I want to make some remarks about the Government’s approach to economic growth – and of the kind of economy we want to grow. This is of course a topical question in light of last week’s disappointing figures for GDP growth. We are under no illusions in the Government about the difficult economic circumstances that we inherited from Labour. The Chancellor and the Governor of the Bank of England have said that recovery from the recession is likely to be ‘choppy’ for some time. The Prime Minister and I have both said that the nation faces a long, hard road back to prosperity.
It is worth saying that there are also some strongly positive signals in the economy. During the course of this week, we have seen the publication of three sets of important economics indicators on manufacturing, construction and services – all moving in a positive direction. Things are difficult, but it is not all doom and gloom.
So the Coalition Government is determined not only to eliminate the deficit, and to restore economic growth. But let me be clear: paying off the deficit is a means, not an end in itself. We are determined to foster a new model of economic growth, and a new economy – one built on enterprise and investment, not unsustainable debt. We seek nothing less than a new model of sustainable growth.
Paying off the deficit is vital part of our plan for growth. Necessary for restoring confidence in Britain, necessary for keeping down the cost of borrowing for families and business, necessary to avoid paying extra interest to the bond markets. Necessary – but not sufficient. If the Coalition Government simply pays off the deficit, but leaves the underlying economy unchanged, we will have failed.
We are not in Government simply to clean up Labour’s mess. We are in Government to lay the foundations of a better, stronger economy. People want their politicians to be leaders, not accountants.
It is vitally important to be crystal clear about the problems we are addressing. Most people know that we inherited not only a crippling deficit. But perhaps it is not yet clear enough that we also inherited a failed economic model. The model of economic growth fuelled by debt and based on financial services is broken for good. So the Coalition is undertaking two very difficult tasks at the same time – dealing with the deficit and building a new model of economic growth.
Let me say too that as Government, we are determined to get this right. It is very tempting in a time of economic difficulty for governments to churn out initiative after initiative, in a desperate attempt to stimulate the economy or – all to often – to try and give the appearance of doing so. And politicians can sometimes fall prey to the myth that somewhere there is a lever they can pull to generate growth, and that they should simply pull as many as possible in the hope of finding it.
That is why the Government is currently conducting a growth review, consulting with business and experts to ensure that our approach is grounded, evidence-based and properly thought through. Some have expressed concern that we haven’t published it yet, and that we are waiting for the Budget. I do not think we should apologise But we need to be clear about the fundamental factors that drive economy growth; clear about the areas in which government can effectively play a role; and clear about the interventions than make the most difference.
What’s all this rebalancing about then?
We need, in short, a grown-up approach to growth based on hard-headed analysis – in place of the ‘pick and mix’ approach that has characterised too much recent government activity, grabbing at instant initiatives rather than taking the big decisions that really count.
Today I want to highlight four key elements of the new economy:
– Weaning ourselves off debt-financed growth, and onto investment-led prosperity
– Investing in the infrastructure that underpins growth, both the ‘hard’ infrastructure such as transport and the supply of skills and education, ‘soft’ infrastructure businesses need
– Boosting competitiveness by reducing the regulatory burden and opening up markets
– Balancing regions and sectors, instead of putting all our economic eggs in one basket
Interesting stuff – and it all sounds very grown up. There’s obviously still loads more to come on detail, but Nick’s words show that long held Liberal Democrat philosophy is becoming an integral part of the Government’s thinking.