Britannia Radio

This from Cameron is the most coherent and intelligent analysis I  
have yet sdeen from him.  I think most readers would sign up to this  
approach.  The devil in getting it accepted, of course and as usual,  
will be in the details.

The Telegraph‘s leader goes further than ever before and declares  
roundly that Brown is  “on the wrong side of this argument.“

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TELEGRAPH                   26.3.09
1. David Cameron: We were right to make debt a priority
Isn't it ironic? As the Prime Minister tours the world lecturing  
other countries on how to run their economies, the Governor of the  
Bank of England has suggested that Gordon Brown doesn't know how to  
run our own.

    By David Cameron, Conservative Party Leader

Mervyn King’s evidence to the House of Commons Treasury Select  
Committee two days ago was a defining moment in this recession. In  
warning that the country couldn’t afford a second fiscal stimulus, he  
vindicated the argument of the Conservative Party that the priority  
must be tackling debt. We have been clear, consistent and right about  
the dangers of a large, discretionary fiscal stimulus in the  
circumstances that Gordon Brown has created.

That’s why, in the teeth of considerable opposition last Autumn we  
opposed the government’s £12.5 billion VAT cut. It’s a tough decision  
for any centre right politician to oppose a tax cut, but we knew that  
the country couldn’t afford it and so it would do more harm than good.

Back then, Labour liked to say that we in the Conservative Party were  
isolated in our opposition to their fiscal stimulus. Today, it is  
Gordon Brown who is isolated, with the CBI, the German Government,  
the European Central Bank, independent forecasters – and now the Bank  
of England all saying we can’t afford a further discretionary fiscal  
stimulus because of the disastrous state of the public finances and  
the scale of Labour’s Debt Crisis.

But the vindication of our position does not just go back to last  
Autumn. It goes right back to the start of my leadership of the  
Conservative Party, when I made clear my rejection of unfunded tax  
cuts and my belief that economic stability must always come first. Of  
course I believe in cutting taxes but if you promise it, or indeed do  
it, when you can’t afford it you just end up letting people down.

Today it is not just a question of economic stability; it is a  
question of recovery from a deep recession, and I believe as strongly  
as ever that fiscal responsibility is an essential step. Fiscal  
responsibility is an absolutely non-negotiable part of my kind of  
conservatism. Here’s why: there’s a moral case, an economic case and  
a political case.

Fiscal responsibility is morally right because it’s wrong to live  
like there’s no tomorrow and burden future generations with our  
debts. Thanks to Gordon Brown’s reckless and irresponsible spending,  
every child in Britain is now born owing at least £17,000, and  
servicing just the interest on that debt will cost more than  
educating those children.

Fiscal responsibility is economically right too. The conventional  
wisdom is that in a recession governments have to step in to  
stimulate the economy with spending increases and tax cuts. That  
might be right for countries that built up surpluses when times were  
good or those with modest deficits. And it’s easier if you have a  
reserve currency like America. But that argument gets turned on its  
head when the government is already living way beyond its means as in  
the UK.

As Mervyn King himself says: “we entered this crisis with levels of  
public borrowing which were too high”. The IMF say we’re going to  
have easily the highest borrowing of any G20 economy. In these  
circumstances, a further fiscal stimulus will do the opposite of what  
Gordon Brown claims. Instead of making things better – stimulating  
demand, reducing unemployment and increasing growth – it will make  
things worse – undermining confidence with the certainty of higher  
taxes and the risk of higher interest rates. As one leading retailer  
told me recently, consumers are sorting out their own finances and  
they’ll only be confident when the Government does the same.

Just look at what happened yesterday when the Government failed to  
find enough investors willing to buy its debt – something that hasn’t  
happened for many years. The markets took fright and long term  
interest rates began to rise. That’s a worrying sign, because higher  
interest rates will increase the cost of paying for the national debt  
and could deter the investment we need to get us out of this  
recession. That would make the recession longer.

Instead, we’ve argued that monetary policy should take the lead in  
tackling the recession. That’s why we called for a National Loan  
Guarantee Scheme back in October to get credit flowing. Government  
can help in other ways too. We’ve called for the Government to slow  
the growth of spending and use the money, £4.1 billion, properly  
costed, to help the innocent victims of the recession by abolishing  
the basic rate of tax on savings income and cutting taxes for  
pensioners.

But fiscal responsibility is not just morally and economically right,  
it’s right politically too because it’s a vital part of the  
Conservative belief in personal and social responsibility. We’re  
never going to build the kind of country where people save for their  
future and where families take responsibility for their children’s  
future if people see a Government that throws responsibility to the  
wind and expects future generations to pick up the bill. Government  
should lead by example, and that’s why fiscal responsibility should  
be such an important part of Conservative politics.

The only way to restore confidence in our public finances and our  
economy – at home and abroad – is to set out a credible strategy for  
living within our means. That’s why what the country needs right now  
is straight talk and a strong lead. Straight talk on the debt crisis,  
because we've got to start solving it in order to get our economy out  
of recession and into recovery. And a strong lead on the economy,  
because everyone's going to have to take their fair share of the  
burden for putting right what Labour have got wrong. That’s what the  
Conservative Party is offering the country, and fiscal responsibility  
is at the very heart of it.
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2. The markets don't agree with the PM
Telegraph View: Gordon Brown looks increasingly on the wrong side of  
the argument about how to recover from the recession.

Telegraph View

We have had our differences in recent months with Mervyn King, the  
Governor of the Bank of England. The handling of monetary policy by  
the Bank has left a great deal to be desired, with interest rates  
kept too low to begin with and then too high when a recession seemed  
certain. However, Mr King's unexpected intervention in the current  
economic crisis – a "defining moment", as David Cameron, the Tory  
leader, called it – must be applauded.

There have been mutterings from some in the Labour Party that, in  
publicly warning the Government against borrowing any more money to  
engineer a fiscal stimulus, the Governor has exceeded his brief and  
entered murky political waters. But as head of the central bank, and  
ostensibly an independent figure, Mr King is entitled to highlight  
his anxieties about the future of the economy.

These were compounded yesterday when an auction of Government gilt- 
edged bonds failed to attract enough buyers. While this has happened  
before, it is unusual. In the current circumstances, the failure  
suggests that the creditworthiness of the nation is being called into  
question. This surely makes a further fiscal stimulus even less  
advisable – and less likely – in next month's Budget.

The Governor was correct to voice his worries. His comments were not  
parti pris and nor were they intended to settle scores; rather they  
were a thoughtful exposition of the realities of the country's  
current predicament. That the message was delivered in such a  
measured way made it all the more powerful. It less resembled Michael  
Heseltine storming out of Mrs Thatcher's Cabinet than it did the  
departure of Sir Geoffrey Howe, who left more in sorrow than in anger  
– then delivered a devastating verdict on her premiership.  
Essentially, Mr King was telling Gordon Brown that the country is  
broke and that any attempt to borrow and spend more would be foolhardy.

Characteristically, Mr Brown has refused to accept that the Governor  
has done anything other than support the Government's handling of the  
crisis. On a visit to New York yesterday, the Prime Minister denied  
there was a disagreement, despite his own professed desire for a  
further fiscal stimulus.

Unlike everyone else, Mr Brown saw consensus, not a rift. But there  
is now a clear and fundamental divide between those who believe that  
the country has accumulated enough debt and that this should not be  
added to, and those who think another co-ordinated spending spree is  
essential to reboot the global economy. Mr Brown looks increasingly  
on the wrong side of this argument.