A few days ago I relied on a Bank of England statistic that 1.2 million homes would soon face negative equity. For an even gloomier forecast read this post by the excellent Fraser Nelson at the Coffee House blog.
George Osborne’s speech to the LSE today is well worth reading. In it he sets out his opposition to the Government’s proposals of spending its way out of the impending recession and thereby dismisses as flawed the Keynesian model the Chancellor is advocating. The Tories approach to deal with the inevitable rise in borrowing during a recession is not more borrowing but effective use of monetary policy such as allowing the Bank of England to do its job and cut interest rates. It’s a similar proposal to what Lord Lawson advocated two days ago which I mentioned here. There were no promises of big tax cuts in the speech, but smaller measures previously announced to help families and small businesses such as a council tax freeze, deferring VAT bills for six months for SME’s, a cut in payroll taxes for for the smallest companies and a stop to planned tax rises on family cars and small businesses.
After the cross party agreement on bank bailouts, the difference in approach between Labour and the Conservatives in dealing with the economic slump is becoming clear. I expect the differences will become even more clear after the pre budget report and George Osborne’s response to it. As things stand Labour is in the Keynesian corner, we Conservatives in the corner of the Monetarists. Let the battle commence.
You have to admire the
bare faced cheek sheer audacity of Labour in producing this dossier trying to portray George Osborne as a novice. One would have thought that with government borrowing going through the roof, house prices tumbling, 1.2 million facing negative equity, repossessions rising rapidly, more and more small businesses going bust daily, unemployment approaching 2 million, a long and painful recession looming as well as a plethora of economic gloom stories coming out each week, Labour would have enough on their plate without trying desperately to question George Osborne’s judgment.
The dossier is a calculated attack on George Osborne who Labour perceive incorrectly to be vulnerable after yachtgate. A dossier in return listing Gordon Brown’s failures would require a lot more than 14 pages to catalogue. It could perhaps start with this quote from Gordon Brown in January 1997:
‘In 1993, I said the new Labour Party would never construct economic policy by drawing up a wish-list of spending, seeing how much of it could be financed by taxation and meeting any gap by borrowing. There would be no return to the days of careless demand management, masquerading as Keynesianism.’
…which is exactly where we are at.