Any assessment of government statements that have a bearing on the economy should answer two questions: will the measures announced boost growth in the short-term and will they strength the economy's growth potential in the medium- to long-term. On neither score was there much to get excited about in today's Queen's Speech.
Queen's Speeches are not, of course, the place for announcements about fiscal or monetary policy; that is for budgets, autumn statements and the monthly meeting of the Monetary Policy Committee (MPC). The last budget made it clear that the government is still determined - despite the lack of growth in the economy and likely criticism from the IMF team in the UK to assess the economy - to stick to its deficit reduction plan. There will be no discretionary increase in public spending or tax cut to lift growth in the economy this side of the general election.
Government support for short-term growth will continue to come in the form of schemes like Funding for Lending and the Help to Buy: attempts to ensure that the benefits of low interest rates are passed on to small businesses and house buyers. The MPC has also been given a little more flexibility over the way it conducts monetary policy until the economic recovery is firmly established, though few believe this will make any difference in practice.
Rather than pump-priming the mortgage market through Help to Buy and encouraging another increase in household debt, the government should be introducing measures designed to lift the rate of house building. The UK needs to build around 250,000 new homes every year to meet demand, but the current rate of house starts is less than half this rate. The Queen's Speech should have included a Housing Bill, designed to deliver a massive step-change in the rate of house building.
The Speech had nothing to say about banking. The government is already increasing protection for taxpayers - but also for shareholders, bondholders and other stakeholders - in the event of another financial crisis and seeking to reduce the risks of such a crisis occurring. These are important steps. But it is only part of what needs to be done to reform banking. So far, the government has done very little to address the issues of excess rent extraction by banks from the rest of the economy and introducing more competition into the banking sector. A Banking Bill could have tackled these issues.
The other economic measures included in today's announcement - to exempt employers from the first £2,000 of their National Insurance contributions, to create a set of consumer rights, to strengthen intellectual property protection and to cut red tape - have been generally welcomed. But they will do little to strengthen the economy's growth potential in the medium-term. A government that was serious about rebalancing and strengthening the economy might have announced, for example, an Export Bill containing measures to increase support for firms, particularly small and medium-sized firms, looking to export for the first time; or an Employment Bill with measures to increase employment rates among groups traditionally disadvantaged in the labour market, including young people.
It has been clear since the economy went into recession in 2008 that fundamental change is required, but so far little has been delivered and another opportunity to step up the pace of change was missed today. Expectations of the Queen's Speech, in terms of economic measures, were low. Sadly, they turn out to be right. Nothing that was announced today will make much difference either to growth in the economy in the short-term or its potential to grow in the medium-term.Suggest a correction