Politics 1, Economic Prosperity 0

By Chris Rumiftt / @dispatchblog

Cartoon: Martin Rowson, The Guardian

If the budget, with its confirmation of the deep financial morass we now find ourselves in, were not gloomy enough, the reaction of the commentariat in today’s newspapers makes for even more depressing reading for anyone who cares about the future of the country (rather than political point scoring) and is seeking to understand a way out of this terrible, unholy mess.

What is so depressing is that both sides of the political debate seem to be taking unedifying joy in the contents of yesterday’s Budget. The right are cock-a-hoop at being able to say that Labour has reverted to type, whilst the left – a descriptor I would generally accept for myself – seemed to take a perverse pleasure from the new 50p tax rate for the rich, a change many have willed for years and the recession gives them an opportunity to introduce.

What no-one, in either party or beyond the parties, seems to be doing is genuinely confronting what the future looks like within the new economic reality that confronts us.

There is broadly a consensus that the first task is to get the economy moving again – stopping recession turning into depression. And it is hoped that a mixture of the fiscal stimulus, low interest rates and quantitative easing will deliver this. There is a second area of consensus that in the new world order we need to lock in a new economic and regulatory structure to make sure we can never sleep walk into this catastrophe again; whilst at the same time retaining the dynamism and energy which have driven our prosperity in recent decades.

But once those things are done, we will still have an enormous inherited national debt and a very long road back to an annual budget surplus; with long-term consequences for levels of taxation and interest rates, and the vitality and prosperity of the British economy as a whole.

So where in the acres of newsprint and rolls of press releases, were the commentators genuinely confronting the hard choices which face us to rebuild our economy in the new economic reality in which all the tectonic plates have shifted?

On debt the questions we should be debating are about what should our long-term level of national debt be? How quickly should we seek to move back to annual budget surplus? Once we do so, should we try to pay back the national debt or simply seek to stablise?

The hardest questions for the right arise on the question of the future of taxation. It goes against their instincts but taxes clearly need to rise, but to what level and who should pay? What should the spread be between taxing income or savings, expenditure or pollution? Are the tax rises permanent or temporary? And how quickly should they come in if we are not to harm any nascent recovery?

On public spending, the biggest challenge is for the left. If we accept that getting back to budget surplus is something we do need to achieve at some point, it suggests that public spending needs to fall, and may need to do so significantly. This goes against the instincts of the left, but we need to seriously consider with a blank sheet of paper what activity the public sector does and doesn’t do, and understand fully the drain on resources this represents for the rest of the economy, and the implications for levels of taxation and interest rates. This blank sheet of paper approach needs to encompass national and local Government, and there can be no sacred cows – even in populist spending departments like health and education. Most of all, the question of public sector pensions does need a long hard look – for if the left does not do so, the right surely will.

And on both tax and spending we need to work out what the linkages are between Government activity in those areas and the rather urgent need to do something about climate change.

Sadly I didn’t read much of this in this morning’s papers, nor in the fabled political blogoshere. I saw lots of political point scoring and metaphorical wagging of fingers. I read a headline in the Telegraph which said “The return of class war” (it isn’t) and one in the Guardian which said “At last the super-rich bluff is called” (is it that either?). Altogether the commentary was unedifying and utterly failed to grasp the seriousness of the situation in which we find ourselves.

We are in a national and global economic crisis which is of far greater importance to most ordinary people than the outcome of the next General Election. My sense is the British people want partisanship put to one side and politicians of all parties working together to address these issues on which their jobs, their homes and their future prosperity depend. With twelve months until the general election, I will not be holding my breath.