Although the Office of Budget Responsibility suggests a bleak picture with weak growth at home, and an economy not helped by the crisis in the Eurozone, all is not bleak. There is more to be done. First public spending must come down, having spiralled after 2006-2007 to around 50 per cent of GDP. The evidence from a number of economies which have been here before is that tough fiscal policy combined with market liberalisation and structural reforms can help economies recover reasonably rapidly.
Sweden, Ireland (before it and the UK went on the path to boom in the last decade) and New Zealand followed that course to prosperity and growth. So too did the emerging economies – Brazil and Chile. The package is well documented (See Going for Growth: The Best Course For Sustained Economic Recovery)
- Public spending levels cut.
- Tax burdens reduced.
- Property Rights emphasised.
- Institutional reforms seen through
This package, as the evidence indicates, has led to sustained growth.