The political debate over the past year has been dominated by argument over the deficit.  How far and how fast to cut.  Yet the signals in this country and others in recent weeks show that this debate is missing a more urgent point: how countries can secure the growth needed to lift their economies out of recession.

The phrase “double dip” is something of a misnomer.  In truth we never fully recovered from the financial collapse of 2008.  We did have a couple of quarters of decent growth as a result of the outgoing Labour Government’s efforts, but this was quickly choked off after the election.

The issue is not just how much Government spends but also what it spends on.  Much expenditure is distributional, ensuring benefits and services are delivered.  Other expenditure contributes more directly to economic growth.  The debate on the deficit has tended not to distinguish between the two.

The idea that Government can simply cut spending and hope that the growth and jobs will come is not being borne out either by the performance of the past nine months or the declining level of confidence in future prospects.

This is of course not just a UK problem but an international one.  Yet what our Government does by way of response can have an impact.  The “plan for growth” produced at the time of the budget has failed to convince business that the Government is serious about proactively trying to foster growth.

It is little wonder that the Director General of the CBI has waded into this debate calling for the Government to step up a gear and pointing out the huge need for infrastructure investment in the UK.

There is certainly the potential for job creation in the transition to a lower carbon economy and in putting policy weight behind the rhetoric of rebalancing the economy and supporting the activity of making things.  Yet there is no sense of government energy and ambition in the action that accompanies this rhetoric. 

Perhaps, a year and a half in, the reality of the Government’s character is becoming clearer – it springs into action when faced with an immediate crisis such as the August riots, yet is failing to do the medium term policy making that would lead to more growth and more jobs.

This is the urgent issue facing the country.  Not only do we need a strong plan for growth for the UK with policy meat behind it.  We also need Britain to be leading this debate internationally.

This article is also available on the Progress Online website. Posted on 6 September 2011.


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