Political Promise

Gordon’s revenge and Clegg’s betrayal

In Jonny Roberts on August 12, 2010 at 10:09 am

By Jonny Roberts

How will history view the recessionary period 2008-2010? Indeed, who knows when the recovery will be complete? As things stand you’d be forgiven for imagining Gordon Brown’s premiership will be remembered as a total flop and David Cameron and Nick Clegg will be remembered for forging the first successful post-war coalition in British politics. That works but only if the recovery works – the budget slashing, capital cuts and reduced corporation tax serves its intended purpose of balancing Britain’s books and bringing in growth all while Gordon Brown sulks in Scotland writing books about how he saved the world and was repaid with a boot in the bum from the British electorate.Maybe that’s how things will play out, but it’s hardly guaranteed. There is alternative history which could yet be written. Already this week we hear from the Centre of Economic and Business Research that the bank bailout is likely to end up in a £19 billion profit for the taxpayer. David Cameron and George Osborne attacked Labour for intervening when Northern Rock was bailed out; as the scale of the crisis deepened they soon backtracked and supported Brown and Darling’s plan. This global recession was the deepest since the 1930’s yet felt easier (on most) than the UK recessions of the 1980s and 90s Tory Britain. Unemployment stayed lower than in the early 90s and has decreased ever since, and home repossessions were lower. This all looks like sound economic crisis-management to me.

So the questionable economics must be those which led to the crisis. Was it wild public spending as the bizarre and out-of-the-blue Huhne and Warsi double-act today suggested? No, this is revisionist history and only economic success combined with a logic-defying smooth ride on social policy will allow it to become common fact. We must remember it was the risky lending of unregulated banks which led to this recession- you can attack Labour for being too light-touch with The City, but remember- it wasn’t that long ago the Tories were arguing for less not more regulation. It was this bank-led recession – with people out of jobs, businesses making less money and fewer products being sold – which led to lower tax receipts and therefore a deficit. Admittedly the deficit was compounded by high public spending and not all this spending was frugal but new secondary schools, university places for all those with good qualifications, the highest numbers of police in history and a strong NHS don’t come cheap.

If the coalition’s public spending cuts drive huge increases in unemployment (as expected) and their VAT rise slows consumption then the result could very well be a double-dip recession. If that happens, history will look at the improving economic fortunes in the first 3 months of the coalition’s time in power as a result of a Labour policy hangover, contrast with the double-dip recession and conclude that Gordon was right all along.

Clegg, far from being idolised for being the first Liberal leader to hold office in over 70 years, will be at best lambasted, at worst ridiculed, for his change of heart on cuts. During the election Clegg campaigned on the basis that cutting now and raising VAT would be damaging to society and the economy yet in the 5 days after that election (where his party won fewer seats than they did under Charles Kennedy in 2005), when he was on the verge of becoming Deputy Prime Minister, Clegg decided that wasn’t true anymore. In the BBC’s documentary 5 Days That Changed Britain Clegg says he decided early cuts would be necessary before the election; I guess he just forgot to tell the millions voting for his party believing their votes were for delayed cuts. Brown’s revenge would be Clegg’s humiliation.

There is one glitch in this possible future history (if you get what I mean?), Labour would have cut pretty deeply too. Alistair Darling told us these cuts would be worse than anything seen under Thatcher, so even if history judges Labour’s reaction to the recession as a success it too would be implicated in the failure of what came next…though not quite as badly- at least they would have allowed the economy to recover first. Yet Brown may be redeemed here too. It’s well known that Brown was a ‘deficit denier’ (Copyright: David Cameron), Mandelson’s memoirs detail how the Prime Minister had to be bullied by his cabinet into admitting the need to scale back the state, he believed instead that efficiencies and reform would make sufficient savings combined with the return of high tax revenues from the 50% top-rate, a tax on bankers bonuses (which has brought in more than expected) and growth which he was sure would return as long as consumer spending remained high (hence his other denied ambition – to rule out a VAT rise pre-election).

This is, of course, all the stuff of speculation and Labour-loving dreams but there are facts here – Labour’s support of the economy seemed to be doing the trick and if a double-dip comes from cutting too fast, history will not look kindly on this coalition and Brown may well be reprieved. Of course, things could go well in the private sector recovery and the public may enjoy a less generous state. Even my passion for my party wouldn’t see me wanting to wish another recession on the country. I’d be delighted to see rapid growth return (albeit more tightly regulated) but I fear this won’t be the case. But then, we’ll have to wait and see.

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