I’m trying to be as politically correct as possible here, but it’s not going to work. The FT has reported:
George Osborne pleased businesses by protecting the science budget and softening the impact of the spending review on infrastructure projects, but there were warnings that the government now needed to turn this into a clear strategy for growth.
“Business has been clear: the deficit must be tackled, no matter what. The CSR does the job of setting out how this will be done,” said David Frost, director-general of the British Chambers of Commerce. “We were disappointed that the Government succumbed to political ring-fencing of some spending areas, when it is clear to business that a bigger boost to investment in productive infrastructure and exporting would be the best bet for growth.”
But, he added: “The CSR alone is not enough. The government must now deliver a clear strategy for growth – which in turn will give companies, and especially small and medium-sized enterprises, the confidence to invest. Perceptions matter. Businesses and government must work together to deliver a real year for growth in 2011. This is the only way that the private sector will be able to take up the slack.”
The proverbial is not the BCC, of course: the proverbial are what you think they are, but they might as well be one and the same.
The government will run a deficit as a matter of fact, whatever it does, if it does not change three things because of the following accounting identity, which must hold true:
Budget deficit = Private Savings minus Private Investment plus Current Account Deficit
Business is doing 92% of savings right now.
Households are doing it by cutting their mortgages.
Banks are helping by reducing lending.
Business is not investing – which is why it is saving so much.
And the prospect of an improvement in trade is near enough zero.
So the deficit will continue or grow – as I predict – whatever George does.
And a plan to cut the deficit is meaningless in that case – because it is beyond his control. He can encourage more spending. But he didn’t. Everything he did today will discourage it.
He can encourage more investment. And he did – just a tiny bit – but overall government investment is to fall heavily, so business investment is likely to fall still further.
And nothing we do is going to increase imports.
So the BCC show themselves to have not a clue what they are talking about in saying what they do.
It was only an economic stimulus package – with more spending and a cancellation of a VAT increase – that could have worked today. But we didn’t get it. So there’s not a hope the BCC will get what they now want. And that’s because they actually asked George to deliver a recession today – which is what they’re likely to get.