FINANCIAL TIMES 28.4.09
History's tide sweeps Britain into the past
By Philip Stephens
Britain is a nation caught in history's turning tide. The dismal
condition of Gordon Brown's Labour government has summoned up dark
ghosts from the 1970s. David Cameron's Conservatives are disinterring
the Thatcherite thrift of the early 1980s. Both parties are
reclaiming pasts they thought they had long ago left behind.
The dire state of Britain's public finances and last week's Budget
plans for hefty new taxes on the rich have stirred memories of the
economic chaos that toppled James Callaghan's Labour government in
1979. The present bust has likewise fuelled expectations that Mr
Brown will suffer Callaghan's electoral fate.
Understandably, Mr Brown disavows any parallel between the country's
economic plight and the crisis that forced Callaghan to go cap in
hand to the International Monetary Fund in 1976. You can see why. The
three years of spending cuts, tax rises and industrial strife that
followed the IMF bail-out so ruined Labour's reputation for economic
competence that it was locked out of office for 18 years.
The organising fact of the New Labour prospectus that put the party
back in power under Tony Blair in 1997 was a break with the politics
of high spending and soak-the-rich taxation. The political genius of
Mr Blair's three election victories lay in persuading voters that
they could have it both ways: Old Labour's social values and devotion
to public services and hard-edged market economics. [Events have
proved that the voters were wrong! -cs]
Now, try as he might, Mr Brown cannot shake off Mr Cameron's wounding
charge that, ultimately, "all Labour governments run out of money".
Britain, the prime minister may fairly argue, has been caught in the
global economic hurricane. But why are other governments weathering
the storm in so much better financial shape?
The public borrowing figures disclosed in the Budget - £175bn, or 12
per cent of national income for each of the next two years - would
have made Callaghan blanch. Red ink for as far as the eye can see
prompts financial markets to again ask questions about Britain's
solvency.
A new top income tax rate of 50 per cent is still far short of the
punitive 90 per cent seen during the 1970s. But the symbolism of the
latest increase is potent. The previous 40 per cent ceiling
proclaimed that New Labour backed aspiration as well as fairness.
The present prime minister's case is that times have changed. The
beneficiaries of the financial boom must now pay their share of the
cost of the crash. The Treasury needs the money. For now, voters may
agree. People are happy to see wealthy bankers get their comeuppance.
Yet Mr Brown, always a more tribal politician than Mr Blair, has
recalled the spirit of the 1970s by talking up the political dividing
line: Labour taxes the rich, the Conservatives cut public spending.
Some of his colleagues see a cue to reclaim the language of class war.
In truth, now as then, it will not be a question of either/or.
Britain faces harsh curbs on public spending and higher taxes. Mr
Cameron has already hinted that, initially at least, an incoming
Conservative government would not be able to find the money to lower
the top tax rate.
If Mr Brown is revisiting the 1970s, Mr Cameron has been studying the
early 1980s to see how Margaret Thatcher's government handled its
dismal inheritance after the 1979 election. A succession of austerity
Budgets written by Geoffrey Howe, then chancellor, are coming under
close contemporary scrutiny.
Mr Cameron had not planned to revisit the 1980s. On the contrary, he
has spent most of his time distancing his party from the harsh
economic individualism of the Thatcher years. He judged, rightly,
that the country had moved on: in paying constant homage to the past,
the Conservatives had kept Mr Blair in office.
Until recently his central ambition was to promote a kinder
Conservatism - in favour of lower taxes certainly, but not at the
expense of decent schools and hospitals and a fair deal for the less
privileged.
This was a prospectus framed in times of prosperity. Now Mr Cameron
speaks of a new age of austerity. His message is that the priority
must be to pay down the government's massive debts.
History should tell him it will be a painful business. The Thatcher
government sparked outrage in 1981 by cutting spending and raising
taxes in the midst of recession. Some 364 indignant economists
famously called for a change of course. As it happens, one of them
was Mervyn King, now governor of the Bank of England.
George Osborne, Mr Cameron's shadow chancellor, has a rather
different take. The mistake was not to have acted sooner. The 1981
Budget should have been unveiled in 1979.
The implication is that a Cameron government would act swiftly [but
it needs to have acted 6 months ago but it wasn't in power then and
won't be for many months to come one fears -cs] and decisively to
restore the public finances. We shall see. Taking Callaghan's cue, Mr
Brown will probably delay the election until the last possible moment
in mid-2010. Callaghan, who had inherited the premiership from Harold
Wilson, would never win a popular mandate. Later, he would say that
Labour had been swept away by the tide of history. The same fate
seems to beckon Mr Brown.
==================== And a Postscript also from the FT today
"The end of the Thatcher era
By Gideon Rachman
[ - - - - - - - - -]
So is the Thatcher era definitively over? The economic cataclysms and
policy reversals of recent months suggest that it surely must be.
And yet there is still room for doubt. When Mrs Thatcher came to
power, she and her advisers had been thinking for years about the
policies and ideas they intended to pursue. By contrast, today's
political leaders are fighting the economic crisis with whatever
tools come to hand. The decisions to nationalise Britain's banks and
to print money were emergency measures - not the products of a
carefully thought-out ideology or political programme.
One of Mrs Thatcher's most famous phrases was: "There is no
alternative." As yet, no major political figure in Britain or the
western world has really articulated a coherent alternative to the
free-market principles inherited from Thatcherism. Until that
happens, the Thatcher era will not be definitively over." [I don't
think it has occured to anybody to look for one! -cs]
Posts
