All Eyes on January
The chance of Labour remaining in power now rests squarely on the economy, and here the last vestiges of support for new-Labours economic record will be blown away. I have believed for a year or so that there is a downturn coming and that the downturn will expose Labour economic and social philosophy as bankrupt.
The fact that there will be a recession is not particularly the fault of the Labour Government. Business cycles happen, and macro economic policy has at least benefited from the independence of the BoE (for which Labour should get credit). The fault lies squarely with Labour however when it comes to public spending and the underlying state of public finances.
When the last recession hit, the Major Government was able to respond with huge increases in spending - as it entered the recession having built up government surplus during the good years. This allowed the Major administration to win the 1992 election despite the downturn. However, in contrast, New Labour has raised spending (now higher than Germany's) and borrowing to an extent that leaves it horribly exposed when the economy turns down. And the resulting government squeeze on spending during a time of falling revenues will subsequently shine a harsh light on the dreadful nature of our Labour Welfare State. With 5.3m people of working age on benefits, with hugely inefficient public sector monolithic public services swallowing money and asking for more, with rising numbers of teenages leaving school without the ability to properly read/write - there will be no money to respond. And then the intellectuall bankrupcy of the welfarism of Brown and the left cannot be hidden. No longer will they be able to say with any coherence that "under-investment" is the issue, no longer will they be able to hide the crises in our welfare state by throwing more tax-payers money at the problem. It will be terribly messy, and will bear comparison with the Winter of Discontent that did for economic socialism in the late 70s. Expect this time, it will be the welfare socialism that gets exposed as broken.
We can already feel the tremours of the approaching downturn. We are now in our traditional pre-christmas rush and expect the UK consumer to have one last hurrah as Christmas is often seen as an obligation to spend not an option. Then watch what happens in the gloom of January and February - house price falls, rising unemployment, collapsing government revenues, spending "cuts", fractious public sector unions and so on. The last 2 years of Brown government will not be happy ones.
On the bright side, the Conservative Party has a clear opportunity to lay out a vision for something different, and to catch the public mood for a serious change in direction. They have 2 years to do it. If Thatcher was able to do this from 1977-1979 then we can but hope that Cameron and Co. can do the same thirty years and a generation later.
The fact that there will be a recession is not particularly the fault of the Labour Government. Business cycles happen, and macro economic policy has at least benefited from the independence of the BoE (for which Labour should get credit). The fault lies squarely with Labour however when it comes to public spending and the underlying state of public finances.
When the last recession hit, the Major Government was able to respond with huge increases in spending - as it entered the recession having built up government surplus during the good years. This allowed the Major administration to win the 1992 election despite the downturn. However, in contrast, New Labour has raised spending (now higher than Germany's) and borrowing to an extent that leaves it horribly exposed when the economy turns down. And the resulting government squeeze on spending during a time of falling revenues will subsequently shine a harsh light on the dreadful nature of our Labour Welfare State. With 5.3m people of working age on benefits, with hugely inefficient public sector monolithic public services swallowing money and asking for more, with rising numbers of teenages leaving school without the ability to properly read/write - there will be no money to respond. And then the intellectuall bankrupcy of the welfarism of Brown and the left cannot be hidden. No longer will they be able to say with any coherence that "under-investment" is the issue, no longer will they be able to hide the crises in our welfare state by throwing more tax-payers money at the problem. It will be terribly messy, and will bear comparison with the Winter of Discontent that did for economic socialism in the late 70s. Expect this time, it will be the welfare socialism that gets exposed as broken.
We can already feel the tremours of the approaching downturn. We are now in our traditional pre-christmas rush and expect the UK consumer to have one last hurrah as Christmas is often seen as an obligation to spend not an option. Then watch what happens in the gloom of January and February - house price falls, rising unemployment, collapsing government revenues, spending "cuts", fractious public sector unions and so on. The last 2 years of Brown government will not be happy ones.
On the bright side, the Conservative Party has a clear opportunity to lay out a vision for something different, and to catch the public mood for a serious change in direction. They have 2 years to do it. If Thatcher was able to do this from 1977-1979 then we can but hope that Cameron and Co. can do the same thirty years and a generation later.
posted by Richard John | 5:06 pm
<< Home