The Economic Imperative: The New Governments ChallengeMay 12, 2010
You will have had to have been locked away for the last few months if you did not know that any Government formed after the General Election would not have to face tough economic times and make swathing cuts in public spending. The UK budget deficit currently stands at around 11% of Britain’s GDP with the prediction of a further rise making it the worst in the EU (even worse than Greece at present) so the need to take action now is obvious.
David Cameron has promised £6 billion in economy savings straight away, and if this does equate to just £1.00 for every £100 spent in government it should be easy to achieve and, actually, somewhat unambitious. Anyone who has had dealings with aspects of the Government or Civil Service will know the endless waste and innumerable ‘arms lengths’ bodies, whose roles often seem to overlap, are ripe for economic rationalisation.
Yet it seems obvious further cuts will be needed which will lead to a fall in public sector jobs, a concern given the rise today (completely masked by other news) of the number of ‘economically inactive’ people of working age, having increased by 88,000 over the quarter to reach a record high of 8.17 million.
Therefore the challenge facing the newly formed Government is not only one of cutting spending but also helping those who want to find work.
This is where we have the flip side of economic policy that has been barely mentioned in all of the campaigning – Economic Growth. Cutting spending is a part of reducing the deficit but increasing GDP is the other important side. This is not something that the Government has any real control over but it can put policies in place that stimulate and encourage growth and it is these we need to here as a confidence booster to the UK.
Economic growth is not just something to be handled by the new Chancellor, George Osborne, but one that extends across a multitude of Government Departments. The principle of which will be the Department of Business (whichever name it goes under now) under the leadership of Vince Cable. The role of his team will to be find ways British business can grow under the current economic climate and, in turn, help the UK grow out of its budget deficit.
Chris Huhne, at the Department of Energy, will need to find ways businesses and household can cut their energy costs as lower energy costs will be a huge boost to economic growth as it frees up disposable income. Added to this is their role of creating a more carbon efficient economy with a boost in green energy production jobs.
The Department of Work and Pensions will need to engage with the private sector to find ways in which employment can be boosted, genuine employment not just schemes created to massage the unemployment figures.
Beyond these obvious Departments others have a role to play such as the Foreign Office, under William Hague, can play a vital role in promoting British goods around the world but, more profoundly, it can play a role in Europe where the economics of the Euro affect British exports. There is a need for reform in the EU and there should be a British lead call for efficiency savings to be made by the EU freeing money that can be used by the member states to protect their own front line services.
Eliminating Britain’s budget deficit must be the economic imperative of this Government but David Cameron and Nick Clegg must ensure that their cabinet team can deliver growth as well as spending cuts.