The key issue at the general election: it’s the economy, stupid

By Brian Barder

In the last few days the Tories have been discomfited, and Labour correspondingly heartened, by divisions within the Tory ranks over the National Health Service. These have highlighted the chasm which separates the party’s Cameroon self-styled “progressives”, with their “compassionate conservatism”, from the old traditional Tory hard-liners of the stupid party (J S Mill’s description). This bids fair to be an issue at the forthcoming general election and one which, carefully handled, should help Labour. But the temptation to focus obsessively on Labour’s ownership of and commitment to preserving the NHS shouldn’t cause Labour to take its eye off the ball: and the ball is the recession, its dire consequences for millions of ordinary people, and the chaos into which it has dragged the nation’s finances (including especially the colossal amount of national debt accumulated as a result). The election result will turn on which of the two major parties has the more convincing policies for dealing with these inter-related problems: unemployment, house repossessions, the threat to public services, how to get credit flowing again, what to do about the national debt. A key aspect of these questions is the timing of remedial action: many of the remedies that will be required are common to both Labour and Conservative policies. The really significant difference is when it will be safe and effective to begin to apply them.

Already the Tories’ line is beginning to have a deadly effect on public opinion as voiced in the opinion polls, the radio and television talk shows, and the blogosphere. It makes some seemingly obvious points in simple terms:

“the economy is in ruins; as so often before, a Labour government has presided over economic disaster, and a Conservative government will have to come to the rescue; reckless spending by the government under Gordon Brown as chancellor and now as Prime Minister has been financed by borrowing on a colossal scale, resulting in an unprecedented mountain of national debt; this huge debt will be an albatross round our children’s and their children’s necks unless a new government has the courage to tackle it urgently, whatever the cost to some areas of government spending; yet all the Labour government can offer is more spend, spend, spend, thus running up ever more debt. Spending and the debt it incurs are the problem, not the solution.”

Yet this whole indictment is utterly wrong, misguided, and dangerous. It’s imperative that Labour should begin now to expose it as such. Continuing to parrot the well-worn mantra contrasting “Labour investment with Tory cuts” really won’t do: on its own, that seems only to confirm the Tory charge sheet.

Labour’s campaign needs to concentrate on a few relatively simple points:

* The recession is a global phenomenon affecting virtually all countries, not just Britain. To blame it on any single government is absurd and dishonest.

* It’s generally acknowledged by leading economists and statesmen world-wide that the measures taken by Gordon Brown to save the banking system and then to limit the worst effects of the consequent recession have been far-sighted; they were eventually followed by all major western governments; they have already been beneficial, and they are already showing tentative signs of success. Each of them was initially opposed by the Tories, who however had no alternatives to suggest.

* To prevent the collapse of the banking and credit system and to stop recession turning into even more catastrophic slump, government has had to pump unprecedented quantities of money into the economy, first to allow the banks to function again, then to stimulate demand and through demand to get companies investing, re-employing workers, and producing once more. The recession has slashed government revenues through falls in the tax take, and forced government to spend more on unemployment benefit and other support for victims of the recession; so there has been no alternative but to fund the measures to re-float the economy by fresh borrowing. To have done anything else would have deepened and prolonged the recession – eventually requiring yet more borrowing and even higher debt.

* Recovery from recession is the overriding priority; paying off the national debt is strictly secondary. With low global interest rates Britain can afford to carry existing debt for as long as necessary while we start to re-inflate demand, and thus get unemployment down, credit flowing again, investment resuming, and the basics of normal economic activity back on the rails.

* Timing is the key. To start cutting government expenditure while we’re still in recession – as the Tories are hell-bent on doing – is bound to make the recession worse, and to delay our recovery from it. The Tories have an instinctive ideological desire for smaller government spending less money, reducing taxes, minimising universal public services such as education and the NHS, and giving the leading role as providers to private sector companies motivated primarily by profit. They hope to seize on the national debt problem as an excuse for slashing public spending long before it can be safe to do so, even if it makes the recession worse.

* Whichever party is in office when we start to move out of recession is going to have to start making painful and unpopular cuts in selected areas of government spending. Some taxes will need to be increased, too. No-one denies the eventual need for some expenditure cuts and some higher taxes. The questions are: which cuts: which taxes: and when? On all three questions the Tories are terribly wrong. Only Labour will target cuts which will do least harm to the most vulnerable and to those who have already been hard hit by the recession. Only Labour will ensure that higher taxes mainly affect those best able to pay them. Only Labour will defer until we are clearly out of recession measures to deal with the national debt which will torpedo the recovery if imposed too soon. Only Labour will force restraint and reform on the Tories’ friends in the City.

All this can be summed up quite shortly. The big increase in debt has been the right and necessary consequence of action to prevent a total economic and banking melt-down: other countries are building up and carrying higher levels of debt than us without having nervous breakdowns about it; a huge amount of the problematic debt is private and banking rather than government debt; Britain acting alone couldn’t have reined in the bankers before disaster struck, because the credit crunch and world trade imbalances are global phenomena beyond the reach of any individual government; with interest rates so low, there need be no tearing hurry to wind down the debt, which we could if necessary carry and service for years; and it will be suicidal folly to start cutting government spending in order to reduce the debt level while we’re still in recession, as the Tories seem hell-bent on doing.

It may not be too late, even now, to start getting this message across. To do so will require a disciplined and united government and party, which means a truce in the squabbling between the Blairites, the Brownites, the Old Labour grassroots, and the New Labour revisionists. If this kind of self-indulgent, petulant in-fighting continues, we’re going to wake up one morning soon to find a Cameron government selling off schools and hospitals, slashing taxes on the rich, closing down public infrastructure programmes, giving the nod to its banker friends to resume bonuses as usual, and telling the lengthening queues of unemployed that they must bear more than their share of the pain of cuts in benefits because their plight is all the fault of the Labour government and Gordon Brown.

A recent letter in the Guardian carries a warning that should be printed out and pinned to every notice-board in the country. The most frightening danger facing the country is not the credit crunch, not the recession, and certainly not the national debt: it’s the threat of a Conservative government, and what it will do. It’s time to say so, loud and clear.

Brian
www.barder.com/ephems