Trevor Kavanagh says that Britain’s pitiful standing on the world stage is not just about al-Megrahi or the recession, but is the result of Labour’s disastrous mismanagement. Everything now depends on Cameron

For the incurable optimist — of which there are no doubt several in the Downing Street bunker — there are signs that Britain is starting to recover. The stock market is booming once more, confidence is returning to the housing market and the recession may soon be over. Is it possible Gordon Brown really has saved the world — even if it is too late to save himself? Or, as Labour used to warble, might things only get better?

If only. The bleak truth for UK plc is that after 12 years of stupefying Labour incompetence, the worst is yet to come. Britain is once again on the slide towards the margins of economic influence and military clout. We have the worst public finances of any comparable western economy. The British Chambers of Commerce warned this week that the UK faces a ‘grim’ economic future, with a high risk of a relapse. Unemployment is not just spreading but setting like concrete for years to come. And our shabbily treated troops, once a match for the world’s best, will soon be driven humiliatingly out of Afghanistan.

This is not the slow, managed decline of an empire looking for a role. It is a sudden, embarrassing discovery that we don’t count on the world stage any more. Thanks to our lumbering Prime Minister, we have been given the unwelcome gift to see ourselves as others see us. And it ain’t pretty.

I am writing this from New York, whose citizens once saw Britain as a staunch economic, diplomatic and military ally. It is only a few short years since they hailed Tony Blair as a 9/11 hero and awarded him the Congressional Medal he was so embarrassed to collect. That was the high-water mark for New Labour.

Today, thanks to the Oil-for-Megrahi fiasco, we are a bitter disappointment to America. Newspapers from the Wall Street Journal to the New York Daily News are still running every fresh turn in this tawdry story.

It was perfectly summed up by a devastatingly editorial in the News: ‘Gordon Brown has given grounds to believe today’s British are a cowardly, unprincipled, amoral and duplicitous lot. Because he is all of those.’ Those are cruelly exaggerated words, but they put the finger on a single identifiable cause of Britain’s collapse. The new decline in Britain’s standing on the world stage is not just about Lockerbie. Nor is it even the decision to trade a convicted mass murderer for Libya’s vast oil reserves. It is about the shifty, furtive and ultimately disastrous management of a country which, in 1997, had every conceivable chance of becoming great again.

Labour strode to power with a huge Commons majority, the goodwill of the British people and the prospect of at least two terms in office. For the first time, Labour could ride an economy which had just taken off on a long and sustainable boom.

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Tony Blair could have done one or two truly great things. His government had the cash and clout to transform a welfare state in which almost three million were on incapacity benefit. Instead, it left them to rot while importing migrants to fill almost all of the three million new jobs created. It could have performed drastic but urgently needed surgery on the lumbering National Health Service. Instead, it poured truckloads of taxpayers’ money into a giant bureaucracy, entrenching inefficiencies that will cost us up to £40 billion a year, every year.

It could have unpicked our gridlocked roads and chaotic rail networks. Instead, vainglorious John Prescott carved out a grotesque personal empire and abandoned his promised ‘integrated transport system’. Less expensively, Labour really could have delivered ‘education, education, education’. Today, children who have spent their entire school life under Labour are joining the workforce semi-literate and unable to do their times tables.

As Labour stumbles towards the end of its third and final lap, it can look back on a record of almost unbridled failure. Certainly, it will point to achievements like the minimum wage and the Northern Ireland peace process. But in so many other costly ways this government has led us up blind alleys — on Europe, street crime, immigration. Today, Cabinet ministers publicly argue the ‘line to take’ while privately expressing despair over Labour’s failure to deliver. Even Labour’s one signal triumph, the liberation of the Bank of England, has been tarnished by bungled bank deregulation.

Gordon Brown insists rightly that this is global recession. But much of this country’s special misery was made in Britain. We lost the plot the day the new Chancellor cancelled the Bank’s role as City watchdog and handed it to three competing versions, none with final authority. If Britain is just another victim of a worldwide crisis, why are our high-street banks effectively bust, with liabilities running into trillions? If we’re all in the same boat, how is it that Australia, for instance, can boast that all four of its major banks still have double-A credit rating, and have not needed a dollar of taxpayer support?

For all the shock of Northern Rock, this crisis has been a long time coming. It began the moment Mr Brown took his foot off the brake in 2001. And it accelerated as he used Mansion House speeches to urge bankers to take even more risks. It was visible even to observers like me, who wondered how the country could continue to stack up so much debt with such little collateral.

Quantitative easing didn’t begin the day Mervyn King started printing money. It started when the Chancellor encouraged consumers to borrow and spend money they didn’t have to fuel an unsustainable house price boom and provide the taxes for Mr Brown’s own grossly irresponsible spend-and-borrow spree, which was as reckless as anything the banks were doing.

Where did all those hundreds of borrowed billions go? Do we have the world-class teachers and hospitals, the dentists and doctors, the roads and railways we deserve? Certainly not. Ministers may bluster on television, but they know that the experiment has been a spectacular failure. They know this country is now lumbered with a gigantic and costly public sector which is guzzling a fortune today and landing our children with £1.1 trillion in pension liabilities tomorrow.

Labour had inherited a golden egg. It plundered the nest and ran up debts that will for decades to come act like permanent dead weights on our economy. Tony Blair himself had begun to realise what had happened. The former PM, famously, was an economic illiterate — so much so that he failed to understand that economics is the heavy artillery of political power. He had handed it lock, stock and barrel to his unsharing Chancellor.

It was only when Labour was well into its second term that Mr Blair realised what a hideous mistake he had made. But by the time he decided to sack his Chancellor, it was too late. Mr Brown resolved that, having put elites like the monarchy and private schools in their place, it was time for the military to be ‘brought down a peg or two’. His refusal to fund the military put a ball and chain round the ankles of our fighting forces — as they were to discover when sent into actions in the streets of Basra and the explosive-riddled desert of Helmand.

While Mr Blair was deploying our armed forces like new toys in Sierra Leone and Kosovo, Brown kept a tight rein on the money. Not all of his instincts were wrong-headed. He was right to be suspicious of the MoD’s appalling record of buying the wrong equipment at the wrong price for the wrong war. Yet if he were serious about preserving Britain’s role in the world, he would have ordered a proper defence review. Instead, deplorably, he left the poor bloody inf
antry to swing in the wind.

This is when it started to be clear to the world that Britain, for all Blair’s rhetoric, was running on empty. We went into a desert war in Iraq with Snatch Land Rovers and soft-hat tactics designed for Northern Ireland. By the time we realised the extent of this error, we had lost our grip on bomb-hurling militants and were effectively driven, defeated, out of southern Iraq.

That was the moment America woke up to the truth that Britain was now an empire with no clothes. Even before Megrahi, we were being depicted by organs like Newsweek as ‘Little Britain’. The argument is as clear as it is depressing. This recession has dealt a harder blow than any seen by Wilson, Thatcher or Major. It will take six years for Britain’s per capita income to reach the levels of the start of last year, according to the National Institute for Economic and Social Research. Our national debt is to double, and the interest payments will cost more than the cost of educating our children or defending the realm. Defence is likely to be the softest target for cuts — affecting Britain’s ability to project power.

But all is not irretrievably lost. David Cameron can do plenty. Leaders with courage have hauled nations back from the brink before — Margaret Thatcher did it in 1979. Gritty Sir Roger Douglas did it with New Zealand in the 1980s. Ronald Reagan did it with America But whether it can be done this time is a horribly open question. The test confronting Mr Cameron has been compared with the dark days of the Winter of Discontent. But the current situation is, alas, far, far worse.

This is why so much now depends on the Conservatives. This is no time for ‘Blair Mk II’ — spin is useless when set against such problems. They must prescribe some bitter medicine — and be prepared to become deeply unpopular in the process. They have so far shown little sign of doing so. They have ditched a preposterous promise to ‘share the proceeds of growth’, but they continue to insist, against all the evidence, that the NHS must be treated as a special case, with its £110 billion budget left intact. That promise must be broken — and the sooner the better.

Little wonder that so many voters are ambivalent about Mr Cameron and what the Conservatives have to offer. Those who would like to give enthusiastic support to the Tories are waiting for a reason to do so. They hope Mr Cameron has been shrewdly keeping his counsel, preparing to unleash the guts of a radical programme — perhaps in his speech to the party conference next month. It would be ideal timing. By then he would have perhaps six months to polling day, and nothing to lose by being brutally honest with a public that is ready to listen. But even those open to the Tory message fear he is simply coasting along with a comfortable lead in the polls that is preserved by the Conservatives greatest asset — Gordon Brown himself.

This profound sense of despair will take Mr Cameron into government almost by default. But the mood is itself a problem. No senior civil servant has yet said that the government’s job is to ‘oversee the orderly management of decline’, as Sir William Armstrong, the Cabinet Secretary, famously did in 1973. But this time, no one needs to. The politics of decline is stamped in everything this exhausted government does. Decisions on our defence are being taken on the basis that Britain no longer can claim to play a major role in the world, that we are a little country, which should stop pretending to be a big one.

This sense of defeatism may be pervasive, but it need not be terminal. It can be turned around — as Britain demonstrated, to the world’s amazement, 30 years ago. All that is requires is the right kind of courage and leadership. Thatcher had it. Heath did not. But does David Cameron? It is not much of an exaggeration to say that Britain’s future now depends on the answer.

Trevor Kavanagh is political columnist for the Sun.

This article first appeared in the print edition of The Spectator magazine, dated