All Labour budgets are essentially works of deception, and Alistair Darling’s speech on Wednesday was no exception. Once again, the Chancellor deployed the normal, tiresome formula: pyrotechnics intended to distract voters from an ugly truth lurking in the small print. Except this time, the distractions were obvious fakes. No one seriously believes the British economy will be helped by a bribe for buying an imported car. And the truth was the ugliest Britain has been told in its peacetime history: that the nation’s finances are in freefall.
By the time you have finished reading this sentence, the national debt will have increased by some £14,000 — rising by £175 billion this year and £173 billion next. It is a bowel-loosening sum, and will be followed by comparable figures in subsequent years. Gordon Brown has no intention of suddenly abstaining from the state spending he worked so hard to drive up. The Budget protects government from any serious cuts, and proposes to saddle us with a collective debt of £1.3 trillion. This will be the Prime Minister’s leaving present to a miserable public.
And make no mistake: it is a leaving present that will transform Britain. Mr Brown’s legacy is to have taken charge of a low-debt economy and turned it into a debtors’ hell. As the small print of the Budget makes clear, interest payments alone will soon overtake the costs of educating our children or defending the realm. Within a few years, debt repayments will be the biggest single cost to the British government — aside from the National Health Service. This Budget may have taken 50 minutes to read, but it will take decades to pay off.
Mr Brown inadvertently explained this in the Commons just before the Budget. ‘Every crisis since the second world war has been caused by high inflation,’ he said. Indeed, and inflation-induced recessions are easily cured, as John Major’s government proved. But ask the Japanese how long it takes to shrug off the effects of a debt crisis — which is precisely what Britain is now wrestling with.
It took the ignominy of an IMF bail-out for Jim Callaghan to confront the fatal flaw of Keynesian economics. As he told the 1976 Labour conference, you cannot ‘spend your way out of a recession and increase employment by cutting taxes and boosting government spending’. Mr Brown had a different message on Wednesday: ‘you cannot cut your way out of a recession’ — a leitmotif Mr Darling echoed without, it must be said, much passion. But you can, and must, cut your way out of a debt crisis. We are witnessing, once more, the Prime Minister’s fundamental inability to understand the problem he has created.
Note that there was no new stimulus. Even if one went along with his fictional claim that Britain will have what David Cameron rightly ridiculed as a ‘trampoline recovery’ — with growth of 3.5 per cent in 2011 — Mr Darling had to admit the books will not be balanced until the end of the next decade. Not even Mr Brown dares reach for the spending tap again. So this means the high-water mark of British government spending will be reached next year: a staggering 50 per cent of economic output.
This has long been, for many on the Left, a totemic goal. It means the British state will be larger than that of the average Eurozone country (including Germany and Italy). So, in this limited respect, it is not quite fair to label Mr Brown a failure. He hit his own target — but destroyed government finances in the process. The economic and fiscal damage caused by his 12-year rampage is visible all around us; and it will be the Tories’ unenviable task to get on with the repair work.
Small wonder that the shadow chancellor looked bilious as he listened to this horror story unfold. Because the tax bombshells which Mr Darling revealed in his armoury are primed to explode in the Tory years. As he knows, the ‘efficiency savings’ he forecast in his budget are illusory. Whitehall does not do ‘efficiency’. If Mr Brown had sought to design a budget to make life hell for the next Tory government, he could scarcely have done better. As Labour is likely to be out of power for the seven years mapped out in this Budget, the whole document can be seen as a straightforward booby trap for the Conservatives.
Such traps have, after all, worked for years. The weakness of the Cameron operation so far has been a curious willingness to navigate according to Labour’s economic lodestars, to play by Gordon’s rules. This is why, for example, Mr Brown will impose a pre-election 50p tax on the super-rich. Its purpose is not to raise revenue. Saddling Britain with the third highest top rate of tax on the planet will drive away highly mobile wealth creators, resulting in a net loss to the Exchequer during the Tory years. It is an act of sabotage — and Mr Brown calculates that David Cameron and George Osborne will not dare reverse this measure, being paranoid about their own wealthy backgrounds and being seen to help ‘the rich’.
Of course, such games will work only if the Tories follow the ‘hug-them-close’ strategy that Tony Blair adopted in the mid-1990s. Ken Clarke’s budgets plotted a path to such prosperity that it took Mr Brown almost a decade to ruin it. Labour budgets end in the near-bankruptcy of the nation, as was made painfully clear on Wednesday. The economic forecasts within them are fiction, figures plucked from the air to see the government through to the general election. The cost to the taxpayer of the banking crisis, for example, was declared to be barely a third of the £130 billion estimated by external observers.
As Mr Darling told the Commons: ‘in all these decisions, we have been guided by our core values.’ And this, ultimately, was the problem. The Budget marked the failure not just of short-term planning, but of Mr Brown’s entire world-view and his grand delusion that high state spending makes for a strong country. Intellectually, I suppose, the Prime Minister has done Britain a favour in one respect at least: he has tested Labour economic policies to destruction.
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