Of Growth and Paperclips

Far be it from me to stand up for the Coalition. I will be honest, at the last election I preferred the Tories but that was on the grounds that I hoped they would be less a bunch of incompetent control freaks than their predecessors. Incompetence I can tolerate - when have governments ever been anything other than incompetent? But to have people whose only successful real-world ventures were running booze-ups in their Student Union Bars trying to micro-manage the country is a terrifying thing, and an all-too-common sight.

So I won't stand up for them. Especially little Osborne who is now, Burton tells me, taking a third of the price of beer in duty and VAT. Driving pubs into the dust through punitive taxation is no way for the party of - allegedly - low tax to behave. Any responsible chancellor would surely slash the duty on alcohol and restore our balance of payments by encouraging the French to run booze cruises to Folkestone. But I digress, big-style.

The point I was really after was this. The complaint from the Left is that we do not have growth in the economy. But the aim of the Coalition is not growth - it's paying off the deficit. I suspect these two things are incompatible, at least in tne short term.

Let's take the much-vaunted savings in public sector procurement. Let's imagine that a far-reaching investigation into the paper-clip procurement process in the NHS unveils vast inefficiencies. Let's say that either the NHS is being massively over-charged as part of a foolish single source of supply contract, or else each NHS trust has negotiated its own deal, suffering from individually weak bargaining power as a result.

So let's suppose one, super, negotiator takes over the NHS paper clip procurement. In a bonfire of contracts and specifications across the land, thousands of paper-clips are already freed for use in the NHS. By negotiating a better price overall, money is saved. By introducing an on-line paperclip replenishment system, drawing paperclips from a paperclip distribution centre on a just-in-time process, the capital tied up in paper clips can be freed and the Deficit Reduced.

Let's look at that from the paper-clip industry's perspective. So now the Government has one preferred supplier - all the other paper-clip sales executives, paper-clip accounts directors and paper-clip order processing clerks have lost their jobs.

The number of paper-clips in the supply chain has been reduced. So maintenance cycles on paper-clip counting machines, paper-clip boxing machines and paper-clip manufacturing machines are reduced. Some stand idle. The people who service paper-clip machines, and those who train the service engineers, undergo contraction. The British representatives of the (no doubt Chinese) companies that make paper-clip machines, and from whom the paper-clip companies order their raw materials, are laid off. In an ideal world they'd go off into the Doily sector, but it's hard times for doilies - the Civil Service's Doily Rationalisation Initiative has laid waste to great swathes of our doily-making heritage.

So the deficit has been cut, the environment is better for it (less fuel used making paper-clips). But growth is impacted. The Paper-clip industry is in the worst recession since all the paper-clips were called in to make armaments in WW2.

If you want growth generated by Central Goverment, it seems to me that logic says we should invent truly wasteful ways to procure paper clips. We should introduce new legislation demanding the use of paperclips on all bundles of paper, even if they're as small as just one sheet. We should create reserve stores of doilies, for use in emergencies - which of course will never come. We should deliberately over-pay public sector paper-clip suppliers, so their sales executives can buy new Beamers with their bonuses. Blimey, they might even be able to put in new layers of management.

Of course, this wouldn't help the deficit. I can see this one is gonna be tricky.