Just a trim?

Happy 100 Days day everyone! With the media currently using the lapse in Parliamentary business to indulge in a double helping of analysis and examination of the Coalition’s every move since its inception back in May (The Times “100 things you may not know about the first 100 days” was a particularly enlightening example), it is perhaps time Plain Thinking took a glance at the one issue that, in a period crammed with policies, has gained more coverage than anything else. Cuts.

Up until 2010 swingeing was, I thought, something done by bored couples in dark car-parks. Despite some evidence that the public are more or less onboard with the Coalition’s relatively aggressive programme of spending cuts, the proliferation of column inches devoted to the opposite opinion is striking. It is possible to find someone writing in the national press almost every day fretting over the potential double-dip recession.

It is certainly not my intention to attack their opinions; indeed I have a great deal of respect for my colleague at Demos who wrote in the Daily Mail detailing the threat Osborne’s retrenchment poses to small businesses, the very firms he is depending on to hire all those ex-QUANGO staff who are going to lose out from his bonfire.

Rather, what is intriguing is the attitude it implies. Putting aside for a moment what level of cuts these columnists do approve of, something they tend not to mention (and fair enough, they are not policy makers), the point is that their simplification of national macro-economics lowers the level of the debate.

So if Britain does re-enter recession, they will claim their opinions vindicated. If only, poor misled Coalition fans, we had cut more gently then we would have avoided such disaster. Osborne would find the whole crushing weight of popular media brought down upon him. Simply, he would not survive. Yet all of this is based on a false premise. Britain’s economic fortunes are dependent on far more factors than pure domestic demand. In much the same way the initial crisis was triggered from overseas, so could Recession 2: The Double Dip. It is near impossible to assign an economic effect a clear cause. Cut swingeingly or cut gently, but everyone needs to be aware that the consequences are only partially within our own control.

Fighting Talk

Another day, another bank. Today it was Lloyd’s turn to unveil profits of over a billion pounds, to the sound, or perhaps the silence, of much hand-wringing in government. For the Coalition has converging interests in the banks. Clearly it wants RBS and Lloyd’s profitable again so it can turn those massive state-owned stakes into revenue. But on the other hand, clearly their senior ranks believe there is much political capital still to be drawn from our recent national pastime, ‘banker bashing’.

Both parts of the King and Osborne double-act at the top of Britain’s finances have berated the banks in recent days for failing to lend to small businesses, or for asking for excessive security when they do. The Governor in particular laying it on particularly thick to the Treasury Select Committee when he described the situation as “heartbreaking”.

Rather what is heartbreaking about this situation is not the behaviour of the banks, but the callous political populism of those who criticise them. Of course, small businesses need credit to expand. George Osborne has bet the political farm that they do, in order to fill the yawning chasm in the economy that he is about to open.

Who would have thought two short years after commentators attacked the banks’ reckless lending, and with the green shoots of recovery still extremely vulnerable, suddenly those self same banks face calls to lend more. Whether many of these fêted small businesses are good, and wise, investments from the banks’ point of view seems to have been largely ignored.

Of course the banks do deserve much of their recent treatment. They did gamble irresponsibly with savers’ money, and left taxpayers to pick up the pieces. But this new political populism helps no one, saying that they did lend unwisely in the past (a fairly sure bet) and that they are being needlessly over-cautious now may make sense in the tabloids (no offense), but not to many. Simply blaming banks for all society’s ills will in the end serve no one. And if the Coalition is looking for a sector which can lead the recovery and contribute millions in tax revenue at the same time, it could go worse than looking at those same banks it is currently determined to demonise.