Now or later?

The positions of the government and main opposition on economic recovery have converged slightly.

The government now accepts that there is urgent need to deal with the national debt problem.

Government and opposition see growth as the most acceptable way to achieve a reduction in the problem.

There is, however, a profound difference in suggested timing. The government wishes to reduce the deficit slowly, halving it over four years,and allow debt to rise of course, while the opposition are conscious of a loss in our credit rating and subsequent higher interest rates, so wish a significant cut immediately. So both see a false step as causing a major problem.

Action now may have a slight edge:

- The public have been prepared to expect action, and will accept it for a year or two.

- Reform is badly needed in the public sector, and this adjustment could occur early as part of the action.The 1980s saw a short sharp contraction which permitted major adjustments which had been needed for some time.

- Action will stop drifting and dithering, will send a strong message to everyone, including the important creditors.

- The Canadians went through such a process in the early 1990s with great success.

- Business and industry can be encouraged in other ways - reduced red tape, guaranteed loans, easier credit, etc.

- Some economists are concerned about the possibility of inflation, especially if sterling depreciates. A tight control will lessen this risk, and also that of another asset bubble caused by low interest rates.

If G.Brown prevails, and action is deferred, it is to be hoped that his Queen's Speech window dressing of all sorts of extra expenditures do not occur, or we could have find bottle necks and capacity constraints that lead to inflation and an eventual dreadful and severe adjustment.