Guido has just got back from Bloomberg’s City HQ (a cross between a nightclub and an art gallery with offices above). He was there to hear what had been billed as Cameron’s speech
in defence of free enterprise and the start of the counter-attack on Gordon’s handling of the crisis.
First the good news: the Tory diagnosis of Brown’s errors that have got us where we are is coherent. The mistaken emasculation of the Bank of England is critical to understanding what went wrong with British banking. The Brown Bust is going to be worse for Britain than the credit crunch is going to be in many other countries because the government’s finances are so weak. Dave told the City audience that, basically, they would not have got us into this situation because they would have held down public expenditure – the traditional role of centre-right governments the world over. Fine. But we are where we are.
Now the bad news: if the Tories were in government tomorrow they offer next to nothing to get us out of the mess we are in. There was no road-map out of recession. The Tories promise to be “responsible” with the economy is just an echo of New Labour’s pre-1997 promise to be “prudent”. It is political triangulation to neutralise Labour’s tried and tested attacks on “Tory Cuts”. Guido heard only two concrete policy initiatives repeated; a freeze on council taxes and the removal of the requirement for retirees to purchase pension annuities.
The freeze is worth some £50 to £100 per household per annum. The change to pension planning applies to less than 1% of the population per annum. Not exactly policies to get us out of recession are they?
There is no “responsible” route out of recession – we need radical action to rescue the economy. We need a growth package and we need it fast, the sooner it is in place the quicker we will be out of recession. On the back of an envelope Guido reckons raising tax thresholds £1000 will cost £6 billion or so per annum. It will boost household incomes accordingly, putting money into the economy the best way, not via the state, but from spending decisions by those hard pressed families politicians are always on about. Forget the PSBR and the golden rule, that has just been overshot by 100% plus, you can’t prudently get out of recession, you need to stimulate growth.
The U.S. will be out of recession faster because they have already put $500 billion into the economy with a tax rebate and because both presidential candidates are running on a platform of more tax cuts to boost growth. The Tory plan for responsibility is a plan for prudence, not a plan for growth. Wrong policy, wrong time. Is that it?
Osborne and Cameron always emphasise that they won’t be reckless with the economy, they also say we now have the highest levels of taxation ever. Isn’t it actually reckless to maintain that level of a tax burden on an already depressed economy?
UPDATE : A tax wonk tells Guido that for £20 billion we could raise tax thresholds some £3,000 per annum. Even better. That would be real help, for real people in the real economy.