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Westminster watch

Simon Barrow

BarrowWhen the new coalition announced its programme, an economic austerity response was at the heart of it. With global growth stunted, it argued, a sizeable reduction in the national debt was non-negotiable. Britain needed to downsize substantially. Trying to spend its way out of recession would bankrupt us.

Over the past four months, that argument has been seriously challenged. But not by the major protagonists in the last General Election. Instead, it has been an international economist, the promoters of a 'Green New Deal', and the nationalist parties in Scotland and Wales who have made the most noise about the plans - and the long-term political implications.

Joseph Stiglitz, former chief adviser at the World Bank, has been most forthright in his criticism of Cameronomics. The UK is not the world's largest debtor nation, he points out. It cannot pretend that it is invulnerable to pressure from the international financial markets, but it is not Greece. It has much wider choices than the small nations about how (and how fast) it adjusts. What's more, if it maintains a 'public bad' versus 'private good' stance to investment, it runs a severe risk of damaging the very productivity that is needed to help keep the global economy afloat.

The Green economists go further. What is needed is not cuts but a massive redirection of public, private and mutual resources to a restructured, low carbon economy. Far from safeguarding Britain's future, the present approach is imperilling it. It is not just unnecessary, but wrong.

Meanwhile, there are other choppy political waters ahead. The Scottish National Party has ditched a parliamentary vote on an independence referendum during this term of the Scottish government, and will instead go to the public in the May 2011 elections seeking to forge a renewed argument for constitutional change. Its case is that Westminster has no legitimate mandate to impose its economic agenda on those parts of Britain that have consistently voted against it. Scotland and Wales now need comprehensive tax raising powers.

Such arguments will emerge again when the UK government publishes its long-awaited comprehensive Spending Review this month. This will set out in painful detail exactly who is going to pay the price of stringency. The howls will come from Surrey as well as Sunderland.

Meanwhile, the Institute for Fiscal Studies, which can hardly be accused of being a force for agitation, has already publicly crossed swords with Nick Clegg over how the cuts will impact the country's poorest and most vulnerable citizens - notably in areas like health, housing, income, employment and social welfare.

The chancellor's 'we're all in this together' rhetoric will take a further hammering when the full details are on the table. So far the coalition has enjoyed a fair degree of public sympathy. By spring next year that could have changed significantly.