Today our political editor George Parker has penned a feature which captures the newfound mood of pessimism in the Treasury and Downing Street. In it he explains how many government insiders are now admitting that many of the working assumptions are now looking increasingly optimistic.
Ministers are no longer taking for granted 1] a rapid economic recovery; 2] the sale of the bank stakes during this Parliament to raise tens of billions of pounds; and 3] the idea that the second half of the parliament would be all about “spending the proceeds of growth”. It is an assessment shared by others; Lord Mandelson, in the “Purple Book” – a Blairite pamphlet published this week – predicts that the economy will not be growing quickly even at the time of the next general election.
Amid this darkening mood the autumn growth review becomes even more critical; but ministers and officials learned back in March that you can’t just flick on a supply-side switch to create economic growth. I revealed earlier this week some of the ideas being discussed ahead of the review – including tax breaks for small companies and green initiatives. These don’t sound like game-changers. Ministers are now under pressure to deliver bigger, bolder moves; but the ideas in the ether (such as scrapping the 50p rate, launching new toll roads or cutting NI) do not come for free. Nor are they guaranteed to succeed either against such tricky headwinds.