News Commentaries

Clegg says Coalition was wrong to cut capital spending

          

The coalition made a mistake in cutting back capital spending when it came into office, Nick Clegg has said.

Comment:

I partly disagree with the Deputy Prime minister on this subject. The problem is not as simple as it is made to look. There wasn’t enough room to manoeuvre from the onset for this Government. Let’s look closer at the facts, options and possible outcomes.

The economic rigour and discipline exhibited by his Govt from the start is what earned her confidence from both investors and the rating agencies, otherwise we would have lost our AAA rating long time ago. Already the Govt has applied a lot of stimulus, ranging from the £375 billion of Quantitative easing, £80 billion funding for lending scheme to the £30 billion mass infrastructure spending for which so far there are not much takers.

The answer to our economic problems is not spend, spend and spend as Mr. Clegg seems to be suggesting. In fact this Govt’s decision to cancel a £700 million school building and renovation project when it came to power in 2010 was, and is still the right decision. My real worry is not in the anticipated fall in last quarter GDP figures, but in what the future holds.

The PM’s recent announcement on our relationship with Europe is one such clear fear of what the future holds. That the Pound Sterling (£) is presently not under any serious threat masks a lot of hidden weaknesses in the economy. Who knows tomorrow? But never say never. God forbid, but what if the £ is seriously threaten in future, then all bets are off. People should not always use the American economy as an excuse to encourage indefensible risk-taking. The US is a massive economy which can absorb all kinds of shocks and the dollar is the world’s reserve currency.

As this is intended to be a short piece, I can’t say much more; prudence, discipline and a cautious approach to the uncertainties of the future should be the way forward. Finally, may I refer readers to a short but penetrating essay written by Terry Smith, the CEO of Tullett Prebon and Fundsmith, published in the Daily Mail of 3^rd December 2012, on page 59.