The return of risk

4 February 2011 / Issue 523

Investing in an age of unrest


  • A crafty way to cash in on bankers’ bonuses
  • China is heading for a revolution
  • How we built ‘the Amazon of sex toys’


Plan A will do just fine

When I interviewed Terry Smith for this week’s issue, I asked him if he thought George Osborne needed a Plan B. He did not. Instead, he thought the best thing Osborne could actually do is follow through with what is supposed to be his Plan A. So far there has been no actual reduction in government spending. There should be. There should also be a significant cull of the rules and regulations that restrict businesses from getting on with growth.

Overall, said Terry, what we really need is not for the government to come up with the plan for “jobs and growth” demanded by Ed Balls, but to get out of the way so the private sector can get on with doing it themselves. If you provide low interest rates and low corporate taxes, “you don’t need any plan beyond that point. And in fact any plan you do have after that point will only interfere and add cost. Don’t do it.”

I think he’s generally right. But that puts us in something of a minority. As Allister Heath points out in City AM this week, one of the main reasons that the coalition is beginning to look like it is losing the public debate on austerity is because it is “conceding too much intellectually to its opponents”.

Neither the Tories nor the Lib Dems made the positive case for the government to do less, not more – ie, for a smaller state – during the Gordon Brown years, and they aren’t doing it now. Instead, “their post-crisis conversion to reducing spending is entirely framed in terms of staving off national bankruptcy, implying that ever more state spending would still be a good thing in different circumstances.” 

However, if they were brave enough to look at it, there’s plenty of research to suggest that this simply isn’t the case.

• Read the full editor’s letter here: Plan A will do just fine 

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