The Tory quest for a fiscal Holy Grail is doomed

05 November 2008

Brown’s golden rules have been exposed as a sham, says Irwin Stelzer, but the Tory response has been feeble. Their target should be the PM’s feathering of Old Labour nests

The good news is that Gordon Brown’s golden rules are no more. These rules did not stop the then chancellor from launching a spending binge. They did not stop him from spilling red ink all over the nation’s books at a time when the flow of cash into the Treasury was at record levels. They did not stop him from raising taxes, 60 times by some counts. They did not stop him from redistributing income from wealth-creators to wealth-consumers.

What the rules did do was provide the curtain behind which this latter-day Wizard of Oz could hide, give him the distraction on which magicians rely to prevent audiences from following their sleight-of-hand. Pay no attention to my tax-and-spend, I am adhering to the golden rules I invented.

And in the end, when his 2002 promise that ‘at all times — now and in the future — we will never compromise our commitment to meet our fiscal rules and disciplines’ became inconvenient, Brown sent his chosen successor into the newly cruel world to announce, ‘To apply the fiscal rules in a rigid manner today would be perverse.’ Indeed, Alistair Darling has no intention of applying them in a rigid or any other manner. Golden rule, R.I.P. rules that are jettisoned when they become inconvenient hardly qualify for that designation. It is as if we were all allowed to disregard the speed limit when we are in a hurry — not very binding, such rules.

The fiscal rules that were Brown’s guarantor against ‘boom and bust’ are not the only casualties of the current credit crisis and recession. The independence of the Bank of England has been seriously compromised. Now, the Bank was never truly independent, since the Chancellor has the power to appoint and, if he is unhappy, to fail to reappoint the Governor and the members of the monetary policy committee. He also sets the inflation target, currently at 2 per cent, a single mandate that has prompted Mervyn King to keep interest rates higher than any sensible economist would countenance. Now that inflation is clicking along at an annual rate in excess of 5 per cent, the Chancellor has signalled the Bank that it need not worry just now about meeting its 2 per cent target — better to lower interest rates to support the government’s efforts to stimulate the economy. Gone is the notion that an independent bank’s primary job is to tighten monetary policy when it feels the government is playing fast and loose with fiscal policy. Or at least to apply the judgment of its monetary policy gurus, rather than take ‘advice’ from Number 11 — more precisely, Number 10.

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David

November 6th, 2008 9:14am Report this comment

"Still, Brown has finally got it right"

I'm pretty sure Irwin has been telling us Brown has got it right every year for the past decade.

Tony Makara

November 6th, 2008 10:18am Report this comment

The Conservative leadership fails to understand the need for public works programmes as a way of keeping people in work at a time of recession. The cost in terms of welfare and social housing for those who lose jobs will be far greater in the long term.

David Cameron has talked about supporting the supply side with transport infrastructure and the recession now provides an opportunity for government to make that sort of investment.

The more people we can keep in work the more property owners will emerge from this recession. This is very important if we want to preserve the housing market and support social mobility.

perdix

November 6th, 2008 9:12pm Report this comment

Noone has a coherent economic policy and with shocks like today's interest rate cut it's not surprising.

Cogito Ergosum

November 7th, 2008 12:09am Report this comment

A former work colleague went out to Korea. In two years they turned a green field into a working power station.

We could do likewise if we really wanted to. Roads, power stations, military equipment...

Dwight Vandryver

November 7th, 2008 4:13am Report this comment

The welfare state costs the UK over £300bn per year, the NHS an extra £100bn per year. The list goes on. Collective personal debt is over £1 trillion. Brown has pledged half that to try to ameliorate the UK's banking crisis, on top of the ludicrously increasing government and PFI debt of his own making.
And Mr Stelzer tells us that Brown "has it broadly right" to spend his way out of recession? Mr Stelzer needs a rethink. If new contracts are put out for tender for "works benefiting the public", there is no guarantee that these would not be won by foreign firms employing their own staff. In fact, they probably would be, but the spin Labour would put on them would be tantamount to untruths. At the end of the day, Brown's spending spree will have to be paid back through taxation, and who wants to be around when the S hits the F? With this as a backdrop, it's no wonder that the Tories are somewhat reticent.

Ashley Slater

November 7th, 2008 10:26am Report this comment

The horrendous spectre of Brown spending another full term in office is on the cards after the Glenrothes by-election. In fact, I predict here and now it'll happen. Brown has buried us up to our necks in doo-doo but he'll get away with it because the people of this country still associate the failure of the financial institutions with the Tories. Fat cats are Tories and Cameron will never gain power as long as the Tories are seen as a bunch of Old Etonians. I'm sorry, you Old Etonians out there, but you're not everyone's cup of Earl Grey. Forget about fiscal policy, forget about the absurdity of Tory 'green' policy, forget anout any policy. It's image that matters, as Obama has proved, and the public image is one of George Osborne sipping martinis on a yacht. That's a very strong image. (Mandelsson is a Tory as far as most people are concerned so don't think his presence counts). But the most important point is that, for the vast majority of British people, Tories equal big business and right now big business is Public Enemy Number One, just ahead of Jonathan Ross and Gary Glitter. Brown, by single-handedly wrecking the economy, has unwittingly ensured his own survival. Genius! Joseph Heller couldn't make it up.

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