Tuesday, 18 November 2008

Tories bite back on economy and defend Osborne

After Labour excoriated shadow chancellor, George Osborne, for ‘irresponsibility’ and ‘talking down’ the pound, over the weekend, the Tories have launched what has every appearance of an effective comeback on economic issues.

In the Telegraph, Boris Johnson defends his colleague’s right to offer a prognosis on the economy. Although this contention might appear self-evident, the government has reacted with increasing petulance on each occasion that an opposition politician dares to question the wisdom of Gordon Brown’s economic plans. Labour chose to interpret Conservative support for its bank bail-out as an open ended commitment to support all of its anti-recessionary measures. As Brown’s spending pledges become increasingly extravagant, and as tax cutting initiatives are launched in tandem, then it is not only inevitable that opposition politicians will challenge him, it is their duty to do so. Johnson asks,

“How can there possibly be a "convention" that stops shadow chancellors from pointing out the baleful effects on sterling of an irresponsible fiscal policy? Surely that is the very definition of his job?”


Meanwhile David Cameron has been offering his assessment of Gordon Brown’s proposals for unfunded tax cuts, by quoting the Prime Minister’s previous thoughts on, well, unfunded tax cuts.

“To make unfunded promises, to play fast and loose with stability (indeed to play politics with stability) is ... something I will never do and the British people will not accept.”


Cameron offers strong arguments that fiscal responsibility is what is required in the current climate. After all, it is widely agreed that irresponsible borrowing got the UK into the particular mess in which it now finds itself, why then should more irresponsible borrowing solve the problem?

The Conservatives argue that unfunded tax cuts now will inevitably mean substantial tax increases later, at precisely the point when the economy might otherwise be recovering. In concert with promises to curb growth in spending, the Tories are edging toward coherency which was lacking in the party’s economic message up to now.

2 comments:

fair_deal said...

Indeed it is a more coherent and more appropriate line but one that will take a time to sink in with the electorate. Between sections of the public being spooked and wanting "something to be done" and Labour trying to play the unity in face of national and international crisis cards, the Tories will have to hold their nerve.

Also compare and contrast

“Cameron offers strong arguments that fiscal responsibility is what is required in the current climate."

David Burnside last week

"...speaking up for Northern Ireland and for more finance."

kensei said...

Cameron offers strong arguments that fiscal responsibility is what is required in the current climate. After all, it is widely agreed that irresponsible borrowing got the UK into the particular mess in which it now finds itself, why then should more irresponsible borrowing solve the problem?

Deflationary spiral.

The Conservatives argue that unfunded tax cuts now will inevitably mean substantial tax increases later, at precisely the point when the economy might otherwise be recovering. In concert with promises to curb growth in spending, the Tories are edging toward coherency which was lacking in the party’s economic message up to now.

Over the long term fiscal responsibility is necessary. In the long term we are also all dead. The government need to plug the gap caused by a reduced private sector, else declines will cause a drop in demand that will cause more people to be laid of which will cause a drop in demand... it prolongs and deepens the recession.

Will it mean tax rises in the future? Yes, either that or lower spending than we would otherwise have had, until the public finances are back in shape. That will hurt, but much less than if we cut now. That is what borrowing is: it is moving money from a time you have it but don't need it, to a time when you don't but you do. Cameroon may be coherent, but he is also wrong.

There is a point where fiscal responsibility will matter, and when he should be focusing his fire. That point is when we are coming out of the slump -- how do we get the finances back on track. Labour government's weaknesses are they never fulfill the second half, paying the money back, and that is where the damage is done.

The Republic are following Cameroon's prescription. They might well mange to come out of this in a better position. But watch the howls of pain as they go through it.

Some pertinent thoughts
http://krugman.blogs.nytimes.com/2008/11/15/macro-policy-in-a-liquidity-trap-wonkish/