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Let’s hope Cameron is for turning

In his New Year message, the Prime Minister claimed to have all the answers. He clearly doesn’t.

In his New Year message, the Prime Minister claimed to have all the answers. He clearly doesn’t.

David Cameron's official New Year message certainly caught my attention. His comments about the economy are unconvincing codswallop. The US has made it clear that fiscal stimulus and tax cuts are realistic alternatives to the spending cuts – alternatives that Cameron ignores at his peril. It could all go bad, and quickly.

Here is a point-by-point rebuttal to his claims.

1. "We have been living seriously beyond our means. We have to sort this out. Every sensible person knows this."

Actually, we haven't been living beyond our means. We have just been hit by a once-in-a hundred-years financial crisis; it takes a while to recover from such a significant shock. There are many different ways to "sort out" this problem and your way is not the only way.

A better way would be to cut taxes and increase public spending as the United States has just done. As Alan Johnson has argued, raising VAT right now, for starters, looks like a really dumb idea.

2. "The national interest dictates that we do the right thing, which is to act, not the easy thing, which would be to delay. In doing so, we should be clear: Britain has a really bright future to look forward to."

It is plausible that the national interest is best served by delaying paying off the deficit, in order to stimulate growth. Only time will tell whether the steps your government has taken are necessary or not.

Judging by historical precedent, there is a non-negligible probability that these policies will turn out to be a disaster. What if you are wrong, Mr Cameron, and the markets turn against you or growth falters? Then what?

Directionally challenged

3. "The actions we are taking are essential, because they are putting our economy and our country on the right path. Together, we can make 2011 the year that Britain gets back on its feet."

They are certainly not "essential" and there is a significant chance that this is the wrong path. For many, 2011 is going to be a year when they are knocked off their feet. An Ipsos/MORI poll published on 1 January found that British people were among the most pessimistic in the world about their prospects. Only 17 per cent said they expected their financial position to improve in the next six months – half the number that thought the same in Australia (35 per cent) and the United States (34 per cent). Three-quarters of the UK workers said they felt less secure in their job than they did just six months ago.

4. "Eight months ago we inherited an economy in deep trouble. The previous government had racked up the biggest budget deficit in our peacetime history."

Again, our economy was hit by a once-in-a-hundred-years crisis – and the actions of the fiscal and monetary authorities prevented another Great Depression. If I recall, Prime Minister, you and your party opposed these actions and were in favour of all the deregulation that ultimately caused the crisis. So what would you have done differently to resolve it? You had no answer then; why should we believe you have one now?

5. "We only have to look at what's been happening in Greece or Ireland to see the kind of danger we were in. Rising interest rates. Falling confidence. Others questioning whether you are still creditworthy as a country."

Nonsense. What has happened in Greece and Ireland is largely irrelevant, as they are stuck in monetary union. The UK has its own central bank and a floating exchange rate. What is relevant is that fiscal austerity appears to have failed in both countries as growth has been compromised. Bad example. And business and consumer confidence has collapsed in the UK since you took office.

6. "Remember, the deficit we inherited back in May was actually forecast to be bigger than that of Ireland or Greece – or any other developed country for that matter. But we have pulled Britain out of that danger zone."

In fact, the UK was never in a danger zone. But we may well be in one soon, when the coalition's misguided spending cuts and tax increases take effect. The public finances have worsened sharply under the coalition. The latest data showed a big increase in both the size of the debt and the debt-to-GDP ratio.

7. "Through the Budget and the Spending Review we've taken some really tough decisions to rescue our public finances and fundamentally change the direction of our economy."

It is true that the coalition has made a number of announcements, though it remains unclear whether the government will change the economy for the better. At this point we still don't know if it has even made any of the "efficiency savings" it trumpeted in May 2010. It is very likely that destroying large numbers of jobs will fundamentally change the direction of the economy. Ask any young person.

8. "So we have a credible plan for restoring confidence in our economy. But we have to see it through."

Judging by the evidence up to this point, you don't. To repeat, confidence has collapsed and unemployment is rising. Your plan is not credible as it is based on an assumption the private sector will step in, in a way it has never done before. Continuously saying you have to "see it through" is a dangerous strategy. Suppose your plan is entirely wrong-headed, as many believe – including me. You will be in big trouble.

Curb your zeal

9. "We're tackling the deficit because we have to – not out of some ideological zeal. This is a government led by people with a practical desire to sort out this country's problems, not by ideology. When we talk of building a bigger, stronger society, we mean it."

You may well mean it, but simply repeating that it isn't ideological doesn't mean it isn't – or that you know what you are doing. Historical precedent is against you. Plus, your response is exactly what a zealot would say.

10. "We are all in this together."

No we aren't. VAT is a regressive tax. The millionaires in cabinet will not become homeless or become depressed because of worries about paying the bills. The poor, the weak, children, single mothers and the disabled are going to pay a big price for this coalition's doctrinaire attack on them. Rising unemployment and inequality make people unhappy.

Thank goodness, Mr Cameron, you are gaining a reputation as someone who is for turning. My advice is to have a plan B ready.

David Blanchflower is economics editor of the NS and a professor at Dartmouth College, New Hampshire, and the University of Stirling

David Blanchflower is economics editor of the New Statesman and professor of economics at Dartmouth College, New Hampshire

This article first appeared in the 10 January 2011 issue of the New Statesman, Here comes the squeeze

David Young
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The Tories are the zombie party: with an ageing, falling membership, still they stagger on to victory

One Labour MP in Brighton spotted a baby in a red Babygro and said to me: “There’s our next [Labour] prime minister.”

All football clubs have “ultras” – and, increasingly, political parties do, too: although, in the case of political parties, their loudest and angriest supporters are mostly found on the internet. The SNP got there first: in the early days of email, journalists at the Scotsman used to receive bilious missives complaining about its coverage – or, on occasion, lack of coverage – of what the Scottish National Party was up to. The rest soon followed, with Ukip, the Labour Party and even the crushed Liberal Democrats now boasting a furious electronic horde.

The exception is the Conservative Party. Britain’s table-topping team might have its first majority in 18 years and is widely expected in Westminster to remain in power for another decade. But it doesn’t have any fans. The party’s conference in Manchester, like Labour’s in Brighton, will be full to bursting. But where the Labour shindig is chock-full of members, trade unionists and hangers-on from the charitable sector, the Conservative gathering is a more corporate affair: at the fringes I attended last year, lobbyists outnumbered members by four to one. At one, the journalist Peter Oborne demanded to know how many people in the room were party members. It was standing room only – but just four people put their hands up.

During Grant Shapps’s stint at Conservative headquarters, serious attempts were made to revive membership. Shapps, a figure who is underrated because of his online blunders, and his co-chair Andrew Feldman were able to reverse some of the decline, but they were running just to stand still. Some of the biggest increases in membership came in urban centres where the Tories are not in contention to win a seat.

All this made the 2015 election win the triumph of a husk. A party with a membership in long-term and perhaps irreversible decline, which in many seats had no activists at all, delivered crushing defeats to its opponents across England and Wales.

Like José Mourinho’s sides, which, he once boasted, won “without the ball”, the Conservatives won without members. In Cumbria the party had no ground campaign and two paper candidates. But letters written by the Defence Secretary, Michael Fallon, were posted to every household where someone was employed making Trident submarines, warning that their jobs would be under threat under a Labour government. This helped the Tories come close to taking out both Labour MPs, John Woodcock in Barrow and Furness and Jamie Reed in Copeland. It was no small feat: Labour has held Barrow since 1992 and has won Copeland at every election it has fought.

The Tories have become the zombies of British politics: still moving though dead from the neck down. And not only moving, but thriving. One Labour MP in Brighton spotted a baby in a red Babygro and said to me: “There’s our next [Labour] prime minister.” His Conservative counterparts also believe that their rivals are out of power for at least a decade.

Yet there are more threats to the zombie Tories than commonly believed. The European referendum will cause endless trouble for their whips over the coming years. And for all there’s a spring in the Conservative step at the moment, the party has a majority of only 12 in the Commons. Parliamentary defeats could easily become commonplace. But now that Labour has elected Jeremy Corbyn – either a more consensual or a more chaotic leader than his predecessors, depending on your perspective – division within parties will become a feature, rather than a quirk, at Westminster. There will be “splits” aplenty on both sides of the House.

The bigger threat to Tory hegemony is the spending cuts to come, and the still vulnerable state of the British economy. In the last parliament, George Osborne’s cuts fell predominantly on the poorest and those working in the public sector. They were accompanied by an extravagant outlay to affluent retirees. As my colleague Helen Lewis wrote last week, over the next five years, cuts will fall on the sharp-elbowed middle classes, not just the vulnerable. Reductions in tax credits, so popular among voters in the abstract, may prove just as toxic as the poll tax and the abolition of the 10p bottom income-tax rate – both of which were popular until they were actually implemented.

Added to that, the British economy has what the economist Stephen King calls “the Titanic problem”: a surplus of icebergs, a deficit of lifeboats. Many of the levers used by Gordon Brown and Mervyn King in the last recession are not available to David Cameron and the chief of the Bank of England, Mark Carney: debt-funded fiscal stimulus is off the table because the public finances are already in the red. Interest rates are already at rock bottom.

Yet against that grim backdrop, the Conservatives retain the two trump cards that allowed them to win in May: questions about Labour’s economic competence, and the personal allure of David Cameron. The public is still convinced that the cuts are the result of “the mess” left by Labour, however unfair that charge may be. If a second crisis strikes, it could still be the Tories who feel the benefit, if they can convince voters that the poor state of the finances is still the result of New Labour excess rather than Cameroon failure.

As for Cameron, in 2015 it was his lead over Ed Miliband as Britons’ preferred prime minister that helped the Conservatives over the line. This time, it is his withdrawal from politics which could hand the Tories a victory even if the economy tanks or cuts become widely unpopular. He could absorb the hatred for the failures and the U-turns, and then hand over to a fresher face. Nicky Morgan or a Sajid Javid, say, could yet repeat John Major’s trick in 1992, breathing life into a seemingly doomed Conservative project. For Labour, the Tory zombie remains frustratingly lively. 

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.

This article first appeared in the 01 October 2015 issue of the New Statesman, The Tory tide