Cut Loose

Now is the time to cut ourselves loose from the Government’s “spend and borrow” approach

Edward Leigh MP
As Gordon Brown said in his Conference speech on Tuesday “There’s a lot to be serious about.” This was put over as a jocular way of celebrating his famous dourness. But whilst he went through a brief mea culpa over the 10p tax fiasco, he was content to lay all the blame for our current economic problems on the volatility in international markets.

This will not do.

Not when the finances of the government he heads and whose purse-strings he held for the last decade are in their current parlous state. Government borrowing is at record levels. A few months ago the Chancellor was predicting he would borrow £120 billion over the next four years. Now he is saying he needs an extra £20 billion. £7 billion will be needed next year alone. Meanwhile the budget deficit is over 3 per cent of GDP. That is the worst figure of all industrial economies, excepting Hungary, Pakistan and Egypt[1]. After fifteen years of global growth. That is nearly three times the EU average. As a result, the European Commission has initiated disciplinary proceedings against the UK.

So perhaps Alistair Darling was not exaggerating very much when he said we could be facing the worst downturn for 60 years.

Last summer he warned us of the need to tighten our belts, invoking the dangers of a wage-price spiral reminiscent of the 1970s.

But as Prime Minster the reputedly prudent Gordon Brown still wants to spend like a renaissance prince on the public sector. This at a time when the Governor of the Bank of England has had to write to his Chancellor about the inflation rate soon rising to an expected peak of 5 per cent; when unemployment has risen by 81,000 between May and July, to 1.72 million, and the prices of food, petrol and utilities have all risen massively.

The OECD’s economic outlook report says the Government’s options for coping with the crisis are limited by its own profligacy. It speaks of “excessively loose” fiscal policy in past years of strong growth. Now, it says the deficit will climb “significantly above” 3 per cent of GDP, so risking a breach of the sustainable investment rule next year as net government debt shoots towards 40 per cent.

On top of all this, the Prime Minister’s latest wheeze is to provide free nursery places for all two-year-olds. On the basis that there are 600,000 two-year-olds in the country, that is likely to cost over £1 billion. His socialist reflexes react to hard times with yet another hand-out.

And now Ed Balls promises free school meals for all primary school children. It has been widely reported in the press that this will end up costing around £1 billion a year.

We have before us the appalling prospect of an incoming Conservative Government being forced to put up taxes in 2010. We cannot be the victims of a scorched earth approach to public spending. It would be disastrous if an incoming Conservative government had to raise taxes. As Bush senior and John Major found, Conservative governments that raise taxes long-term are dead Conservative governments.

We Conservatives must now cut ourselves loose from the ball and chain of Labour’s tax-and-spend approach. We should do this by making a concerted intellectual case for why spending must not be allowed to increase any further; indeed, why it should, where possible, be restrained.

Part of our historic role as a party should be to manage the public finances with prudence and thrift. We should be explaining now how we are going to deliver public services more efficiently and with greater value for money. As long as the economy grows over a cycle it is still possible for a Conservative government to deliver lower taxes and better public services, and this case must be made – and made now.

To this end, I welcome the recent announcements that George Osborne is currently reviewing our spending plans, and that he will set out the results of this review next year.

I also look forward to what he will say at the Conservative Conference today. It is understood he will set out the Party’s plans for gradually reducing the share of GDP consumed by government. That is also a very positive development.

But above all I hope he makes it crystal clear that we Conservatives cannot be tarred with the brush of this Government’s woeful wastage of taxpayers’ money.




[1] The Economist June 2008