Leading article: Distraction will not be enough, Mr Cameron

 

Monday 16 July 2012 08:03
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It has been an uncomfortable few months for the Government. The economy is back in recession.

The Budget was not only a fiasco in itself – the pluses leaked, the minuses buried – it was followed by a string of embarrassing U-turns as ill-thought-out policies, from fuel duty rises to pasty taxes, were disowned. Then there was last week's rebellion over House of Lords reform, a debacle which struck at the heart of coalition co-operation and left the Prime Minister open to charges of everything from disingenuousness, to weakness, to bullying. Mid-term blues, indeed.

Hardly surprising, then, that David Cameron hopes to use the brief hiatus before Parliament's summer break to draw a line under recent upheavals. And how better to do it than to shift the focus back to the economy? Not only might some big-ticket programmes draw public attention away from the feuds and emphasise coalition consensus on the issue that is, by far, voters' priority. They might also head off increasingly vocal criticisms – from the Confederation of British Industry, among others – that the cuts-obsessed Government is not doing enough to restore growth.

What of the measures themselves? The first came at the end of last week, with the launch of a Bank of England-backed project to pump more money into loans for businesses wanting to expand. The idea is an inventive one. But it is far from certain whether it will work. There is no guarantee that banks will participate, nor that there will be suitable demand, and previous efforts, albeit less sophisticated in design, have had little effect.

Hot on the heels of the "funding for lending" scheme comes today's breathless announcement of "the biggest investment in the rail network since the Victorian era". There is much to be welcomed here, both in the general good of transport spending and in the specifics of, for example, major capacity increases in the north. But the fact remains that a capital programme running from 2014 onwards hardly helps with Britain's current economic woes. Of greater promise are infrastructure plans, due later in the week, that are expected to set out ways to use the government balance sheet to encourage private sector investment, particularly in building houses. Given Britain's dire shortage of affordable homes, and desperate need for skilled jobs, the proposal has considerable potential. As with credit easing efforts, however, it remains to be seen whether a clever idea can be made to work in practice.

In the immediate term, though, the Prime Minister hopes the flurry of activity will steady the Government's wobble by proving that, for all the internal differences, the need to kick-start economic growth remains the Coalition's top – and undisputed – priority. Yes and no. It would certainly be easy to make too much of reports of fury on the back benches. Disagreements are, after all, an unavoidable feature of coalition. The problem is that the vast majority have, so far, gone the Conservatives' way, with only minor concessions in return. It is this that makes last week's fracas more than just a passing spat, raising the risk that the Liberal Democrats vote down Tory-backed boundary changes in return, and that the Government then descends into unworkable acrimony.

To predict the Coalition's demise would be precipitous. But it would, equally, be naive to think that the tensions will just fade away, for all the consensus on economic policy. The Liberal Democrats have fulfilled their side of the Rose Garden bargain. The ball is now in Mr Cameron's court. With Lords reform to return to the Commons in the autumn, he does not have long to decide how he will play it.

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