Leaders: Coalition policy must move towards co-ordinated growth

Published on 23/07/2012 00:00

WE cannot go on like this. A relapse into “double dip” recession and an admonition from the International Monetary Fund that policy should change if economic growth does not recover make it plain that the coalition’s existing policy stance is falling well short. They add to growing pressure for a change in that stance this autumn if the coalition government is to retain credibility both with voters and with markets.

In fairness, further stimulus is already in the pipeline. The Bank of England has sanctioned another £50 billion of monetary easing, taking the total so far to £375 billion. More is widely expected. In addition there is the Funding for Lending scheme specifically designed to encourage banks to take advantage of ultra-cheap finance to on lend to business. And the government is looking to accelerate infrastructure projects, both through the simplification of planning protocols and the underwriting of up to £40 billion in public investment projects to help encourage private sector investment.

Welcome though all these are, they are unlikely to prove enough. Cash shortage is not the main problem. Many large companies are flush with cash but do not have the confidence to commit to new investment that would boost jobs and growth. Here the paper today from the Institute for Public Policy Research on A Path Back to Growth provides a positive and constructive contribution to debate. Its key virtue is to shift the emphasis from the series of one-off emergency measures that have dominated the coalition’s response thus far to a wider, longer term policy change to address long-standing weaknesses in the UK economy. These include under-investment, vulnerability to external shocks, poor export performance and persistent inequalities. It advocates a path to “a different kind of British capitalism”. That is an ambitious wish-list, particularly when the UK‘s open economy has historically rendered it more vulnerable to external shocks and when our biggest export markets on the continent are mired in recession. But many would certainly welcome a shift away from over-reliance on banking-dominated financial services.

It is in finding new drivers for the economy where attention now needs to focus, and the IPPR paper is important in this process. The attraction for business is that its overall prescription offers the prospect of commitment to policies designed to achieve sustainable, longer term growth. One of the reasons for the fragility of business confidence is that stimulus policies, once seen to have induced a flicker of recovery, will be quickly suspended or withdrawn. This is a perception that the government needs urgently to address this autumn.

As the IPPR points out, even if a more co-ordinated growth programme does not deliver all that we would wish in its first 12 months, it might help to minimise the impact of a deepening crisis in the eurozone.

Best example to pedal to the masses

In their Tour de France triumph, Bradley Wiggins and Team Sky have pulled off a stunning coup. The Tour is one of the world’s most challenging and gruelling sporting events. It requires, in addition to peak fitness, a sustained commitment and determination to win.

Not only did Bradley Wiggins become the first British rider to win the Tour de France, but he did so emphatically, with a winning margin after the final stage round the streets of Paris yesterday of three minutes and 21 seconds. As admirable was the UK’s awesome display of teamwork as Mark Cavendish claimed his fourth consecutive final-stage victory.

There could scarcely be a more inspiring success for the UK athletes in the final stages of preparation for the start of the Olympics on Friday. But arguably more important is the encouragement that this victory will give, not only for the status of cycling as a sport in the UK, but also for thousands of young people to take up cycle racing as a serious hobby.

For as Bradley Wiggins has demonstrated, it is more than about pushing pedals. To this carefully considered and dedicated effort, he also brought a display of exemplary sportsmanship when he slowed down to allow a rival who had fallen victim to tacks on the road to recover.

Example is the spur to self-improvement. And this victory cannot but inspire many across the UK to get on their bike. We cannot all aspire to be Tour de France winners. Wiggins’ winning margin yesterday is the time it takes many of us just to get on the bike and start the wheels turning. But cycling is one of the most accessible and efficacious ways to get and to stay fit. What a superb example we now have.