There’s a pattern emerging to George Osborne’s autumn. He gives a big domestic set piece speech on growth and then immediately leaves the country for a meeting of European finance ministers. It is what he did straight after his conference speech last month and what he will do after the growth review on 29 November. It is a reminder that the fate of the British economy is uncomfortably linked to the fortunes of the floundering eurozone.
The Prime Minister and the Chancellor have never been more worried about the economic outlook than they are now. One Downing Street aide remarks: ‘it is not quite sleepless nights territory. But it is bloody serious.’ Fears of a chaotic break-up of the euro have been heightened by the events of the past few days. There are concerns that the new governments in Greece and Italy will not be able to deliver on their austerity programmes and that the Germans still have no intention of letting the European Central Bank act as a lender of last resort.
But however bleak the situation across the Channel is, the coalition must do whatever it can to promote growth at home. The tendency to view everything else as small beer compared to a resolution of the eurozone crisis must be resisted. Cameron and Osborne are going to have to concentrate both on how to solve the seemingly intractable problems of the single currency, and on how to boost Britain’s growth without spending more public money.
One consequence of the Chancellor moving his family from Notting Hill to Downing Street earlier this year is that he now has time to go for a jog every morning. His regular lap of St James’s Park might provide photographers with the odd undignified snap. But this short-term pain is well worth the medium-term gain. There’s a lesson in this for the coalition. The Chancellor is fond of saying that in the current circumstances, growth must come first; that social and environmental concerns must now take a backseat to the urgent task of getting the economy moving again. But this doctrine has not been applied across the board. There have been examples of it happening — notably in Osborne’s declaration that Britain won’t reduce its carbon emissions any faster than the rest of Europe and his plan to use the autumn statement to exempt energy-intensive industries from various carbon levies — but they remain the exception not the rule. Too often, the status quo has prevailed because it has been deemed politically damaging to challenge it. The result is that many of the barriers to enterprise have remained in place.
When Osborne addressed the 1922 Committee of Tory backbenchers last week, he asked them for their suggestions for the growth review. The bulk of them concerned reducing the burden of regulation. Osborne listened sympathetically, frequently nodding in agreement. So, one might ask, what’s the problem? As so often, it is that the Liberal Democrats do not share the Tory analysis. They are adamant that there’s no proof that deregulation boosts economic growth. They dismiss it as a Tory ideological obsession.
At a recent meeting of the Liberal Democrat parliamentary party, every single one of their MPs was opposed to Adrian Beecroft’s proposal to simplify employment law by replacing unfair dismissal with severance pay based on length of service. Even this small step is too much for them. This means that the idea is done for. Cameron and Osborne won’t dare their coalition partners to bring the government down over the issue.
Nos. 10 and 11 are furious about newspaper reports of tensions between Osborne and Cameron’s senior adviser Steve Hilton over this retreat. The Cameroons, who are determined not to fall into the Brown/Blair trap of a Treasury at war with No. 10, are acutely sensitive to anything that pits the two buildings against each other. Cameron called in all Tory special advisers for an extraordinary meeting in Downing Street on Tuesday afternoon, and warned them not to brief against fellow Conservatives. But Cameron is misguided if he really thinks these Tory special advisers are to blame for leaks. The culprits in this case are widely suspected to be Liberal Democrats. One Tory complains that there is a better than fifty-fifty chance of the Lib Dems leaking the contents of any sensitive meeting they are in.
So what to do about Lib Dem leaks? There is currently some head-scratching in Downing Street about this. A solution being urged on Hilton is to adopt a ‘not in front of the children’ rule when it comes to Liberal Democrats and their special advisers. But as a long-time colleague of his says, ‘one of the problems with Steve is he doesn’t give a shit who is in the room.’
There are other problems engendered by the Lib Dems. Some worry that the philosophical divide between the coalition partners might end up limiting the scope of the growth review. One Tory MP points to the debate about youth unemployment as an example of where the two intellectual agendas collide. Youth unemployment hit one million this week and there are fears that figures next week will show that one in four 16- to 18-year-olds are not in education, employment or training.
The Tories are keen to adopt Beecroft’s recommendations as a solution for young people. The idea is that companies would be more prepared to take on school leavers and graduates if they came without so many employment rights. But the Liberal Democrats are opposed to what one Clegg ally calls ‘a race to the bottom’. Instead, they favour financial incentives for companies to hire young workers. Vince Cable is pushing for cash payments to firms that take on apprentices. Tories, understandably, worry about both the cost and the market-distorting effects of this kind of government action.
Two of the main planks of the growth review are already known. There will be a credit-easing programme to boost the amount of money flowing to small and medium-sized enterprises, and a new pensions infrastructure fund designed to encourage up to £50 billion of private sector investment in infrastructure projects.
These measures have the potential to assist in the creation of jobs and growth. But in the current economic emergency the coalition needs to use every tool at its disposal. A growth review that doesn’t fully apply Osborne’s mantra and put growth first would be a missed opportunity.
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