What a difference a few months make! In the summer Gordon
Brown was on the ropes. Over the past couple of months he has picked up a
thoroughly undeserved reputation as the ‘saviour of the world economy.’
Brown has embraced Keynesian policies wholeheartedly,
without explaining his U-turn. His solution to our economic ills is to hurl
money at them. ‘Never apologise, never explain’, seems to be his motto. So what
is making Brown look good? The Tories, that’s what.
George Osborne has set out his stall to deal with the
crisis. He wants to abolish stamp duty on sale of houses worth less than
£250,000. (Stamp duty has been put on hold by Darling since the crisis started
to bite. It hasn’t succeeded in stimulating the housing market.) He wants to
raise the threshold on inheritance tax to £1m. And he wants to cut corporation
tax from 28-25%. Come rain, shine, hail or high water the Tories have the same
economic policies – cut taxes for the rich! Apart from anything else, the rich spend
a smaller portion of their income than poor people, so tax cuts for them will
be less effective in stimulating the economy.
The Tories have come out against ‘unfunded’ tax cuts. This
means tax cuts in one sector should be matched by tax increases, or cuts in
spending elsewhere. But this is robbing Peter to pay Paul. It will not
stimulate the economy.
Osborne drones on
that, “Spending our way out of recession will not work.” In this he is at odds
with some traditionally very conservative economists. Samuel Brittan, writing
in the Financial Times, comments that, “Too few people understand that a
government’s budget is not like a family’s or a company’s. It is precisely when
the private sector is cutting down and saving that the government needs to spend
more.”
What do the Tories propose? Brown may be panicking but at
least it looks as if he is doing something. Cameron has torn up the commitment
to keep to Labour’s spending plans if and when he becomes Prime Minister. He is
repositioning his Party as one advocating cuts in government spending to pay
for tax cuts for the rich. That was Thatcher’s response to the recession of
1980. As a result Britain went into recession earlier and deeper than anywhere
else in the western world. Thatcher was hated by millions for her flinty
indifference to the hardship she inflicted on the working class. That is the
tradition the Tories are reclaiming.
Osborne continued this theme with his assault on Darling’s
pre-budget report, accusing him of "Bringing this country to the verge of
bankruptcy" by doubling the national debt and setting up "a huge
unexploded tax bombshell timed to go off at the time of the next economic
recovery".
It is true that Brown is recklessly hurling money at the
crisis. He doesn’t really know what he is doing. Brown’s horizons don’t really go beyond 2010, the last possible
date for an election. We could be looking at 3 million unemployed by then. If
so, he won’t be looking like a winner.
It is true that the spending splurge may well not work. Most
analysts believe a 2½% cut in prices by cutting VAT is too small a boost to do
much to make people go out and spend this Christmas. Brown is building up huge
debts – possibly as much as £120bn to be borrowed next year. These sums will
have to be repaid one day.
But the Tories have shown they don’t care about ordinary people.
They don’t care if there’s mass unemployment, which they called “a price worth
paying” in the 1980s. All they care about is the rich and preserving the capitalist
system that is ruining people’s lives. They
can never be the answer for working people’s problems.
