Steve Richards: Call it Plan A, B or C - just give us some growth!

Osborne wants to delay popular tax cuts but even the IMF is calling for policies to promote growth
  • @steverichards14

Rigid plans for the economy are rarely formed and are never adhered to. Even in the best of times Chancellors seek to appear unyielding in their attachment to a plan, but it is the appearance that matters. In reality they cannot be as unswerving as they seem because they are never fully in control of events. In George Osborne’s case he appears to stick to Plan A without having a clue what he might wake up to tomorrow, let alone in a year’s time, and without fully explaining quite what Plan A actually is.

Currently, some senior ministers insist they stick with Plan A while pledging a much needed boost to capital spending. Nick Clegg made such a declaration in yesterday’s Financial Times. In some quarters this is portrayed as Plan B or Plan A Minus. Yet in his first autumn statement in 2010, Osborne made an important qualification to his message of misjudged austerity. He noted the previous Conservative government had made an error during the early 1990s’ recession when it cut capital spending. Osborne insisted he saw the virtues of boosting investment in infrastructure projects and would not make the same mistake. As far as there was a Plan A, it included a theoretical commitment to big capital projects from the beginning.

Sadly the attachment to this form of spending remained theoretical. As with many ministerial statements the actual policy details did not match the publicly declared intent. A substantial cut in capital investment was planned in 2010. Now Clegg promises massive investment in housing and infrastructure. He did not explain precisely how this was going to be financed, so we must await the details. It will be perceived as Plan B, but Plan A included a notional commitment to such projects.

Not that there ever was a fully formed Plan A. Myths form quickly in modern politics. Indeed they form so quickly that even the present is easily mythologised, such as that in the summer of 2010 the UK economy was as precarious as Greece, an assertion that became almost self-fulfilling. It was complete nonsense and entirely at odds with what was happening in front of our eyes. In his last act as Chancellor, Alistair Darling dashed to an emergency European summit aimed at rescuing Greece (now a near weekly gathering). Those attending did not suggest that the UK should be rescued too. But the myth persists that the UK was on the edge of the same cliff.

The myth of Plan A is even more persistent, and accepted even by Coalition ministers, who are trapped by it. As far as there was such a plan, Osborne sought to wipe out the so-called structural deficit by the end of the parliament with real-term spending cuts. In his autumn statement last year the Chancellor admitted the objective would not be met. Some of the cuts agreed in that first rushed spending review will not be met either.

The notion of a Plan A arose because senior Labour figures, in particular Ed Balls, demanded to know whether Osborne was ready to change course in the event of failure. Balls is an important figure in British politics, honoured yesterday by provoking David Cameron to describe him as a “muttering idiot” during Prime Minister’s Questions. Without Balls’ self-confident persistence over the past two years a political consensus would have formed in support of Osborne’s early policies, as it did in the build-up to Tony Blair’s support for a war in Iraq. When that proved a calamity, the Conservative opposition tried to change tack, but could not credibly do so. In contrast, Balls has been a consistent voice on the economy, often when it was deeply unfashionable to be so. It is – and was – important for democratic politics to have such a high level of idiotic muttering.

In response to calls for a Plan B in the autumn of 2010, Osborne gave his policy formal but imprecise definition on the Today programme: |“People in the Labour party keep saying: ‘Where’s your Plan B?’ I’ve got a Plan A...”

From the beginning a degree of flexibility danced with a broader inconsistency. In other areas of policy-making Osborne urged caution over moving too quickly because of the unpredictable global situation. Banking reform, for example, must await a second term on these grounds. And yet the deficit target had to be met irrespective of what happened elsewhere – even though it will not be met.

Unavoidably, the lack of growth will determine government policy rather than a rigid plan. Osborne wants to delay popular tax cuts until nearer the election when he plans to warn of Labour’s tax bombshell, echoing the 1992 election, the last time the Conservatives won an overall majority. But with even the IMF calling for policies to generate growth, government activity in some form is bound to follow soon, as Clegg has promised.

Some will call it Plan B. They will insist it is Plan A. When Mrs Thatcher declared the lady was not for turning in the early 1980s she was U-turning at the speed of a racing driver, loosening her monetarist policies. Ministers have insisted Plan A was about growth as well as spending cuts. Now they must prove it. They can call it whatever plan they want.  <a href="" class="twitter-follow-button">Follow @steverichards14</a>
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