Margaret Thatcher said “Socialist governments always run out of other people’s money. It’s quite a characteristic of them.” In the not too distant past – with a popular Labour Government spending public money on popular things – the Tories had been reduced to merely asking for the “proceeds of growth be shared” between tax cuts and smaller spending increases. Spending other people’s money seemed to be doing the electoral trick.
Since our lopsided economy imploded they have been able to switch back to their good old fashioned ways. They want spending cuts, they want deep spending cuts, and if Nick Clegg hadn’t said it first, they’d want savage spending cuts. Some on the right are positively relishing the prospect of throwing a million of state employees out of their jobs.
Key to the Tories new line is that Brown’s feckless spending in the good times has led to a fiscal catastrophe in the bad times. From 2000, when Brown was really allowed to let rip, to 2009 Britain’s net debt has grown from just over £300 Billion to just under £800. For George Osborne the fiscal cupboard is bare.
The arguments for running deficits in a slump are well worn. By taking up the slack in the economy, state spending can act as a counter balance in recessions. The arguments for running a large deficit in boom times are a little less cogent and revolve around a rather inconsistent set of Golden Rules.
The Tories have taken up a position attacking Brown’s boom time spending for worsening the fiscal situation now times are bad. Despite what Chris Dillow has argued I feel I must agree with them one this small point.
But of course I can never bring myself to agree with the Tories too much. Given the Tories allergic reaction to the mainstream economic opinion on the benefits of stimulus spending it seems foolish to suggest that if they were in power we would see a glut of countercyclical spending. In fact we would still have been treated to a Government reaction and economic collapse like that seen in Ireland.
- Irish unemployment is 12.5 per cent;
- The country is experiencing deflation at –6.6 per cent.
- GDP has fallen 7.4 per cent over the past year and 10.5% from its peak;
- And despite the cuts they have still had their credit rating downgraded.
In the Pre-Budget Report Darling said Labour were acting from a position of strength, much to the mirth of the Conservative benches. But in a way he is correct, right wing pundits are keen argue that the public sector has not kept pace with the productivity of the private sector yet they have still seen a massive increase in spending. From Tom Freeman on the NHS:
Earlier on the news George Osborne was bemoaning Labour’s PBR, he demanded that Darling announce a time table for cuts now: “Budgets must be balanced every household knows that.” A Government is very unlike a household, and its outgoings do not always have to balance with its income, but George Osborne seems worryingly or wilfully oblivious to this.
Our fiscal situation could have been far better entering this recession, but the party most vocal in its lamentation for this failing is also the one which would have been least willing to make the most of it.