Cameron's hollow speech on "popular capitalism"

His speech was eloquent and historically rich but desperately short on specifics.

You can't fault David Cameron's chutzpah. His speech earlier today was an audacious bid to seize the territory of "responsible capitalism" or, as the Prime Minister called it, "popular capitalism" from Labour. True, during his brief flirtation with "Red Toryism" in 2009, Cameron spoke of the need for "markets with morality" but we've heard little since.

The political assertion at the heart of his speech was that only the Conservatives - those who "get the free market" - can build a better and fairer economy. In a well-crafted passage, he recalled the Conservative figures who had reformed capitalism in the public interest. It was Burke, he reminded us, who insisted on public accountability for the East India Company, and William Pitt who brought it under the control of government. It was Peel who repealed the Corn Laws and Disraeli who passed the Factory Act. "Social responsibility has been part of the Conservative mission from the start," he said. Standing in this tradition, Cameron promised to "change the way the free market works, not stop the free market from working."

But though eloquent and historically rich, Cameron's speech was also overly abstract and often contradictory. He damned Labour's "Faustian pact with the City", conveniently forgetting that himself and George Osborne were calling for more, not less, deregulation in 2007. He promised to deliver genuine "equality of opportunity" but ignored the need for greater equality of outcome, the former dependent on the latter.

With Vince Cable's report on executive pay still to come, it would be premature to judge Cameron's commitment to reform. But his belief that merely "empowering shareholders" will transform the system is hopelessly naive. Just 18 of the company remuneration policies put to a vote since Labour first gave investors a say 10 years ago have been defeated.

In the Q&A session following the speech, Cameron pointed to the government's £2,000 limit on cash bonuses at state-owned banks, ignoring the fact that the likes of Stephen Hester will still take millions in shares. He did, however, strongly hint that he supported moves to strip Fred Goodwin of his knighthood. Though officially impartial, Cameron said the forfeiture committee - the Whitehall body responsible for revoking honours - was "right to examine this issue". But while Goodwin, a convenient sacrifical lamb for the political class since the crisis began, is roundly denounced, the system he embodied continues as before.

George Eaton is political editor of the New Statesman.

Photo: Getty
Show Hide image

Scotland's vast deficit remains an obstacle to independence

Though the country's financial position has improved, independence would still risk severe austerity. 

For the SNP, the annual Scottish public spending figures bring good and bad news. The good news, such as it is, is that Scotland's deficit fell by £1.3bn in 2016/17. The bad news is that it remains £13.3bn or 8.3 per cent of GDP – three times the UK figure of 2.4 per cent (£46.2bn) and vastly higher than the white paper's worst case scenario of £5.5bn. 

These figures, it's important to note, include Scotland's geographic share of North Sea oil and gas revenue. The "oil bonus" that the SNP once boasted of has withered since the collapse in commodity prices. Though revenue rose from £56m the previous year to £208m, this remains a fraction of the £8bn recorded in 2011/12. Total public sector revenue was £312 per person below the UK average, while expenditure was £1,437 higher. Though the SNP is playing down the figures as "a snapshot", the white paper unambiguously stated: "GERS [Government Expenditure and Revenue Scotland] is the authoritative publication on Scotland’s public finances". 

As before, Nicola Sturgeon has warned of the threat posed by Brexit to the Scottish economy. But the country's black hole means the risks of independence remain immense. As a new state, Scotland would be forced to pay a premium on its debt, resulting in an even greater fiscal gap. Were it to use the pound without permission, with no independent central bank and no lender of last resort, borrowing costs would rise still further. To offset a Greek-style crisis, Scotland would be forced to impose dramatic austerity. 

Sturgeon is undoubtedly right to warn of the risks of Brexit (particularly of the "hard" variety). But for a large number of Scots, this is merely cause to avoid the added turmoil of independence. Though eventual EU membership would benefit Scotland, its UK trade is worth four times as much as that with Europe. 

Of course, for a true nationalist, economics is irrelevant. Independence is a good in itself and sovereignty always trumps prosperity (a point on which Scottish nationalists align with English Brexiteers). But if Scotland is to ever depart the UK, the SNP will need to win over pragmatists, too. In that quest, Scotland's deficit remains a vast obstacle. 

George Eaton is political editor of the New Statesman.