How Far, How Fast?

Mark Wallace is the executive editor of Conservative Home and a former director with the Taxpayers Alliance, so it's no surprise that his recent article in the Guardian gave short-shrift to the 'Plan B' argument advanced by Labour's shadow chancellor, Ed Balls, that a country - any country - can simply borrow and spend its way out of a recession.   

Strangely enough, I have some sympathy for Ed Balls because I think it is , or at least was possible, to make a different case to the policies pursued by the Coalition Government over the past three and a half years.

But only if you put put forward a convincing plan that explains how an alternative Labour Government would re-balance the economy over the medium to longer-term - for example, the lifetime of a Parliament or even two Parliaments for that matter.

Yet every attempt to get Ed Balls and Ed Miliband to explain their alternative to Too Far, Too Fast has fallen on deaf ears - and now the Labour front bench has dropped this slogan altogether, see post below dated 24 March 2011: 'How Far, How Fast?

And as Mark Wallace rightly points out in the Guardian, the only country where something loosely resembling Labour's Plan B has been put into effect is across the channel in France  - although none too successfully it appears.   

Labour shouldn't emulate France's economic disaster

Ed Balls's plan B has lost all credibility as the UK is doing better than expected – and France's alternative to austerity doesn't work


By Mark Wallace


'Ed Balls, the personification of plan B-ism, has stopped shouting the words 'too far, too fast'. He’s even ditched his flatlining gesture.' Photograph: PA

Business confidence is falling. Unemployment has risen to 10.9%, a 16-year high. Only months after escaping one recession, the nation is on the brink of another. Time to adopt Labour's plan B? No, because this is France – plan B is already in place, and the bad economic news is its grisly fruit.

At one time, it seemed as if the British left would never stop talking about a grand economic alternative to austerity. There was even a "march for the alternative" – though none of its proponents were very specific about exactly how the alternative would work. The most you could get out of them was this: austerity would be stopped; the rich would be made to pay far higher taxes; the deficit could look after itself, or else it would be magically paid off by a plan-B boom.

Those halcyon days are over. Ed Balls, the personification of plan B-ism, has stopped shouting the words "too far, too fast". He's even ditched his flatlining gesture. The British economy isn't fully recovered, and there are plenty of problems – not least the rising cost of living, and the major task of eliminating the rest of the deficit. But the idea that trying to live within our means would cause downturn and disaster has been demolished by reality. Today, the Office for National Statistics (ONS) announced that the number of people out of work fell by 99,000 in the three months to October. The unemployment rate now stands at 7.4% of the working-age population, down from 7.6% in the three months to September – a four-and-a-half-year low.

Plan B has lost all plausibility, because the dire forecasts of its supporters have not come true. That isn't to say we should forget its existence. "The alternative" isn't just a relic of the British political past – it's a fact of life in modern-day France, and we should study it in detail.

The Hollande government has raised taxes by €60bn in two years, loading more costs onto business in particular. Tax on high earners is being hiked to 75% – so they are fleeing to London, Monaco or, in one eccentric case, Russia. At the same time, the power of trade unions and the president's unwillingness to pursue regulatory reform means France's red tape mountain is largely intact. The result is the current fiscal and economic crisis.

The economic resurgence Hollande, Balls and others promised has not come to pass. The public finances continue to be founded on unaffordable debt. So the French government is now trying to move to plan A. The early draft of the 2014 budget proposes €15bn of spending cuts and €3bn in tax rises – a ratio strikingly similar to Osborne's 4:1 formula that the March for the Alternative once denounced.

There is no glee to take, even for deficit hawks like myself, in the disastrous French experiment with plan B. It has inflicted the huge human cost of yet another downturn, yet more unemployment, and yet more debt on a country which could instead be on the road to recovery.

But there is a lesson to learn. When someone promises that you can get out of a serious debt problem by borrowing more, they are lying or they have been lied to.

We in the UK have not had it easy, but we were fortunate that in 2010 the electorate saw through the false promises of those who pretended there was no need to change the way we run the public finances. The French have been less fortunate, and are only now starting to come to the right conclusion the hard way.

When people next march through London preaching an "alternative" to hard decisions and balancing the books, we need only look at the experience of France to realise how wrong they are.

How Far, How Fast? (24 March 2011)

Every time I hear a Labour party spokesperson say - "Too far, too fast" - in relation to the government's public spending cuts.

I hear a voice in my head which demands - "How far, how fast?" - because everyone knows that if Labour had won the general election, they'd have been cutting spending as well.

The official line, of course, is that a Labour chancellor would be cutting the deficit in half - over four years.

Yes, but we know that already, so what does this mean?

Labour originally introduced the 1p rise in National Insurance which came into effect yesterday - not the present government.

And Labour had also planned a series of increases in fuel duty - of around 5p a litre - which were ditched in yesterday's budget.

Now of course, in opposition, Labour will say that they would not actually have followed though on their plans.

But what would they do exactly - how would Labour's cuts differ from the Coalition Government's cuts?

If the party can't answer that - then they're not taking the whole business very seriously - because they've only just left government after 13 years in power.

PMI surveys raise fears that France may be back in recession

By Andrew Walker

BBC World Service Economics correspondent - 17 December 2013

The eurozone's recovery is continuing, a survey of businesses has suggested, but it has also revealed a widening divergence in economic performance between France and Germany.

The latest purchasing managers' index (PMI) from Markit rose to 52.1 in December from 51.7 last month. A figure above 50 indicates expansion.

The eurozone as a whole has started to grow again after a long recession.

But Markit's Chris Williamson said the recovery was "lopsided".

These monthly surveys of business managers give an early indication of countries' economic performance.

Germany's solid PMI reading of 55.2 underlines the country's central role in driving the improvement across the region.

The country's manufacturing industry continued to gain new orders after a rather weak start to the year. The services sector also continued to expand.

Triple dip?

France was a very different story, with its PMI reading falling to a seven-month low of 47.0. The figure suggests an accelerating contraction, and point to a decline in economic activity for the current three-month period.

If that is confirmed by data for gross domestic product, GDP, that would be the second consecutive quarter of falling production of goods and services in France.

In other words, a recession as the term is often used. It would be the second in rapid succession.

The economy of France contracted in the final quarter of last year and the first three months of 2013. It grew for just one quarter before going back into decline.

If this really is another recession that France is in now, it would make it what some call a triple dip. The first phase was the recession at the height of the global financial crisis.

In the case of France, that lasted a full year, with growth only returning in the third quarter of 2009. GDP is still about 0.3% lower than it was in the beginning of 2008, just before that first recession. Germany, by contrast is now 2.6% ahead.

The most obvious and damaging manifestation of this weakness in France is unemployment. Just under 11% of those who want to work can't find a job. It's not the worst in the eurozone but is much higher than Germany.

The figures released by Markit are preliminary - the company calls it a flash estimate. The final numbers, to be published next month, come from a survey of 5,000 firms across the eurozone. Markit says the flash figure is typically based on 85% to 90% of total responses.