The government today announced some more projects that would have to be put on hold in light of the economic circumstances we find ourselves in. Among them was the £80m loan to Sheffield Forgemasters, which sits very close to NC’s constituency.

Labour beatniks, keen to grab back Sheffield City Council from the Lib Dems and keep them out of the Sheffield Central constituency where the majority is now just 165 for Paul Blomfield, have already been condemning this move. But to say that it will cost jobs is just nonsense – no jobs currently exist; the postponement of the loan will mean that they won’t be created as planned. This money would be better spent avoiding cuts to the hundreds of other projects where cancelled government funding will mean private contractors losing revenue and having to lay off staff.

But as they are involved in the “leaching” industry of outsourcing away from union-backed in-house public sector workers, Derek Simpson doesn’t give so much of a monkey’s about them. Apart from anything else, £80m is simply far too much public money to spend on 150 jobs, whether in Sheffield, South Wales or Surrey.

The PM speaking at MK

The PM’s speech in Milton Keynes was among the most important of his political career so far. It defined his position more clearly than anything previously on the defining political question of the decade – how to get Britain back into business.

We can take from it several things – firstly that the PM will lay it on very thick about the economic crisis being Labour’s fault. I think that’s no bad thing – particularly because they are starting to come out with some pretty outrageous criticism of the coalition on a situation they helped, at least, to create. But I think he’s got to be careful and not get too free with this tactic. He needs to be the consensus man, the leader, the unifier and the solution, not the “new” problem.

Secondly, the PM is happy to tell us just how bad it is, unlike Labour. Not everyone will agree with him but it is obviously in his interest to make things seem as bad as possible. I don’t think a great deal of exaggeration is necessary – things are very, very bad – but the openness he is in a political position to afford could be something of an advantage. I think if played well, far from Mervyn King’s prediction being correct, the public could be sympathetic to the Coalition for some time to come. Honest actions go a long way in politics nowadays and the public recognise favourably politicians who are prepared to do the right, if not popular, thing.

Thirdly, Danny Alexander will be right next to him – all the way. There’s no way that the Liberal Democrats are getting off the hook with this one as full members of the Coalition and I don’t think they want to. NC has said that there will be a “cut with kindness” policy that will shield some of the most vulnerable from the worst of what needs to be done but that can only do so much – they can’t be protected from council cuts in many areas.

Nor do I think it’s a good idea for George Osborne to widely consult the public on where to save money. This is a very risky strategy that could puta very considerable rod in his back when Labour organises a Twitter campaign to get people to respond in a particular way. The results could then be FOIed and may not be where the final decision needs to be made. It could look like the public has been consulted and ignored – not great PR.

The simple answer here is that, a bit like Masterchef, this new economic future is going to “change our life”. There are opportunities for efficiency, yes, and looking at different ways of providing services. But the bottom line is that we need to get a £170bn deficit down and there’s a lot of money to hack off budgets. It must be done, it must be done quickly and there is a certainly amount of political risk that is going to come as the pay-off of winning the election (sort of).

I think the Coalition needs to remember that the public has a great deal more of a problem with dishonesty than ineffectiveness. If the government tries to mask the problem, if it breaks its promises over what it is going to cut, if there is a suspicion that certain groups are being unjustly protected or if there is any underhand treasury regulation as with the last government, the considerable goodwill that the public holds will drain quickly.

If the government is straight, calls a cut a cut and acts responsibly for the best interests of the nation, it might just find itself laying down a legacy of decency – if not prosperity – and a chance in 2015 to lead the country properly back into the new world economy with its head held high.

One suspects that if Nick Clegg had decided after May 6 to take up Campbell and Mandelson’s grubby little offer and a Lib/Lab coalition was in power, the BBC would have reported David Laws – rather than Alistair Darling – delivering £6.2bn cuts. As it happens, no such favours are granted to the Conservatives by a corporation whose very skin has been saved by the votes that denied the PM a majority.

The savings identified by the Treasury include some really good things, such as the austerity measures put in place to stop ministers using cars all the time, the abolition of pointless quangos and renegotiating government contracts. The rest of the news emerging from the details is less welcome but regrettably necessary, not least because it goes further than the public sector. The £690m cut from the DfT means contracts put on hold, which has a knock-on effect in the private sector – the A23 scheme and the third phase of the Birmingham Box Managed Motorways project are both, for example, placed on hold and this means uncertainty for the consultants and contractors employed to deliver them.

So too Communities and Local Government, which loses £830m and will have less to spend on meeting its core objectives but also on schemes and projects that are delivered and help fuel a large – and growing – portion of the private sector. Companies like Atkins, Capita, Serco, Halcrow and Balfour Beatty are major employers and cutbacks in local government spending – further underlined by the £1.165bn in savings being expected of local authorities – will mean tougher times ahead for these businesses. The best, of course, will survive – but those who don’t can expect to shed jobs in addition to those that will be shed by the public sector.

And with an emergency budget in June and a Comprehensive Spending Review in October, the bad news is that £6.2bn is only the tip of the iceberg. The total deficit is £157bn and quite how this will be eradicated is anyone’s guess - even ten times what the government announced on Monday is only a third of what is needed. There is a great deal of pain to come and taking the decisions won’t be easy. Although there is a chink of good news in terms of a rise in GDP, the OECD is putting yet more pressure on George Osborne to raise interest rates and avoid cutting too quickly.

It all goes to demonstrate two things: firstly, that there has been – and will continue to be for a while – no real recovery, merely a plot by a Labour-staffed treasury to pump vast amounts of taxpayers’ existing and new money into the economy to delay the onset of recession and the necessity to make fiscal and spending adjustments until after the election. This may turn out to be more damaging than the recession itself.

Secondly, if you vote in a Labour government, sooner or later it runs out of money from which the only recovery is a Conservative government (or in this case coalition) to administer social and economic shock treatment. The only way Labour gets into power is when it promises to spend money - that is the central ethos of democratic socialism. In good times, it will always look more attractive than the more cautious Conservative within-means alternative. But there’s a catch; and we are about to find out exactly what that entails.

Barnes Wallis, inventor of the bouncing bomb, among other things

There’s a very interesting letter published in the Times today that sums up one of the big post-election questions and ties in to the Conservative Political Discussion Group debate that was held tonight at Churchill House.

Conservatives all agree that the public sector needs to be trimmed. We like to think that we can get this from efficiency savings and managed vacancies and possibly that is true. Carl Thomson and John Redwood’s excellent leaflet showed that there is waste all around. But for every time we abolish a Quango, scrap a government scheme or cut a swathe through a government department, there is a risk – although not necessarily a certainty – that jobs could be lost.

I think that the public would be quite approving of 40,000 civil servants and local government officers being stripped from the public liabilities if there wasn’t a recession and memories of redundancy or threats to their own jobs weren’t quite so raw. So the problem for spending-cutting Conservatives is this – how can we invigorate the private sector to create the jobs for those we need to cut from the public sector? Because unless that happens, there won’t be the cuts that some would like to see.

British manufacturing will continue to decline and our financial services sector – the powerhouse behind the 1995-2007 economic boom – looks to have blotted its copybook and is now the target of government ire. So what do we have left? What can Britain give the world? We have a long and established tradition of innovative and creative thinking, invention and a slightly different perspective on a problem. If Britain has any hope of still being great in 2050, this hope lies in science, technology and the support services that surround it.

We can no longer export goods as cheaply as other countries and our services sector will soon be swamped by the rigours of increased scrutiny. But what we can export is patents, ideas and technology – but only if the funding is put into the necessary research.

In Churchill House, we were debating the differences between Labour and the Conservatives in the long and short-term. Labour would maintain and increase the state economy to 60% of GDP or above. Only the Conservatives can challenge this. It’s a risk; but it could change the position of Britain in the world and be the bang that echoes through the next century of our history.

Teresa - know what you are going to say and what might be said back before you say it!

I drove out to Dorking this morning along the A25 via Send for a business meeting. The road, which I know very well from reporting days and past lives, is in a truly awful, appalling state. But that is Guildford and Mole Valley’s issue – the reason I mention it was that I was stuck for about ten minutes in the aftermath of a nasty car crash (at which I hope no-one was seriously hurt) that seemed to mirror what I was listening to on the radio.

Teresa May, shadow employment secretary, appeared on the Stephen Nolan Show, BBC Radio Five Live (you can listen here but need to fast forward), to talk about today’s unemployment figures (notice how the BBC allows Lib Dem Steve Webb to get in a pop at cutting the deficit at the bottom - no bias my foot), which are mixed. It is good that overall unemployment is down – but with the number of Jobseekers’ claimants up and long-term unemployment up it is difficult to argue that it’s a great day. Teresa presumably went on the air to point out the mixed message – specifically that the number of “under-employed” people – where they have been forced into part-time and reduced-hours work – stands at almost three million.

Instead, she allowed herself down a classic funnel by stating that Labour has closed Job Centres at the average of one a month since 2008. There was no need for her to go there – all she needed to do was talk about the Work Programme, express sympathy and understanding and stay calm. By raising the matter of closures, she prompted the inevitable comeback “so would you re-open them?”, to which she had no answer.

The funnel happens when you’re drawn to a pinch point from which the interview cannot go forward without an answer, usually a yes or no question. “I’ll ask you again, if you say that Labour was wrong to close the Job Centres, will you commit to re-open them?” Again she evades – it sounds very poor. Now she’s struggling because once you’re in the funnel, it’s difficult to climb back out again. “Look, you are hoping to become the next government in three months’ time, I think people have a right to know whether you will right a wrong that you say Labour has committed – so yes or no, will you re-open the Job Centres?” Crash, bang.

It’s not the point she has come on air to make (if it was, it was extremely ill-judged and poorly prepared). So why does an experienced politician like Teresa May allow herself to be dragged into the funnel so easily? By the time Labour minister Jim Knights is introduced into the proceedings, he could have danced around like a chicken and sounded more credible than Teresa. To be fair, she improved towards the end but the damage was done. And I don’t blame the BBC for being hard on her – if you make such basic unforced errors, you get what you deserve.

So how to get out of the funnel? Firstly, avoid going there in the first place. Why bring up the mistakes of government on such a peripheral matter? The essence lies in Conservative policy, which in this case is very credible. Once you’re in, there are only two options – attack the basis of the question or tell the truth. In Teresa’s case, she could have done either.

Attack the basis of the question: “I understand why you as a journalist are asking me that question but whether or not we commit to re-opening the centres is not relevant. The damage has already been done and the people who those centres could have helped have not been helped, which adds to the problems that we face now. The time to save those centres was 2008, not 2010. Instead of talking about committing to re-open those centres, we have adjusted our policy to suit the needs of today’s unemployed people.” If nothing else, it looks less evasive and puts you back in control of the issue, dismissing the question as outdated.

Tell the truth: “I think it’s important to give an honest answer to you and that answer is that we are not in a position to re-open those centres given the state of the public finances. If they had been kept open in 2008 we wouldn’t now close them because that money would already be in our budgets. This government has ruined the economy and left us with huge debts and that means that as much as we’d like to, we simply can’t go and undo this and many other bad decisions that Labour has left us with. In the light of these tight resources, it’s important that we target them properly and that is what our new programme is designed to do.”

Neither answer gets you off the hook completely but it allows you to move on. There’s nothing the public hates more than politicians that blatantly won’t answer questions and evasiveness is not a good thing for voters or party members to hear. I don’t know who’s advising Teresa May on dealing with the media but they clearly have a lot of work to do.

In the dark - Broadcasting House seems to have its own view on economics

Apparently two separate blog entries in lightning succession trying to make hay out of the Hatfield House meetings clearly wasn’t enough for Nick Robinson, who surely won’t still be BBC Political Editor by the end of the year. The fact that no other media saw fit to run with this story in a big way shows how isolated he is, how drawn into the Labour spin trap.

We now have another blog post on Tory cuts that tries to have it all ways – saying the Conservatives will cut and if they don’t painting that as a U-turn and another slight on DC. He then helps perpetuate the myth that government spending boosts growth and will therefore aid a recovery. Government spending doesn’t boost growth - it creates its own growth, which then disappears once the subsidy is withdrawn. The UK would still be in recession without the Car Scrappage Scheme – with that scheme over, the car industry can expect a significant downturn in the months ahead.

Today, the Labour group on the LGA announced it would push for a 1% pay increase for the least well paid rather than exercise restraint. Again, the money that goes into propping up more and more public sector wages is a massive ongoing subsidy and one that cannot be withdrawn now it has been enacted without devastating unemployment. The reduction of the public sector headcount must be a target of a Conservative government because it is not healthy for our economy, society or democracy for such a large proportion of the population to be employed by the government.

But now so many are, reducing that number is a hugely painful and expensive thing to do. We mustn’t make the same mistake with the economy by using more government money to prop it up – it needs to be nurtured and kicked into a recovery of its own and the only way to do that is to reduce our debt. Yesterday Bill Gross told investors across the world to avoid the UK because of our huge debts, weak currency and fragile recovery. Like George Osborne, he sees that debt reduction – preferably quickly – is the only way to restore confidence, maintain our credit rating and keep interest rates down.

It’s all very well pumping money into the economy – even if it doesn’t actually promote sustainable growth. But if people’s mortgage rates go from 2.5% up to 6% within 12 months, it isn’t going to leave them with much money to aid the recovery; in fact, many of them will be worse off than they were while we were in recession.

So the BBC needs to stop chucking the last dice all over the place in support of Labour and start understanding that more borrowing and spending in the short-term is going to make the problem far, far worse. If they leave everything as it is, we will fingernail into a slow and drawn out recovery process during which many people will be worse off than they have been for the past two years.

Only by committing to reduce the deficit can we carry the confidence of the markets, which are the real force behind recovery. We need to cut public spending while keeping as many people as possible employed, to raise taxes for those that can afford it most and keep interest rates down while selling on as much of our debt as we can. It’s not going to be easy.

Well, don’t you feel better now? The UK is officially out of recession (link to The Times because the BBC’s coverage reads like a Treasury press release), so we can all get back in our cars, go back to shopping in Waitrose and start thinking about re-mortgaging the house. Not quite. Because the government has been pumping so, so much money into our economy during the past 12 months that anything other than growth – however pitifully small – would have been utter humiliation. It’s also worth pointing out that we still have January and February’s figures to come before Q4 2009 growth is confirmed.

I believe that 0.1% is rather convenient for Gordon Brown and will be revised downwards in a few weeks when the fuss has died down. But there is a fundamental distinction between the two parties on how to maintain recovery – and remember that a second “after-slump” in the face of first recovery is something that has characterised nearly all the post-war recession. Labour wants to continue to prop up the economy with taxpayers’ money and there’s nothing particularly wrong with that in such dire circumstances.

The BBC's graph is stastically nonsense

But at some point, the props have to be taken away – and at the moment, the whole thing would come crashing down if that were the case. This is the graph that the Treasury and the BBC wants people in Britain to see. It looks like we are out of the woods. With another 18 months of quantative easing and borrowing, the figure could quite easily be pushed up to 2 or 3 percent and the government given credit for not just a full recovery but a new boom.

The Guardian's graph not only shows us where we actually are but compares with other recessions

This, though, is the Grauniad’s somewhat more realistic assessment of the situation that shows the recession has wiped out all the growth in the British economy since 2005. I have heard both George Osborne and Phillip Hammond in the media today say that the only thing that will keep us out of recession is the private sector’s profits, jobs and tax revenues and that interest rates must stay low to stimulate that growth. We need to cut the defecit to bolster our credit rating and boost our floundering currency.

A rise in interest rates, which would have an adverse affect on people’s spending power, is the most serious threat to our sustained economic recovery – apart from a fourth term for Labour. More borrowing could mean a softening of Britain’s credit rating and devaluing of the pound, which would make government guilts and bonds less attractive to investors. The government desperately needs to harden these investments to pass Britain’s debt onto those with the money to buy it; cuts in spending alone coupled with tax increases will not be enough to pay off our borrowings.

I want to see Ken Clarke and Phillip Hammond blast through Labour bluster about recovery and remind people that whatever Labour has done to bring us out of recession – and you can argue about the effectiveness vs cost of that – it’s nothing compared to the damage they have done to British business and trade, as well as landing us with a huge debt to pay off. I want to see people reminded about this until Gordon Brown doesn’t want to talk about the economy anymore. Brown’s plans to continue to spend his way out of recession and worry about the economic consequences later should convince that he can’t be trusted on this.

He’s been saying for ages that the Conservatives have made the wrong call on the economy every time. It’s not true and it’s time we hit back. He wants to continue to mollycoddle the nation and extend the pain for longer. The Conservative approach is not just a self-flagellating short, sharp shock; it makes absolute economic sense and it’s about time we said so.

The PM spent most of last year talking about how the Conservatives were going to cut their way out of recession. Now, with the publication of the first part of the Conservative manifesto, he has decided to try and say that we are planning to splurge our way out of it with a £34bn black hole.

Labour has form on dodgy dossiers - as we all know - and the compendium of lies that they released in response to the manifesto certainly fell into that category. But they succeeded in one way – the central message of the manifesto, the draft plans for the NHS, did not get an airing on the news. DC has to brush aside this silly question about how much of a promise is a promise and make sure that people know about our ideas and innovations for the future of the country.

As Stephanie Flanders points out, we should be mounting a two-pronged attack here – one with our own ideas and one with some serious hay-making about Labour’s own planned cuts. Where I think she is slightly off the mark is in saying that by talking about the nature of the promises rather than the content, the first day was a Labour success – DC made the point well that the promises are only tentative because of the economic mess Labour has bequeathed.

But he needs to start being more ruthless about ignoring journalists’ questions and getting his own message out. Tony Blair was a master of this art and it contributed a significant part of why he was able to seal the deal in way that DC has yet to. And Nick Robinson is as good a place as any to start.

The man who nose - Ken Clarke

As well as spinning madly about security, Labour’s press team has also been trying to get stuff into the paper along the lines that the Conservative will be cutting spending and raising taxes after Ken Clarke said it would be “folly” to rule out tax increases. The BBC has dutifully responded with just such a story.

First of all, I should hope that no promises whatsoever will be made on tax increases or otherwise until George Osborne is able to see the proper and full government account – including all the off balance sheet PFI liabilities. It would be totally stupid to make any pledges on the overall tax burden until the Conservatives know just what a state the country is in. Ken Clarke is absolutely right and I hope that even tax-cutting Tories can see the logic in that position – or at least appreciate the total illogicality of promising to maintain or cut tax rates at this stage.

Secondly, the BBC has a long memory when it comes to Mrs Thatcher and the poll tax or John Major and sleaze but a very short one when it comes to recalling just who on earth plunged this country into near-bankruptcy to begin with. Every economically active person played a small part, certain larger players in the economy such as the banks and the regulators played a far more significant role but the one institution that has to carry the can for such throwaway mismanagement is HM Government.

For two years, Labour has spun that the banks were to blame and the price of the banks readily shouldering that blame has been £60bn of taxpayers’ money to make them competitive again. Those that wouldn’t play ball, like Sir Fred Goodwin, were fed to the media in a frenzy of inflammatory briefings that if they had been conducted by a private citizen on another private citizen would have been on the edge of legality.

The BBC, Grauniad and others have happily swallowed that line to the point where most of the British public believe that the banks were more or just as responsible as the government for the recession. Rubbish.

A few banks don’t make a recession, no matter how dodgy the loans. The recession was caused by a framework of poor decisions, insufficient regulation, faulty economic plans and over-optimistic projections. It was also caused because western governments were too complacent and arrogant to understand that their economies must shift to work around the emerging markets of the East rather than just continuing as per the past 50 years. The person responsible for the poor economic planning, the lack of realpolitick, the poor regulation and stoking up of the boom was not Sir Fred or any other banker. It was Gordon Brown the chancellor and Gordon Brown the PM.

Yet somehow it will be the fault of the Conservative Party if, after the next election, taxes need to rise and spending be cut. Well, spending will be cut after the next election because our national debt needs to be controlled. And taxes will rise as well because cuts alone won’t deliver the massive amounts of money that need to be raised.

DC is concerned that people will see the Conservatives offering only a decade of downbeat austerity and vote for Gordon who wants more borrowing to keep spending. It is a worry but in the end you have to trust the electorate to do what is right. And I think they will understand that a decade of different economic behaviour – most of it bearable, much of it positive but some of it unwelcome – is the price of the Noughties Boom.

A little while ago, the PM liked to remind us how the recession started in America and wasn’t really the fault of anyone in the UK (even the bankers). He also assured us that the UK was best placed to deal with the recession and that we would come out of it strongly, ahead of other less well-prepared economies.

Yesterday’s announcement that the UK is still in recession while the Americans are now growing at 2.2% won’t damage Labour politically any further because their economic incompetence is already reflected in their current poll rating. But it will make it more difficult to hold an early election in March because the Conservatives will be able to argue on these figures and no further ones are due before a March campaign would be well underway.

There again, if the PM wants to wait until May – and his indecisiveness makes this the most likely option – he will have to deliver a gloom-filled budget that will overshadow any official news of recession exit and a small overall growth in the economy. The real damage of this recession was never going to be fully apparent during its duration but rather in the years that will follow.

In all fairness, I don’t think the PM and this Labour government have earned the right to manage the recovery and believe that voters will see it that way during an election too. It remains for DC and George Osborne to convince that they have the approach to see the country onto a even footing and the imagination to maintain growth in the face of the crippling debts that Labour have left to us.

The debt is the price of the PM trying to force an early recovery – increasing spending and refusing to exercise restraint. In addition, all the money that has been printed is a serious inflation risk in 2010/11 and the public and private sector have to show moderation and pay restraint during the first years of recovery. Working for a company that provides support services largely to government clients, I include myself in that too.

The dishonesty of the PM in misrepresenting the UK’s strength to fight the recession has been one if its most unedifying features.