Blog 2023 Malcolm Blair-Robinson

This Blog has had many doubts about David Cameron and disagrees with quite a bit he has done or is planning. He took unnecessary damage over Coulson, of which more may be heard in due course.

But his leadership is growing in confidence and authority and his speech to the Tory conference was by far the best of the three party leaders. Indeed the Tories are much more focused as a party in power and this is beginning to show. At a time of national challenge and international crisis there is now nobody in sight who looks a better bet. That said the Tories still lag in the opinion polls, which, considering Labour’s various difficulties, is an indication of just how frightened people are about what the future holds in store for them.

For months and months the eurozone leaders have talked and debated, agreed and declared, delayed and procrastinated. They either have not acted or if they have, they have not implemented. Not a single one of the pressing issues of governance or funding have been definitively resolved. The multiple centres of control and power are far too complex and diverse to cope with what is now unfolding. The shuffling finance ministers have now lost control of events. The first major bank has sent out an SOS. It owes e240 billion and it has run out of cash. Not only can it no longer borrow, but investors want their money. Italy has been further downgraded. Who knows what the day will bring.

What it needs and what it will not bring is decisive leadership and a sense of mission to save the day. Perhaps it cannot be any longer saved. What the cost to everyone of this unfolding disaster will be cannot yet be calculated. Much depends at what point somebody, somewhere, can make a stand. The European dream is among the most worthy in history. In its many headed form it is now over. The current model of Europe, with its uncontrolled and variable economic policy and a currency lacking the institutions to mange it, is now fatally holed. It can be repaired and rebuilt but at great cost. When the job is done, if it is to stand, its institutions, its governance and even its membership will look quite different.

Meanwhile Britain holds fast to defend against contagion. With its unwritten constitution, its limited democracy, its first past the post electoral system and its Royal prerogatives, it is able to offer and enjoy strong decisive government at a time of, in the Prime Minister’s words, great danger. We have a funny way of doing things in these islands, but it is tested over time and it works. Europe has something to learn from us perhaps. Britain, among the most indebted countries in the world, sees more clearly than many, that debt, too much of it, is the soul of the crisis now gripping the western economies. Failure of political leadership is the heart.

Not only have sovereign funds borrowed more than they can repay, but so have too many of the banks. Indeed banks have changed their stripe from institutions in which money was saved and then lent in roughly equal measure, to traders who borrow many, many times the value of their deposits and then spend the money on assets whose value in a crisis collapses. That is why we have, once again, a banking crisis. In the end there will be some busted banks and several sovereign funds in default. It has always been this Blog’s view that a general across the board default may be the only way to make a credible fresh start.

This is the most interesting of the big three conferences, not least because the Tories lead the government. It is interesting also because there is now open debate about  the government’s growth strategy.  The Tory Chairman of the important Treasury Select Commitee, Andrew Tyrie MP, thinks it doesn’t have one.

Before we explore what might be done, or is being done, we need to question the whole idea of growth. It should be possible to live within your means, save money and keep your budget balanced without growth in your income. If you can grow your income as well, your standard of living will rise. If, however you are in the position of having enjoyed an elevated living standard on borrowed money to the point where you are heading for bust, borrowing more to keep up the spree will make bust certain. Cutting back your lifestyle to the point where it is below your earnings so that you can begin to reduce your debts is a mandatory requirement of financial survival. From that point you may be able to grow your income on a sound footing.

Because so much activity in the Western economies was on borrowed money, the net position of economic growth is a good deal lower than the headline figure. Making the correction and keeping economic activity broadly stable is an achievement which should not be overlooked. In the UK the overall money owed by the economy, including personal debt, is the highest in the whole world except for the U.S. There is absolutely no other route open except for cuts, cuts and more cuts.

Mr Tyrie was right to question increasing overseas aid, engaging the military in (or over) Libya and fancy projects like the Big Society, local-ism and so on at such a time of financial crisis. He was right to do so, even if distraught party managers have made him row back somewhat. The fact is that the Tories lead a Government of National Emergency and at such a time ideological fancies, however laudable, are only worth doing if they save money. The NHS Reforms and  Welfare  Reform are supposed to do that (will they?). Reforming educational practice and examination structures can greatly enhance educational quality; free schools and loads of conversions of LEA schools to academies may not do any good, beyond pleasing a certain type of pushy Tory voter. 

This Tory lead Coalition must remain utterly single minded upon its purpose of financial salvation and it cannot borrow any more money to fund some aspiration of growth. What it can do, and appears to be starting to do, is to clear the decks of restrictions upon business and employment which will both save money and help the private sector to create jobs and wealth. Planning Laws, excessive Health and Safety regulations, corporation tax, the abuse of the Human Rights Act, having to pay absent workers while they have long periods of parental leave;  most of these things and many more would cost nothing to modify, but will save a good deal. Above all it will make it easier to start or expand a business. If the economy is set free it will start to grow with more confidence.

It is expected that the Bank of England will soon favour more Quantitative Easing. If it does this and once again the money goes into the dealing rooms of the banks to boost their proprietary trading power, it will make matters worse in the long run and tax public patience to breaking point. The demos in New York, getting bigger all the time, are a serious wake up call. If by Credit Easing the Chancellor means the next round of QE will go direct to small and medium sized businesses to reboot economic growth, he could be onto a very good idea. The cash rich big corporations will then be more likely to release funds for investment.

Finally, if Thatcher had built a new council house for every one she sold, not only would we have no housing shortage today, but the house price bubble and its accompanying world record breaking debt mountain would never have happened. Cameron’s plan to sell and build may be his best idea yet. By far.