Fraser Nelson Fraser Nelson

If Cameron wants a second term, he needs to level with the public now

Might David Cameron be a one-term wonder? The pendulum of British politics does tend to move slowly and as little as 18 months ago the Tories could expect two terms at least. But the economic stars are aligning in a way that will make sensible Conservatives shudder. Cuts – real ones, not the type Gordon Brown accuses the Tories of – are looking inevitable. Those Dublin protests could be coming here next. Brown may borrow just enough to avoid making cuts, leaving Cameron to burst the public spending bubble. I outline this scenario in my News of the World column today. I’m not saying it’s likely, just that it should be taken seriously. Here are a few factors to consider.

1)   China may save Brown from the IMF. There’s a reason Hillary Clinton is in China – to kiss the ring of her new creditors. China still has a massive savings surplus and nowhere to put the cash other than government-issued securities. In another era, the US and the UK would face a buyers’ strike – no one would buy their bonds, or demand huge risk premiums. It’s becoming increasingly clear that the imbalance of the East Asian savings glut (which many blame for the Western debt crisis) is now encouraging government profligacy in the way it used to encourage private borrowing. The cash is there: mountains of it. So Brown may well be able to keep finding buyers to enable state spending at about £100bn a year more than he’s generating in tax. The IMF bailout scenario Osbrone has spoken about is indeed real – but it might happen after the election.

2)   Cuts are inevitable Even if the Chinese would keep lending us money, it is immoral to keep saddling the next generation with debts just because the current generation didn’t want to face reality.

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