Britannia Radio

TELEGRAPH     8.1.09
Alistair Darling is a man in desperate need of ideas    (leading 
article)
Where is the Chancellor's sense of urgency?

In his pre-Budget Report (PBR) on November 24, Alistair Darling said 
the measures he was taking would ensure a "shallower and shorter" 
slowdown than would otherwise have been the case, as he confidently 
predicted that the economy would start to grow again from the middle 
of this year. We warned at the time that his forecasts were "wildly 
optimistic" and yesterday – six weeks after delivering them – Mr 
Darling conceded as much. In a thoroughly humiliating retreat, the 
Chancellor finally caught up with the rest of the country and 
admitted that we are "far from through this". Far from through this? 
In reality, we are still sliding into it. Mr Darling's credibility 
was shot long before yesterday's embarrassing display of ineffectual 
hand-wringing but it is now beyond dispute that, without new 
leadership at the Treasury, Britain's economic recovery will be 
hampered.

On one thing we do agree with Mr Darling – his insistence that he 
will "do what it takes" to get us through the recession in as good 
shape as possible. So he should, yet he appears frozen by inaction. 
Since the PBR, we have looked to the Treasury for measures that will 
get the economy moving and we have looked in vain. Mr Darling said 
yesterday that he would announce moves to tackle the banking crisis 
"within a few weeks". Such insouciance is breathtaking. The banks 
have been gridlocked since last September. Where is the sense of 
urgency? New lending in the third quarter of 2008 was just £447 
million, compared with £16 billion in the equivalent quarter of 2007. 
In effect, credit is non-existent and that remains the biggest 
problem confronting us.

The Conservatives have proposed a government-backed loan guarantee 
scheme to help restore confidence and get money moving again. Yet one 
suspects that because it is an opposition plan it will not be 
considered by the Treasury. Such partisan petulance is unforgivable 
in these difficult times. The same is true of the Tories' plan to 
curb increases in government spending which ministers dismiss as 
"economic madness". Really? In an annual budget of £650 billion, 
there is no room for savings? It remains slightly surreal that while 
every business and family in the land is tightening its belt, the 
Government seems to think itself immune from the process.

Reducing public spending means switching resources from the 
unproductive part of the economy to the productive, and without such 
a shift we will struggle to climb out of the ditch. Cutting the size 
of the public sector would also leave room for reducing income tax. 
It is already clear that the centrepiece of the Government's fiscal 
stimulus, the temporary
2.5 per cent cut in VAT, has been a costly flop. Simon Wolfson, the 
chief executive of Next, said yesterday it had had "no effect 
whatsoever" on retail sales. Leaving people with more of their own 
money to spend would be far more effective.

Mr Darling's inability to rise to the challenge is continuing to 
stifle confidence, without which there will be no recovery. As Sir 
Stuart Rose, the chief executive of Marks and Spencer, observed 
yesterday, the Government has got to convince people that "it will 
get better" and they will in time start to believe it. The 
Chancellor's message yesterday? "It will get worse."

Today's expected interest rate cut by the Bank of England, taking 
rates to the lowest level in three centuries, is designed to do what 
the Chancellor seems incapable of doing, engendering confidence. And 
there are some grounds for such confidence. In many respects, we are 
better placed than most other countries to weather the storm because 
we have lower unemployment and a more flexible labour market.  [but 
sky-rocketting debt - see “The EU looks at Britain and the world 
looks at the EU” earlier -cs] Yet the Chancellor's faltering response 
to the crisis threatens to squander such advantages.

  It is time the Government threw itself at the downturn 
aggressively, and that means adopting good ideas, whatever their 
provenance. This is not the time for petty politics.