While no politician likes to admit to a U-turn, there are two reasons to suggest a break with tradition is ‘just around the corner’. Firstly, UK Chancellor George Osborne is no ordinary politician, and secondly, economic prospects for the UK economy fall outside the normal range of expectations. Increasingly, the issue for Mr Osborne is one of timing rather than political and economic intent. Timing is, of course, everything in the world of macro-economic policy. With the Autumn Statement to come (November 29th), any firm and detailed policy initiative will have to wait until then. But, as noted by Louise Armitstead, writing in the Telegraph (01/01/11), Mr Osborne must ‘show some leg’ on his plans for growth, given the widely held view that a double-dip recession is more likely than not. Having torn up his growth plans, and with increasing pressure from all sides – including business and unions – Mr Osborne is likely to see the Conservative Party’s 128th annual conference in Manchester as an ideal vehicle in which to begin to execute the long awaited u-turn. Mr Osborne’s speech, to be delivered on Monday (3/10/11), is, however, only likely to hint at what is to come, with the thrust of his speech reminding delegates, and the wider audience, that there can be no deviation from the underlying strategy – namely that deficit reduction is the only viable long term option on the table.
However, future tax revenues depend upon a growing economy, which in turn relies upon a healthy private sector and a supportive public sector – there is no long term trade-off between the achievement of a growth and debt reduction. The quicker that the UK economy starts growing, the sooner the deficit can come down.
The real question is what legacy will be left? Will decisions taken over the next few weeks see a more vibrant private sector supported by an efficient public sector? Will the UK improve the productivity of its workforce through increased business investment and training? Will it have a modern and effective infrastructure, not only capable of coping with the London Olympics, but generating work in the short term, and helping reduce business costs in the long term? Or will Mr Osborne be so obsessed with deficit reduction that he fails to make the right short-term decisions. Mr Osborne does not want to be seen to be ‘fiddling while Rome – or Athens – burns’ – he can leave that to other European leaders – and with America unable or unwilling to lead the global economy out of stagnation, Mr Osborne has a chance to make a lasting name for himself. ‘U-turn if you want to’ – maybe he just will.