Tuesday, January 13, 2009

The "do nothing" Conservatives!

Every time some one from the government pops up on TV or Radio, they compare their "action" to the "do nothing" Conservatives. This is of course a plain lie, and from time to time they are getting picked up on it, as well as pieces to camera by the likes of Nick Robinson pointing out what the Conservatives would do.

For example:

Bank recapitalisation, David Cameron suggested it first.

A "golden Hello" for employers who take on anyone who has been unemployed for a while. (As Guido points out here, they were slagging that policy off last month).

A government backed loan guarantee scheme for small businesses.

There are more, but what is interesting about the above three examples of what a Conservative government would do is that they have subsequently become government policy.

So the accusation of "do nothing" is just plain ridiculous. That said James Purnell did get hot under the collar on yesterday's Today program when it was pointed out that the latest government scheme was one nicked wholesale from the Conservative party. He blustered that despite this, the Conservatives were "do nothing" because they (that is us, the Conservative party) would fund these schemes in other ways other than borrowing like there is no tomorrow.

However, I would rather have a "do nothing" government than one which went around doing the wrong things.

Imagine for example your house is on fire. Everyone is thankfully out, but you need the fire put out. Someone turns up who claims to be from the fire brigade and starts taking ten pound notes from you and throwing them on the fire to put it out.

Would you rather do that than nothing? After all, if you just let the fire burn out then you will at least have some money to rebuild if you have not thrown it all on the fire.

The problem we have of course is one of failure to diagnose the problem and then deal with it rather than deal with problems we have not got.

This causes problems as well. Taking as an example a car (at least an old fashioned one) if it will not start but does turn over then generally either you have no spark or a fuel problem. If you have no fuel getting through and start looking to see if you have a spark that's fine. If on the other hand you do have lots of fuel getting through and keep turning the engine over you just flood it, and then it will not start at all for ages. You need to diagnose the problem, or else you will make it worse.

What is curious about the current economic climate is that there is broad agreement on what the problem is, which is the credit crunch, as in the lack of availability of money. It mystifies me that as a result people want to reduce the cost of borrowing money, which is not a big problem, when in fact it will make the real problem worse, which is the lack of money. If you were not prepared to lend at say 4%, why would asking you to lend at 1.5% make you more amenable? The answer is that it will not.

Had interest rates been higher earlier to stave off the housing boom, and/or reduced earlier to stave off the credit crunch all would be well, the credit crunch may well not have happened, and confidence would abound. Alas we are where we are now, and it would help if people dealt with the problems that we do have not try and avoid driving into the ditch we are already in.

The BBC has this.

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