Christopher Fildes

An election won on the economy — or is it ‘vote now, pay later’?

An election won on the economy — or is it ‘vote now, pay later’?

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I found the Chancellor outside his local supermarket, conducting what he called a stationary walkabout. He had brought his spaniel, which canvassed the voters by licking them: ‘I suppose,’ said one, ‘that with a dog like that, you can’t be all bad.’ On the political battleground, this was a peaceful enclave, and indeed some of his colleagues had wanted to fight the campaign without him. At one point they thought they would lose it. He rather thought that it had already been won, and by him. Later on, in his account of his time at the Treasury, he said as much: ‘An election won on the economy.’ This was Nigel Lawson, and his party was on its way, eighteen years ago, to completing a hat trick of victories. His old adversary, Gordon Brown, must recognise the feeling. Some of his colleagues had thought that the campaign would go better without him. Left to themselves, they began to seem capable of losing it. He had to be brought back in, on his own terms. He, too, must think that it has already been won, and by him. His memoirs, when he comes to write them, could then feature a chapter triumphantly headed: ‘Two elections won on the economy.’ All that this blockbuster would need is a title. I suggest My Years with Prudence — and After.

Walking arm in arm

He would have a new story to tell, for, until he arrived, Labour chancellors were not supposed to win elections. The best they could hope was to avoid losing them. From Philip Snowden down the years to Denis Healey, each found himself having to cope with a crisis, and in the voters’ minds the ideas were associated. It took Black Wednesday, when the pound was so expensively thrown out of the Exchange Rate Mechanism, to show that the Conservatives could stage a full-dress crisis of their own. This gave Labour’s next chancellor his chance, and he took it. He would walk into office arm in arm with Prudence, who was paraded as his soul-mate. He would submit to golden rules. His first and boldest stroke was to put monetary policy out to contract with an independent Bank of England. After that, why would he choose to sub-contract it to the European Central Bank? With his Famous Five tests, he asserted the power of veto over any plan to merge the pound into the euro, however much his neighbour in Downing Street might wish it. This week the Chancellor served notice that the neighbour would move out with his ambition unfulfilled.

All done on purpose

Nothing this Chancellor does is without a political purpose. His walk-out with Prudence established his credit, and five summers ago he was ready to use it. Suddenly, he could find all the money he wanted to pour into popular causes, with the National Health Service rated the most popular of all. Spending in this cause would grow twice as fast as the economy for as far ahead as he could see. His timing was flawless. In the election that followed, his party won in a canter, and he must have looked for his reward — but it never arrived, and Prudence’s champion evolved into the biggest spender of them all. If he is still at his post in a year or two’s time, public spending will have doubled on his watch. Although we now work for him for the first five months of each year, his revenues cannot keep up, and he has drifted back into the habit of borrowing, in good times as well as in bad. His cash position gets worse and his forecasts are always too hopeful. It would not now take much to derail his finances — an accident somewhere else in the world, or in its markets — and to leave us to wonder where all the money had gone.

The mug punter

We must wonder about that already. When public spending has doubled, will public services be twice as good as they were? Who would, for a moment, believe it? The government’s own figures bear out our suspicion. They show that something like half of the increase in public spending has been eaten up by inflation, leaving us to pay more and more for the same thing. This has not lately been our experience when shopping for food or for clothes, but inflation is now a public-sector phenomenon. The more money the Chancellor finds for this sector, the less efficient it becomes, for its productivity is in decline. His response has been to look for new and more cheering statistics. A mug punter might just as well look for a new set of racing results. A shrewder punter would look for a different system or, better still, keep his money in his pockets, but not this one. He just doubles up on losers.

Prudence, farewell

He might say that we can afford it. See how the economy carries on growing, to bear out his forecasts and put the doubters to flight. We have seen nothing like it, or so he tells us, since 1701. A selective use of statistics has helped him here, but never mind. No wonder that he must look forward to another election won on the economy. He still looks for his reward. To ask what has been driving this growth, or for how long it can be sustained — these, or so he might say, are questions for the morning after. The short answer is that we have been living on credit. The dauntless British consumer has kept the economy purring, and if he now flags, then the government, borrowing and spending, is there to take up the slack. We trade with the world at a deficit which is wider than ever, and, in one way or another, it must be financed. That is not in his gift, and must depend on our international creditors. All of this can go on, as it has, for a long time but, in the nature of things, not for ever, and turning it round will be harder than keeping it going. We may then ask why a Chancellor once pledged to Prudence could have let it go on for so long.

Fatal feud

These judgments creep up on chancellors, as Nigel Lawson could tell Gordon Brown. After his won election came his tax-reforming Budget, but then his figures and forecasts misfired and he fell out with his neighbour in Downing Street — a feud which proved to be fatal to both of them. His experience shows that an economy can purr too loudly. A Chancellor, too.