Allister Heath

The Irish problem

It isn’t spending cuts

issue 09 October 2010

It isn’t spending cuts

Those arguing against spending cuts have recently adopted a one-word argument: Ireland. The case it stands for is as simple as it is bogus. Ireland had a deficit, now even worse than Britain’s. It adopted an agenda of sharp public spending cuts, on the same logic used by the British government. The result? A double-dip recession and a fresh round of misery. The lesson from Ireland is that cuts don’t work — and that George Osborne is leading Britain into the swamp.

The argument is seductive, but only if one is ignorant about what has just happened in Ireland. It is true that after bouncing back in the first quarter, the economy shrunk again in the second quarter, but such variability is to be expected in any country exiting a slump as severe as Ireland’s. But the real meteor that has just crashed into the government has nothing to do with the cuts, without which the Republic would almost certainly now be bust.

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