While Britain is fixated on the fall of the house of Murdoch, a much greater drama is unfolding.
While Britain is fixated on the fall of the house of Murdoch, a much greater drama is unfolding. The eurozone crisis has spread from Greece and is now threatening Italy, whose economy is five times larger. If Italy defaults, the continent will fall back into recession — and Britain will be in trouble. The great tap of international borrowing on which we depend may run dry again.
The best chance of avoiding such a calamity rests with Angela Merkel and the patience of the German taxpayer. So far, however, Ms Merkel is refusing to create the tool which the Greeks and Italians want: a eurobond. This would allow the eurozone to borrow directly, as a single entity, but it would bind member states more closely together. It would further mean giving Brussels more control over taxes, spending, wages and welfare — creating a federalist core of the eurozone. No sensible German likes that idea. But the alternative, an Italian default and a Europe-wide debt crisis, could be worse.
George Osborne is looking on nervously. He is calling for ‘decisive action’ in the eurozone — urging Merkel on. But if Britain were reducing its debt, or pursuing a radical pro-growth strategy, we would have far less to fear. Instead Osborne has adopted a version of Alistair Darling’s recovery plan and will shave a whisker — just under 1 per cent a year — off what Darling and Brown proposed to spend. The rest of the plan — cheap debt, large deficits and a see-no-evil approach to inflation — is intact.
Osborne is lucky. For now, his government can borrow as cheaply as Germany can, even though Britain has a Greek-style deficit and Italian-style levels of state spending. But market sentiment can change in an instant, as Italy and Greece are learning. The danger for Osborne is that these nervous markets begin to doubt Britain’s recovery plan: not so much his proposed cuts, but the growth he has promised. Where is it? The Chancellor has raised tax and let inflation rip — not exactly a recipe for recovery. The fear is that, very soon, markets may conclude that Britain, like Italy, has fallen into a low-growth, high-debt trap. Osborne should take this threat seriously. Many in Britain are beginning to ask what his growth strategy really is. Is he struggling to articulate one? Or has he struggled to think of one? The solutions should be obvious. Emergency tax cuts for the low-paid — funded by more ambitious savings on state spending — would be a good place to start. Much more needs to be done to encourage British people to take the jobs that are on offer.
Regulation needs to be cut, too, a task that would be infinitely easier if David Cameron were to negotiate a looser relationship with the European Union. And if the eurozone does suffer a crunch, he would have a glorious opportunity to do just that.
Osborne does not need a Plan B, as Labour suggests. He needs a better Plan A to encourage growth as a matter of urgency. The ‘danger zone’ from which he claimed to have rescued Britain
is looming again. Markets are trembling. The Chancellor is correct to say that Europe needs decisive action. But Britain needs a little more of that, too.
Weather or not
If a tabloid used a single spell of cold weather to try to pooh-pooh the theory of global warming, it would rightly be accused of unscientific nonsense. Yet Sir John Beddington, the government’s scientific adviser, has proposed that the government do the same in reverse. In a report entitled ‘International Dimensions of Climate Change’, he calls upon the government to use weather-related disasters as ‘policy windows’ to push through unpopular policies to cut carbon emissions.Every time there is a flood in Bangladesh, in other words, we can expect another couple of pence of duty on a litre of unleaded.
Sir John Beddington’s job is to advise on science. Instead, he appears to have appointed himself minister for propaganda. Even the Met Office accepts that individual meteorological events cannot be attributed to climate change. Drought and tempest were with us before industrial civilisation — though to read Sir John’s report it might be easy to imagine they were not. On half a dozen occasions he brings up the subject of Hurricane Katrina as supposed evidence of climate change. He must know that Katrina was far from the strongest storm to hit the US coast — it was only category three out of five by the time it landed, and there have been 15 stronger ones in the past 100 years, the strongest back in 1935 — but it struck a particularly vulnerable city.
The destruction caused by bad weather is only partly a function of the weather itself. Human disasters are more often caused by too many people living in one place with poorly engineered defences. Improve those defences, and lives can be saved. That is a subtlety lost on Sir John Beddington. Britain has no end of green pressure groups, but only one chief scientific adviser. He would better earn his £165,000 a year by sticking to his remit.
Comments