Friday, May 08, 2009

House Points: Back to the 1970s in politics and economics

My House Points column from today' Liberal Democrat News. There is nothing funny about the state of the economy.

Recession reaction

A few days ago Polly Toynbee warned of “hard Thatcherite ... austerity and cuts” if the Tories win the next general election. She was missing an important point: we are in for austerity and cuts whoever wins the next election.

Alistair Darling did his best to disguise this in the budget and waffled about “efficiency savings” in interviews afterwards. The Conservatives are avoiding policy commitments altogether.

Two politicians have had the courage to tell the truth. Frank Field and Vince Cable have put down a motion at Westminster pointing to the danger that the government will find it increasingly hard to borrow and be forced into a “slash and burn” strategy in the public services to regain the confidence of lenders.

They call for a cross-party committee of MPs to examine the changes needed to bring the national accounts back into balance while protecting the interests of those on modest incomes and laying the foundations for a secure recovery.

It is hard to see this wish being granted, but it does strengthen the impression that we are going back to the 1970s. In those days calls for a “government of national unity” were all the rage.

The truth is that even before it was hit by the credit crunch, this government was borrowing at an unsustainable rate. Chris Huhne is fond of quoting the former chairman of the United States Federal Reservc who said it was his job to “take away the punch bowl just as the party gets going”.

But when the party was going in Britain a few years ago, Labour took it as a signal to spend more. To take just one example, the government announced it would rebuild or refurbish every secondary school in England.

This commitment was announced without any consultations with heads, communities or councils, who might well have better uses for that money or questioned whether it needed to be spent at all.

We Liberal Democrats will be delighted if the economic crises leads to the scrapping of identity cards and the database state. Labour are beginning to resemble the old East German government, bankrupted by the weight of its surveillance apparatus. But we are going to have to learn to question of spending in other areas too.

1 comment:

Phill Tomlinson said...

No chance for the pound with these deficits. QE (printing money) keeps on comming, blowing up the next bubble, the government bond market. We have a fiat currency bubble too and when both of these burst we will have the commodity bubble as worldwide inflation gets out of control, with a new system devised promising a 'solution' to the current Bretton Woods II dollar standard shambles.

People such as Polly Toynbee are useless if they can not see the above. It just keeps getting worse. The worse thing is, no one seems to have a clue how to solve the issues. Do nothing - let the markets take over, and get rid of government.