The phoney war is still gathering steam. Labour charge that only a quarter of the proposed £21bn Tory tax cuts and £13bn reversed tax rises are properly funded, so there is huge Tory black hole. The Tories allege that Darling’s Treasury is circulating papers proposing 17% real total spending cuts outside the three protected departments, so claims of Labour investment and no cuts is nonsense. With 5 months still to go to the election, if this carries on daily, the electorate will have shut off long before. The key point is that neither party offers any alternative to massive cuts. Labour’s answer is that cuts, or at least big cuts, won’t be necessary because economic growth is projected to pick up to 3.5% by 2011-12. Get real: from an economy still in recession in Q3 2009, where is growth of that tall order to come from? As Larry Elliott argued plausibly in yesterday’s Guardian, we were told the worst was over in 1975, but a year later a sterling crisis erupted that brought in the IMF. In 1991 we were told the worst was over, but a year later the £ was forced out of the ERM and Tory economic policy collapsed. Will 2010-11 be any different?

Growth as high as 3.5% a year, within 2 years of a 4.75% drop – a postwar record – would be unprecedented. Where will the growth come from? Not from private sector investment while expectations of profitability remain so depressed at least until the turnaround is much more visibla and more solidly based. Not from private consumption when household debt almost equals GDP. Not from exports when most of the world is still hardly out of recession. The only source of demand equal to the objective assigned by the Government is a major public investment programme of job creation in the areas where it is so desperately needed – in house-building, infrastructure and the new green digital economy. But will New Labour which has hitherto so vigorously repudiated any Keynesian-type management of demand be ready to sacrifice its own ideological prejudices in the national interest?

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