Tim, shouldn’t a PM in waiting have more specific plans of his own?

By Alex Smith / @alexsmith1982

Hi Tim,

I read your response to my original post in Piccadilly Circus. The old Virgin Records, which was Tower Records, is now an empty shell; Lillywhite’s, in the building where my Dad worked in the ’70s when it was the White Bear pub, had closing down banners up; the place I used to get my lunch when I worked at a travel agency down the road was gone; the whole place felt like a ghost town – on a Friday night.

It’s the same story in towns up and down the country. I spoke to one of our readers the other day on the phone and he said Leigh is a shadow of what it was, with pawnbrokers replacing what were thriving businesses. My cousin has been laid off from a job he held for 12 years. And some of my friends – highly skilled and highly qualified people – have been looking for work for months, with no luck.

So in a word, yes: I do understand the seriousness of the economic crisis. I see it all the time in real human terms. It’s miserable, it’s scary and it’s impossible to escape.

But instead of making political hay out of it, what I want from my government is an active search for answers. So, let’s get to grips with your post, which I thought was a good rebuttal.

As you say, executives from Next and Marks & Spencer remarked that the VAT cut had made little difference to the economy – but those remarks were made within a month of the cut being introduced last winter.

Now, a few months down the line, both Next and Marks & Spencer have experienced growth and the head of M&S is currently opposing any increase in the tax. The Telegraph, too, says the VAT cut “stimulated the economy“.

Meanwhile, the Centre for Economics and Business Research has reported that the VAT cut boosted retail sales by £2billion in the three months after it was introduced, and that the 2.6% and then 3.6% increases in retail sales in the month after the VAT cut bucked the trend and constituted “remarkable” growth in the circumstances and “good value for the taxpayer”. The same report says the VAT cut “was the best stimulus option available to the government and has helped lessen the impact of the recession.” Small steps, but hardly the feeble recovery you speak of!

Next – no, I’m not remotely relaxed out the budget deficit. I worry intensely about the sort of life opportunities I will pass on to any children I may one day have. But I am confident that the deficit will be overcome in time, because – as I wrote in my last post – I am confident that the government is investing in the right sorts of development for the future of our economy.

Think of it this way: I owe the government £15,000 for the student loan on which I am being charged interest. Does that preoccupy me? Somewhat, but I know the investment gave me skills that I would otherwise not have had and it prepared me for the future. My old teacher used to say: “fail to prepare, prepare to fail.” It’s exactly the same principle with the national debt – if we fail to prepare for the upturn and the emergence of the developing economies now by creating the infrastructures we’ll need in the future, don’t doubt that we will eventually be left behind. And the pain of this recession would be unnecessarily prolonged.

Indeed, just yesterday, Vince Cable said on the Andrew Marr show:

“It’s partly an issue of timing. When you’re in the middle of a recession, which we are now, it’s the worst possible time to start slashing public spending, because you then compound the recession and in turn make the budget deficit worse. But once the economy is clearly recovering, public spending is going to have to be very severely disciplined.”

In your next rebuttal, you say you are uncomfortable with the government “picking winners”. Well, so am I. In response to a comment on my post Why I’m on the left I wrote that our society should be meritocratic:

“We absolutely need the best people, and the right people, in the right jobs. But that meritocracy should be based from a starting point – legally, socially and culturally – of absolute equality of opportunity and aspiration.”

In previous recessions, good governments have laid the ground for those opportunities by investing in the most important and necessary areas to address the most pertinent issues of their time.

Roosevelt’s first administration, for example, helped America come out of the Great Depression with large investment in transport and social security. Those were big, groundbreaking steps, and they took vision and boldness in the face of hostility.

Bad governments, on the other hand, have been happy to pay the price of unemployment and urban decay.

So to address climate change – which will affect the poor much more than potential increases in privatised energy prices that can in any case be capped – we need to invest in high-skilled and hi-tech manufacturing jobs in the new green jobs to develop the industries of the future and so Britain can lead the multilateral fight against climate change. That will take training, and spending, now.

So I’m surprised that you are sceptical of “too much greenery”. You must hate your party’s logo!

And to say that distributing wealth at this time is the wrong priority, I think, really highlights one of the differences between our two viewpoints. Yes, I appreciate the need to grow the pie in order to share the pie, but people must always come first – not markets – and that’s even more true during recession.

So we have to keep investing now, because – as Roosevelt’s second administration showed, when government stops investing, recovery slows and further mini-recessions can take hold. That’s what happened here in the 1980s, when laissez faire economics prolonged the pain in our cities. You and I are both United fans, so we both know that Manchester is an exponentially improved place now compared to how it was in the ’80s and early ’90s. That is in large part due to the investment it’s had in the last 12 years. And it will continue to improve as an economic entity in its own right as the result of money it receives now. This time, Manchester and other urban communities won’t get left behind.

So in my view, it is the right thing to do to defer these choices, these cuts, to a point in the future when the economy is more stable. What I would like to know is where specifically – which programmes – will David Cameron cut with his emergency budget and in his age of austerity? I don’t think he is certain, and that’s one of the reasons I don’t think the country is certain about him.

With regard to your suggestion that I read more Iain Duncan Smith, I’m not convinced that his calls for scrapping free nursery places and paying women to stay at home are the sort of thing that interest me – and they’re certainly not the sort of early years prioritising I was talking about in my previous post. Nevertheless, I’ll look into them.

Looking forward to your next response and thanks for the opportunity,

Alex

PS – I want to come and respond to some of the comments on your posts, which I will do when I get a minute. And, isn’t it ironic that the guy on the left is arguiing for tax cuts and the guy on the right is supporting tax increases – maybe there is some healthy consensus to be gained out of all this!