plan to cut the deficit and spend to revivify the economy still don't get it. The boom we enjoyed during the noughties was one fuelled by Labour's profligacy. For a time it made our economy seem healthier than it really was. It disguised the poor state of our manufacturing, the hopeless state of our skills base and the truly terrifying imbalances in an economy divided between wealthy industries like financial services and industrial wastelands in the north. It was disguised by cheap credit fuelling a consumer boom and a public sector spoon fed money to create work for Labour's lost generation. Yet still the Labour leader argues that we should be borrowing money to create more public sector jobs to compensate for the uncompetitiveness his party helped encourage and would, given the chance, now exacerbate.

This tends to ignore the fact that we are even now borrowing in excess of £100 billion to pay for public services. Still what's a few billion more say Labour and the unions? Just add it to the pile. The likes of Polly Toynbee even admit that it is counter intuitive to argue that borrowing and spending more creates growth. That's because it doesn't in any real sense. Yes in the short term it creates a few jobs and maybe gives us a short term spurt. But in the long term that debt has to be repaid or at least serviced. That means that future spending will be affected and cuts made or taxes raised. 

There is no easy way out of our current predicament, other than hard work and penny pinching. Those arguing for Keynesian solutions, the modern equivalent of a magic wand, forget that Labour abandoned Keynesianism the moment Brown went on his borrowing and spending binge during the boom. Keynesian economics was supposed to be a way of saving money in the boom times in order to spend during the declines. It was a way of evening out the natural economic cycle, not a way of stopping it and creating growth out of nowhere as some seem to imagine.

Our current extremely modest plans to cut the deficit (not the debt which has now grown above a trillion) are keeping our bankers happy. We should be grateful that they are so amenable, or perhaps we should be grateful that we have a government that is prepared to take the very small steps it is taking towards fiscal sanity rather than take the apparently easy option favoured by Labour which would lead to further disaster and decline. Public sector jobs have to be paid for. 

Yes yesterday's news about GDP was bad but it's hardly surprising. We need to earn more on the world's markets and that is harder given that many are not buying. If Germany is struggling then we are unlikely to fare better. Labour's solution however is to try and stoke up another consumer boom and create public sector jobs to plaster over the cracks. There really are none so blind as those who will not see.

But cutting taxes (income taxes not VAT) is a good idea. It will help those earning the least who are suffering and struggling the most whilst rewarding those who want to work. It might even encourage more to do so and get out of the benefits system if the cuts can be forced through parliament. This economic crisis is hitting the so called squeezed middle the hardest and they should be helped where possible.

Where is the money to come from? It will have to be cut from somewhere. There is plenty of scope for it in our fat and unproductive public sector. Why not freeze their budgets for the next 3 years and tell them to find efficiency savings if they want to increase them or their own salaries? There is plenty of fat to trim. Well managed businesses constantly look for savings and increases in productivity. Public sector staff should be told that they must now do the same.

The times of plenty are over because they were always a fantasy and illusion created by money we didn't have. Things could be a lot worse and would be if Labour had their way. We should be thankful that Nick agrees with Dave and George and they with him.

PS

Of course there is one very easy way of saving the billions needed for a tax cut. How about leaving the EU? What about it, Nick?...... Nick?