You are right Mr Redwood in saying due consideration needs to be given to the relative success past schemes. However, this needs to be in the context of the current realities.
- The budget deficit is already ballooning, with a very real prospect of debt running out of control. Committing to endless schemes will mean massive rises in taxes just as a recovery may be getting underway. George Osborne should make a couple of visits to the IMF to get to know the place, and practice shuffling on his knees.
- Any employment schemes will prove most cost effective when the recovery is underway, not while the economy is still shrinking.
RULES-OF-THUMB need to be used in evaluating policy. At a minimum, any stimulus, business subsidy or job-creation strategy should follow the following criteria.
- It must have a reasonable chance of generating more economic benefits that costs. Preferably it should have the prospect of having a positive impact on the Exchequer.
- Each project should be, at most, an annual commitment with limits imposed. Reviews should be stringent and the plug pulled if costs run out of control, or if projected benefits are not materializing.
- The timing is crucial. If the time is not right existing policies should be pulled. For instance, stamp duty should be re-introduced until the market has started to recover. (Lord Lamont has admitted that it did not work in 1992 and it is not working now) Similarly, if job creation schemes are to be effective, they should only be enacted on a large scale once the economy has bottomed out, when the marginal impact will be greater.
- The government should be aware of its own limitations. To be effective means to be shrewd, ruthless of failure and focused on realities. As with any elected government, this conflicts with pleasing popular opinion and maintaining an image.
- Finally, the government should limit the difficulties it is imposing. It should critically look at the regulations that have little benefits but impose onerous costs, either temporarily suspending them, or removing them off the statute book.
However, the Rules-of-Thumb might be too complex in these panic-stricken times. Instead consider the analogy is with a doctor who he presented with a condition that has not been fully diagnosed. The doctor will first do no harm. Then she will diagnose the best she can, after which will then try various treatments, monitering the patient constantly. If a treatment does not show positive effects, something else will be tried. But with each treatment, the doctor will study and learn. The doctor would consult with others, and not introduce two treatments that known, or likely to, conflict. She was would also be aware of the side effects of dangerous drugs, such as using pain killers that may become additive.