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Prime Minister needs to find a path back to growth

IFDavid Cameron were a character from a Charles Dickens novel, surely he would be Wilkins Micawber from David Copperfield.

With the same reckless cheerfulness, the Prime Minister declares in his New Year message that the UK is "heading in the right direction".

Of course, his Government's economic policy too is based loosely on what we could call the Micawber principle: that the recipe for happiness is that expenditure should never exceed income. In Treasury terms, that involves eliminating the structural deficit over the course of this parliament. Unfortunately, with George Osborne on track to borrow £212bn more than he originally planned and his deficit reduction plan on course to miss even Alistair Darling's more modest target, Mr Cameron's upbeat tone seems somewhat misplaced.

Meanwhile, growth forecasts from the Government's Office for Budget Responsibility (OBR) also seem to be based on the same Micawberish blind optimism. In fact, Tony Dolphin, chief economist at the Institute for Public Policy Research, says in his own Ne'erday homily that the OBR must be depending on "something turning up". With Government spending cuts biting further and the potential for growth in exports curtailed by uncertainty in the US, the eurozone, the Middle East and even Asia, it is hard to see where that growth will come from, unless British households take on more debt. And, as Mr Micawber would remind us, that is a recipe for future misery.

The Centre for Economics and Business Research today puts the chances of a triple-dip recession at 50/50. In truth, the UK has never really recovered from the first one and to the person in the street, fearful for their job and worried about household bills, the distinction between minute growth and a shallow recession is virtually indistinguishable.

Nobody should blame Mr Cameron for trying to put a rosy complexion on the economy. Relentless negativity lubricates downward spirals, as he should have known when he exaggerated Britain's problems two years ago. But it would be irresponsible to pretend the outlook is anything better than uncertain. The Government cannot wait for "something to turn up". It needs a path back to growth. It should include further infrastructure investment and more help into work for the long-term unemployed.

Dickens aficionados may point out that Mr Micawber came up trumps in the end, as a successful bank manager. Whether in the current climate that constitutes success, is a moot point. Given the gloomy outlook, it may be unrealistic to wish The Herald's readers a prosperous New Year but, nevertheless, may it be a happy one.

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