Tories tweaking their message
"We care about the recovery too, honest." That's the message from Conservative high command this week.
I've commented before that (in "More squeeze to come" and "A plan not a timetable") the Tories seemed to want to appear more single-minded in their determination to cut the deficit than they really were. They had allowed Labour to paint them as hell-bent on cutting spending, regardless of the state of the economy, though in practice, they were unlikely to tighten much more than Labour in 2010-11.
Privately, party officials have explained the disconnect as a matter of positioning: "you need to set clear dividing lines first. Later you can tweak the message."
To judge by some of the headlines this morning - for example, on the front page of the FT - this is more than a tweak.
In the past, David Cameron, George Osborne and others had argued that a tough budget programme would help the recovery, by preventing a run on British government debt. An absence of market panic over borrowing would enable interest rates to stay lower, longer, and thus help the recovery.
There was also the shakier claim that a weaker exchange rate would help exports fill any gap in demand created by cuts in public spending. (I say shaky because even if the economics point in that direction, many in the markets would expect sterling to rise following a tough Conservative first budget.)
But as I noted on the day of Osborne's conference speech, this argument for austerity left the party battling a counter-factual.
Until you could see signs of panic in the markets over UK debt - and we haven't seen many yet - it was that much harder to argue that deficit cuts were priority number one. And that much easier for the government to paint the Conservatives as debt fanatics who would put the recovery at risk.
Apparently, party strategists now agree. On the Andrew Marr show yesterday, David Cameron made the negative link between cutting debt and protecting the recovery. But he also tried out a much more positive line: a Conservative government first budget would "go for growth" , with a "proper plan to get the economy growing" - including, for example, a cut in corporation tax.
That tax cut might be popular with many businesses. It could even help them grow, at the margin. But it will be paid for by getting rid of various business allowances (and probably limiting the deductibility of debt interest payments). So many other firms could lose out. For obvious reasons, this would not be a give-away budget even if it was "going for growth".
George Osborne wants to reduce the bias in favour of debt finance in the UK. This is one of many ideas he has for boosting Britain's long-term growth. Opposition chancellors always have a bundle of them (see my earlier post "Are we all long-termists now?"). One would expect to see him include some of them in his first budget, though my understanding is that the tax changes would be phased in over several years.
Even Osborne would admit that these kinds of structural changes will not improve Britain's growth prospects overnight. Whereas many economists would argue that new spending cuts or tax rises which come into force next year - against a backdrop of a lot of spare capacity in the economy and possibly weak global demand - could potentially hurt growth in 2010. That's what Labour is going to be saying for at least the next six months.
After months of austerity talk, David Cameron does need to show he cares about growth after all. But he's not going to seal the deal talking about corporation tax cuts which pay for themselves, and small-bore changes to help small businesses. Labour will always be able to come back and point to all the areas where the Tories have said spending will be cut. (They've already been sending texts to journalists this morning along these lines).
It's difficult to get across the idea that cutting the deficit could help the recovery (leaving aside for the moment the question of whether it actually would). But tweaked or untweaked, the Conservatives are stuck with it. That's the argument they have to get across to the British public. And that, in fact, was the main focus of Cameron's interview yesterday and his speech to the CBI today. The question of the day is whether a strengthening economy makes it easier for him - or harder.