I've just got back from CNBC, where I have been analyzing the pre-budget report for their Strictly Money programme (I'll put the video up once it is available). My line was that the economy needed three things from Alistair Darling today. Firstly, it needed a credible plan to restore some semblance of sanity to the public finances - which are now by far the worst of any OECD country. Secondly, it needed the government to make a short/medium term commitment to policy stability - i.e. no more nasty, politcally motivated surprises for businesses. And thirdly, it needed the chancellor to make a long-term commitment to a low-tax, enterprise economy. The underlying goal should have been to restore business, investor and consumer confidence, so that the private sector can drive our recovery.
Needless to say, that is not what we got from the chancellor. Instead, we were told that even if the government's heroic growth assumptions are met (Darling says 3.5 percent growth in 2011, the average independent forecast is 2 percent) we will still be overspending by £100bn per year come 2013/14. There was no real detail on how spending would be brought under control. Indeed, most of the speech was devoted to unveiling eye-catching new programmes that the government was somehow going to fund - guaranteed jobs for the under 24s, more government support for green technology, more spending on infrastructure, above inflation rises in the state pension, and so on. Fundamentally, Alistair Darling was whole-heartedly embracing the crass, Keynesian notion that government spending drives economic growth, while failing to realize that every pound government spends must first be taken away from the part of the economy that actually produces wealth.
Ultimately, I think one of my fellow guests on CNBC summed it up best: "I've always thought Alistair Darling was on another planet. Now I think he must be in a different galaxy." More to follow...
