Leading article: Cold comfort from abroad

Related Topics

The public relations offensive to prepare the ground for the emergency Budget has begun. Yesterday, the Prime Minister, David Cameron, gave a speech in which he declared the paramount importance of reining in public spending. And today, the Chancellor, George Osborne, and the new Chief Secretary to the Treasury, Danny Alexander, will unveil the framework for this year's Comprehensive Spending Review and signal a determination to learn lessons from successful fiscal consolidations abroad.

There is talk of a Canadian-style "star chamber", which will pressure senior officials and ministers on their spending plans. And the deficit reduction process will, apparently, be shaped by public consultation and debate. This follows Nick Clegg's comments at the weekend in which the Deputy Prime Minister promised that the Government will go about tackling the budget deficit more sensitively than its predecessor in the 1980s.

Promises to protect the vulnerable are welcome. And so are the indications that the Government wants to learn from the experience of other nations in bringing down large deficits. But all this is only of relative comfort. Public borrowing figures for this year have actually come in below official projections. Yet cuts in public spending being planned by this Government will still be deeper than anything attempted by Margaret Thatcher. Between 1979 and 1990 overall current real spending rose every year. Only in one year – 1988-89 – was spending actually cut. Public spending did fall as a proportion of GDP, but that was mainly due to strong GDP growth in the late 1980s.

The wider economic context is now much less benign. Governments everywhere, from Dublin, to Madrid, to Rome, are moving towards fiscal retrenchment. The German government yesterday announced plans for €80bn of cuts by 2014. The problem is that if all governments slash their deficits simultaneously they risk crushing global demand, which will harm all of them.

The UK is not helped by the fact that the euro is weakening on international currency exchanges. This is already threatening to claw back some of British exporters' gains in competitiveness brought about by sterling's 25 per cent depreciation since 2007. Further afield, the latest jobs creation figures from America make for discouraging reading. This all makes the outlook for global growth fragile at best. And this is where experience of other successful consolidations is in danger of being misleading. Sweden, Finland and Canada sorted out their finances in the 1990s in the context of strong global growth. Export growth cushioned the pain of the fiscal adjustment. There is unlikely to be any such cushion for Britain, or any other nation grappling with a large deficit.

And then there is the live danger of a double-dip recession. The crisis in the eurozone could yet set off another slump. But there could be triggers closer to home. Next year, the Governor of the Bank of England, Mervyn King, has signalled his intention to remove the £185bn Special Liquidity Scheme that has propped up the commercial banks in recent years. We need to hope they are healthy enough to cope without this support or we could be facing a fresh domestic credit crunch. The dangers of cutting public spending too fast in Britain should not be ignored either. Mr Cameron argues that deficit reduction will boost general economic confidence. But it could just as easily undermine business sentiment if growth is hit too severely.

This is not to argue that the coalition Government is wrong to set about tackling the deficit. But ministers should not draw false comfort from the experience of other nations in better times. A compassionate and collaborative approach to reducing the deficit is appropriate. But still more important will be the virtues of humility and flexibility.

React Now

Latest stories from i100
iJobs Job Widget
iJobs General

Senior Risk Manager - Banking - London - £650

£600 - £650 per day: Orgtel: Conduct Risk Liaison Manager - Banking - London -...

Commercial Litigation Associate

Highly Attractive Package: Austen Lloyd: CITY - COMMERCIAL LITIGATION - GLOBAL...

Systems Manager - Dynamics AX

£65000 - £75000 per annum + Benefits: Progressive Recruitment: The client is a...

Service Delivery Manager (Software Development, Testing)

£40000 - £45000 per annum: Ashdown Group: A well-established software house ba...

Day In a Page

Read Next
The economy expanded by 0.8 per cent in the second quarter of 2014  

British economy: Government hails the latest GDP figures, but there is still room for skepticism over this 'glorious recovery'

Ben Chu
Comedy queen: Miranda Hart has said that she is excited about working on the new film  

There is no such thing as a middle-class laugh

David Lister
Evan Davis: The BBC’s wolf in sheep’s clothing to take over at Newsnight

The BBC’s wolf in sheep’s clothing

What will Evan Davis be like on Newsnight?
Finding the names for America’s shame: What happens to the immigrants crossing the US-Mexico border without documents who never make it past the Arizona desert?

Finding the names for America’s shame

The immigrants crossing the US-Mexico border without documents who never make it past the Arizona desert
Inside a church for Born Again Christians: Speaking to God in a Manchester multiplex

Inside a church for Born Again Christians

As Britain's Anglican church struggles to establish its modern identity, one branch of Christianity is booming
Rihanna, Kim Kardashian and me: How Olivier Rousteing is revitalising the house of Balmain

Olivier Rousteing is revitalising the house of Balmain

Parisian couturier Pierre Balmain made his name dressing the mid-century jet set. Today, Olivier Rousteing – heir to the house Pierre built – is celebrating their 21st-century equivalents. The result? Nothing short of Balmania
Cancer, cardiac arrest, HIV and homelessness - and he's only 39

Incredible survival story of David Tovey

Tovey went from cooking for the Queen to rifling through bins for his supper. His is a startling story of endurance against the odds – and of a social safety net failing at every turn
Backhanders, bribery and abuses of power have soared in China as economy surges

Bribery and abuses of power soar in China

The bribery is fuelled by the surge in China's economy but the rules of corruption are subtle and unspoken, finds Evan Osnos, as he learns the dark arts from a master
Commonwealth Games 2014: Highland terriers stole the show at the opening ceremony

Highland terriers steal the show at opening ceremony

Gillian Orr explores why a dog loved by film stars and presidents is finally having its day
German art world rocked as artists use renowned fat sculpture to distil schnapps

Brewing the fat from artwork angers widow of sculptor

Part of Joseph Beuys' 1982 sculpture 'Fettecke' used to distil schnapps
BBC's The Secret History of Our Streets reveals a fascinating window into Britain's past

BBC takes viewers back down memory lane

The Secret History of Our Streets, which returns with three films looking at Scottish streets, is the inverse of Benefits Street - delivering warmth instead of cynicism
Joe, film review: Nicolas Cage delivers an astonishing performance in low budget drama

Nicolas Cage shines in low-budget drama Joe

Cage plays an ex-con in David Gordon Green's independent drama, which has been adapted from a novel by Larry Brown
How to make your own gourmet ice lollies, granitas, slushy cocktails and frozen yoghurt

Make your own ice lollies and frozen yoghurt

Think outside the cool box for this summer's tempting frozen treats
Ford Fiesta is UK's most popular car of all-time, with sales topping 4.1 million since 1976

Fiesta is UK's most popular car of all-time

Sales have topped 4.1 million since 1976. To celebrate this milestone, four Independent writers recall their Fiestas with pride
10 best reed diffusers

Heaven scent: 10 best reed diffusers

Keep your rooms smelling summery and fresh with one of these subtle but distinctive home fragrances that’ll last you months
Commonwealth Games 2014: Female boxers set to compete for first time

Female boxers set to compete at Commonwealth Games for first time

There’s no favourites and with no headguards anything could happen
Five things we’ve learned so far about Manchester United under Louis van Gaal

Five things we’ve learned so far about United under Van Gaal

It’s impossible to avoid the impression that the Dutch manager is playing to the gallery a little