Leader: Stimulate growth and debt reduction will follow

IT WOULD be tempting for government ministers to dismiss fresh calls for a moderation of the "breakneck deficit-reduction plan" and resort to a Plan B as predictable griping from the usual suspects. Indeed, here in Scotland, the squeeze on government spending, delayed a year, has barely got under way than it is being held responsible for all manner of ills.

There is no question that the deficit must be brought down and the growth in debt curtailed and reversed. Market confidence in sterling and government debt would be badly undermined were a credible, effective and sustained deficit-reduction policy not in force. However, growing evidence in recent weeks points to a worrying slowdown, both in manufacturing and services, while construction has suffered a sharp contraction. The key problem bearing down on business confidence is the squeeze on household income from a potent combination of inflation, constrained bank lending, petrol-price increases and higher tax.

Abandoning the deficit targets at so early a stage would be little short of catastrophic. The government needs to bolster and reinforce those elements of policy designed to stimulate investment and growth. Cutting red tape, accelerating planning reform and providing greater incentives to take on new staff need to be pushed through with greater emphasis. There is no silver bullet that will create growth overnight. But the government needs to be ready to respond to changing circumstances and to act to avoid a deepening slowdown.

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