Wednesday, November 25, 2009

Declare your interest, Mr Cameron

I thought that Gordon Brown hit home at last week's debate on the Queen's Speech with his lines about the inheritance tax break promised by the Tories - their inverse Robin Hood, stealing from the poor to give to the rich.

The typical constituency will have only five people who will benefit. The biggest group of beneficiaries will be in one area of the country-Kensington and Chelsea, which of course includes Notting Hill. That must be the only tax change in history where the people proposing it-the Leader of the Opposition and the shadow Chancellor-will know by name almost all of the potential beneficiaries. Is this what the Conservatives mean when they say, "We're all in this together"?

The Mirror builds on that today, reminding us that the shadow-Chancellor doesn't just know some of the beneficiaries, he works with a number of them in the Shadow Cabinet. That one policy will save the members of the shadow cabinet £7.5 million. Will the Telegraph be as scathing about this as they have been about MPs expenses? Don't watch this space. Actually, what the Conservatives REALLY mean is that YOU are all in this, we're off to look after our own.

Ken Clarke, of course, wasn't so sure that it would be brought in, but he was swiftly slapped down.

Cameron is reported to have told friends - doubtless some of those desperate to protect their hard-inherited cash from being used to support those not as fortunate to have had wealthy parents - that 'a promise is a promise' and an aide to Gideon is reported to have said

People should be clear that the promise e made on inheritance tax is a promise we will keep.

At least he hasn't made it a 'cast-iron guarantee' yet, otherwise we'd know he's lying. The value of Conservative promises may go down as well as plummet. Your inheritance may be at risk if Cameron does not keep his word. Serving suggestion. E&OE


Then we have the recycled news that there will be an emergency budget within 50 days of a Cameron government ascending to office. Back in June, they were saying that the Conservative Treasury team were hoping to avoid a full emergency budget immediately after an election, but this had shifted by September. So far, this budget looks likely to doom Britain to a double-dip recession. By June, the signs of growth should be there and there may even be a levelling off of unemployment, but the Tory proposals for immediate slashing cuts to the public sector risk stamping all over those green shoots. As David Blanchflower put it

The simple lesson when you are deep in recession is that a serious policy error is to reverse stimulus too early, which then sends the economy crashing into a depression. This is what happened in the United States in the 30s. Monetary and fiscal policy were tightened before recovery was firmly established, which drove the country back into a deep recession at the end of 1937.

But then Gideon's shaky on the economics at the best of times - not a great suprise as he's never been in charge of anything bigger than a university magazine. When it was revealed that a misreading of figures had caused the Conservative shadow Chancellor to miscalculate his figures by the small amount of £3 billion, the Liberal Democrat peer Lord Oakeshott said
This saga of incompetence shoots to pieces his claims to be a responsible chancellor.

Surely it should be obvious that now is the time for the big state to sustain the country. Yes, the debt is a concern, but not for today - there are more urgent issues at hand. Osborne and Cameron don't get it. Their ideological drive is for a smaller state, one that cannot intervene when the going gets rough for the little people. At the Tory conference, Cameron said
Here is the big argument in British politics today. Labour say that to solve the country's problems we need more government. Don't they see? It is more government that got us into this mess.
Er. No. The reality is that an unrestrained market got us into this mess, with bankers, financiers and businessmen colluding to ensure that the gravy train kept running for as long as possible. Cameron's lack of understanding is demonstrated by his apparent intent to elevate Angela Knight - a former Tory MP and currently in charge of the British Bankers' Association, championing bonuses as a way of attracting the best - and Kirstie Allsopp - a cheerleader for booming house prices that have outstripped people's ability to buy - to the peerage. Nobody wanted further regulation - the government was getting tax money out of the system, the bankers were hoarding away their hefty bonuses and the Conservatives were demanding further deregulation to let the overheating engine of the City rise to new heights. There is a very strong argument to be made that there was room for even bigger government regulating the financial industry, but nobody wanted to believe that the merry-go-round would stop. And then the music did stop and someone was left holding the unwanted offspring of this relationship - all those nasty little packages of bad debt that made Pandora's box look positively welcoming by comparison.

Then everyone turned to the government for help, because there was nobody else to help. And the government pumped money into sustaining the banks - remember that we came within minutes, literally minutes, of major banks shutting down their cash machine networks to prevent withdrawals. Can you imagine the effect that action alone would have had on the economy of the country and the confidence of the man in the street? But it was seriously considered.

This is not the time to have the argument over the size of the state. Back to David Blanchflower
Lesson one in a deep recession is you don't cut public spending until you are into the boom phase. Keynes taught us that. The consequence of cutting too soon is to drive the economy into a depression. That means rapidly rising unemployment, social disorder, rising poverty, falling living standards and even soup kitchens. The Tory economic proposals have the potential to push the British economy into a death spiral of decline that would be almost impossible to reverse for a generation

You would have to be an ideologically-fixated, economic moron to believe that slashing the state now is going to help. Is public debt going to have to be dealt with? Yes, of course. We'll pay it back. The state is not your enemy - it takes a big government to do big things and we need them now more than ever. What we need now is a government that understands those priorities and invests in them and I believe that only Labour can offer this. That doesn't mean that I don't want to see more - let's have a firm commitment to building the High-Speed 2 rail link from London to Birmingham and on to Scotland. Let's promise thousands more council houses, homes for our people. If we're going to have to pump money into the economy, let's at least get some solid infrastructure out of it.

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