The idea that such a delicate plant can only flourish under the Conservatives might prove tricky to sustain
Camilla Cavendish
© Jonathan McHugh 2019
Is Boris Johnson about to lose everything, or will he return triumphant from Brussels to preside over a profound shift in British politics? This is an existential moment for the right in the UK. If the prime minister fails to get a deal with the EU and then loses an election, the Conservative party is over — which is why many of its footsoldiers are going along with another radical experiment: the end of fiscal conservatism.
Left and right politicians on both sides of the Atlantic are buying into the theory that persistently low inflation and low interest rates save them from having to worry too much about budget deficits. Traditionally, politicians feared that public debt would slow growth and borrowing would fuel higher prices.
Now, Eurosceptic hawks have discovered there is a magic money tree after all. But it’s a delicate plant and it will only — or this is the pitch — flourish under a Conservative government. That argument could prove tricky to sustain.
At his party conference in Manchester this week, Mr Johnson flung out spending pledges like a two-star general in a third-world country. Post-Brexit Britain will have 20,000 extra police officers, 40 new hospitals, more military might, better-funded schools and youth clubs. Shiny new buses will charge down country lanes. 5G broadband will bring enlightenment to hill and dale, and homes will be warmed by limitless cheap power from miniature fusion reactors.
Although not quite yet. Mr Johnson admitted, in a weird echo of the proposals to replace the Northern Irish backstop with alternative customs arrangements, that this particular technology is not actually ready.
You cannot fault Mr Johnson for optimism. The question is what kind of fiscal reset is implied.
How will a high-spending Conservative party differentiate itself from high-spending Labour under Jeremy Corbyn? “We put up wages,” trumpeted Mr Johnson, “with the biggest expansion of the living wage for a generation; Corbyn would put up taxes for everyone”.
His supporters nodded along, not apparently bothered by the government’s failure to consult business on raising the minimum wage to levels which could be among the highest in the world in five years’ time. There were no frowns over how he planned to fund what the Institute for Fiscal Studies has calculated is a £25bn spending package while cutting taxes.
In Tory minds, uncosted, unfunded pledges are justified by the need to outgun Labour. In this sense, both parties are locked into a mutually assured destruction — or at least a mutually accumulating debt.
With borrowing costs so low, there is a strong argument for chancellor Sajid Javid’s proposed infrastructure spending. With manufacturing output slowing around the globe and Brexit representing a peacetime emergency, some kind of fiscal stimulus is clearly needed.
Even the most enthusiastic pro-Leave economists have predicted a “Nike swoosh” after we leave the EU, with an initial dip in gross domestic product followed by an uptick. Moreover, the rich benefited disproportionately from quantitative easing: as we reach the limits of monetary policy, public spending could target help more effectively.
Yet markets can lose patience. You can’t assume low interest rates for ever. Whoever is in power needs to spend wisely. Mr Johnson’s rhetoric so far contains little detail on how public services — and indeed the wider economy — might be reformed.
The shift among Conservatives is striking. Speaking at a fringe meeting in Manchester this week, I was surprised to find the whole room enthusiastically supporting a proposal to offer personal care to the disabled and elderly for free, at an estimated annual cost of £11bn.
In that same room a few years ago, loud objections would have been made about tax rises. This time, the sole critique came from a councillor worried about burdening the younger generation.
This is partly reflected in polling, which shows rising support for tax rises, especially to fund the National Health Service. But many Tory activists also feel that on social care, the minimum wage and the NHS, keeping Mr Corbyn out of power justifies aping his policies.
Post-Brexit, what does the right stand for? If the Conservative party no longer stands for fiscal prudence, it must deliver an economic boost. Mr Johnson was at pains to talk about productivity and growth this week, but this part of his post-Brexit vision remains alarmingly vague. As he lauded the export of pop star Jason Donovan’s CDs to North Korea, you couldn’t help thinking that Emperor Johnson was even more scantily clad than Mr Donovan, who on the same day was pictured putting out a neighbour’s fire in his underpants.
Ditching prudence may well be a vote-winner. But Brexit demands caution over the public finances. That case has long been made by Rory Stewart, the former leadership contender whose resignation has rocked Tory moderates. His belief that “prudence should be our national strength” reflects the traditional Conservative message at election time of competence based on fiscal responsibility.
Tories see themselves as the diligent guys who roll up their sleeves and fix the roof after the other lot’s profligacy. Hence Gordon Brown and Tony Blair’s adoption of stringent fiscal rules for New Labour in 1997. If Mr Johnson were up against anyone other than the current Labour leadership, his plans would be coming under far more scrutiny. And if this government rewrites the fiscal rules to allow for higher spending, it must be ready for Labour to double down.
The writer, a former head of the Downing Street policy unit, is a Harvard senior fellow
0 comments:
Publicar un comentario