Politics
With the battle lines drawn, Labour has a chance to help the weakest
Published 20 November 2008
It seems only yesterday that wise commentators were talking of a political consensus, of co-operation between the parties, and even of including leading opposition party figures on the National Economic Council, established to steer the UK through the economic storm. Now, suddenly, the consensus is over. First comes George Osborne, accusing Gordon Brown of creating a run on sterling with his talk of "fiscal stimulus". Then the Conservative party leader announces that he is dropping pledges to match Labour's spending plans until 2010-2011 and instead intends to create a "low-tax, low-debt economy".
The policy distinction between Labour and the Conservatives is as sharp as it has ever been, with the latter retreating to their comfort zone of Thatcherite monetarism. Perhaps the Tories calculated that the national mood would swing towards greater caution and frugality; certainly sections of the press have been trenchantly critical of Mr Brown's trajectory from prudence to profligacy. Perhaps the Conservatives are nostalgic for old certainties. The beneficiary of this change, however, can only be Labour: Mr Brown is increasingly seen as occupying the sensible middle ground in a crisis that, it is perceived, only he shows signs of being able to manage. In the debate over how to save the world, there are, among the richer nations, few dissenters from the proposition that the ailing global economy needs a strong dose of Keynesianism - that is to say, spending and government intervention.
More importantly, though, the Tories are entirely at odds with the public mood, as polls showing the narrowing gap between Labour and the Conservatives demonstrate. Polls are, we know, ephemeral, yet they can be indicative of a trend. On the eve of Alistair Darling's pre-Budget report, it is surely encouraging for Labour to see opinion broadly in favour of government policy, particularly if there could be an election as early as May next year (increasingly likely now that Mr Brown knows he will host the next G20 summit in London, in April, and that Barack Obama will attend).
Nonetheless much may happen between now and then. For all Mr Brown's buoyant mood, no one can know where the current crisis is leading. Each calamitous development since the Northern Rock troubles has taken everyone by surprise (even if George Soros always manages an "I told you so"). When we asked leading commentators and politicians such as Will Hutton, Vincent Cable and James Buchan (from page 14) what they thought we should expect or hope for the world following the summit, we found a consensus around the broad principles outlined in the G20 communiqué but, from most, a firm belief in stronger, co-ordinated international intervention and supervision to ensure transparency of financial institutions. There is also near-consensus that dogmatic adherence to the idea of the benevolent "invisible hand" of the free market led to disaster.
And yet, evidently, the financial crisis is far from over. The G20 communiqué from Washington was riddled with bombast and empty rhetoric ("we have taken strong and significant actions", "our shared belief that market principles . . . foster dynamism and innovation") that could return to haunt the Prime Minister. Public debt is worryingly high (though not as high as that of many advanced economies). Tax cuts of too general a nature might increase public indebtedness without necessarily providing the required fiscal stimulus.
We have argued before that the poor spend their money because they have to. As such, the urgency now, when Mr Darling presents his pre-Budget report to parliament on Monday, is for redistribution, to include tax cuts for those on low and middle incomes, measures to keep people in work and provision for loans to those in danger of having their homes repossessed. The tax cuts could be funded by borrowing, of course, but also more imaginatively by raising the top rate of tax for those on high incomes or, as the Liberal Democrats have proposed lately, by closing tax loopholes exploited by the very wealthy. Not only would these measures be just, they would also be effective; they would stimulate the economy at a time when confidence is low and lending between banks has collapsed.
For now, Mr Brown is swimming with the tide, able to accuse the Conservatives of turning their back on those most in need. He may not be able to do much to determine the course of the recession - but he can determine who will be affected by it.
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