With yesterday’s news that the economy shrunk by 0.7 per cent in the last quarter, George Osborne’s economic credibility is waning. But not for the reasons produced by Ed Balls. “Austerity” hasn’t failed because it hasn’t been tried. State spending has risen during this Parliament. The chancellor oversold a small cuts package as a large one, and assumed that private sector growth would come without deregulation or tax cuts. This approach has failed. What is needed is a change in mindset in favour of radical cuts to business regulation. The government should liberalise employment regulation, radically reform planning law to allow more homes to be built, and scrap employers’ national insurance contributions to reduce the costs of employment. To allow the private sector to grow, government spending, taxes and regulation all need to be cut. Give austerity a chance.
Sam Bowman is head of research at the Adam Smith Institute.
To get our economy back on track, businesses must have confidence to take bold decisions. Disappointing GDP figures, together with the ongoing Eurozone crisis, risk undermining fragile confidence. But gloom that leads to extreme caution is the last thing our economy needs. The latest employment figures are positive (total employment is up 180,000 in the last quarter) and the deficit has already been cut by 25 per cent. Like the vast majority of economic statistics, GDP figures are based on survey data. That is why we shouldn’t get too carried away. Labour may like to play Cassandra and talk down our economic prospects, but the reality is that businesses are sitting on record amounts of cash that could be invested. By making it easier for infrastructure projects to go ahead and improving access to credit, the government is helping get money into the economy. That is the right approach, and the only way out of this economic mess.
Sam Gyimah is Conservative MP for East Surrey.