There are some interesting points in Martin Wolf's new article on the deficit:
"The second qualification is that the country is not living beyond its means, to any significant degree; the government is. Not only is the current account deficit modest, but the UK’s net liabilities were only 13 per cent of GDP at the end of 2009.
Third, more attention needs to be paid to the long-term health of manufacturing, which still generates half of all export earnings.
Finally, we have the question of how to tighten the fiscal position. I would have no problem with Conservative opposition to higher employers’ national insurance contributions, if they had not suggested that greater efficiency alone might replace it. With a need to tighten fiscal policy by at least £100bn (7 per cent of GDP), the UK must implement all the efficiency savings it can imagine, plus real-terms cuts to public sector pay bills and services, plus tax increases. The parties are determined not to discuss these realities. If politicians treat voters like children, the voters will throw tantrums when cuts come."
As I mentioned in responding to another article from Martin Wolf earlier this week, I think he underestimates the extent to which government spending and regulation is getting in the way of a private sector recovery. High spending, and the borrowing needed to pay for it, undermines economic confidence by suggesting big tax bills to come. Climate change regulations drive up energy prices and make it much harder for British firms to compete. That is why the sort of programme that we recommend in the new book, looking at every area the cost of government can be brought down, is so important.