Even as his troubles snowballed at the height of winter, the prime minister
was on bullish form over dinner when he turned to his favourite subject, the
economy. Northern Rock was a trial, he admitted, and the international
outlook was indeed bleak but in no way was he downcast.
As chancellor, hadn’t he seen off the Asian crisis and the Russian debt
disaster of 1998? His then Tory shadow, Francis Maude, had warned of a
“downturn made in Downing Street” but it had turned out to be “a false
dusk”. Under his stewardship again, the economy had rebounded after the
bursting of the dotcom bubble of 2000 and the terror attacks of 9/11. True,
there were dark clouds on the horizon for 2008 but sunshine would return. In
a year’s time we’d all look back and put these difficulties into perspective.
In his first inaugural address Franklin Roosevelt famously stated that “the
only thing to fear is fear itself”. We are in a downturn, not a great
depression, so our politicians won’t wish to emulate FDR’s heroic
hyperactivity; but the voters do need to see their fears addressed in
concrete ways. That is a challenge as much for David Cameron as it is for
Gordon Brown.
Six months after Brown’s prophecy to me, the voters are finding it hard to put
their troubles in perspective. They stubbornly refuse to join a Monty Python
chorus of “Always look on the bright side of life”. The prices of their
bread, milk, eggs, butter and petrol have soared; tax rises have eaten into
their salaries.
Brown and the chancellor, Alistair Darling, are nothing if not consistent. As
the housing market was throttled by an absence of credit in March, a
Treasury economic working paper boasted that the UK had “the most resilient”
economy in the developed world. Last Thursday, Marks & Spencer announced
that its sales had gone south. This is the sort of news even economically
illiterate Everyman relates to. In response, Darling delivered a relatively
upbeat assessment that interest rates and unemployment were far lower than
in the downturn of the early 1990s.
Try as he might to portray our difficulties as made in oil-thirsty China, the
prime minister is thought by voters, rightly or wrongly, to be accountable
for the mess because of his decade-long tenure at the Treasury. They are not
listening to excuses – in fact they aren’t listening to a word he says at
all right now.
That is the problem with overhyping your success as the best economic results
since “the Hanoverian succession”, and “an end to boom and bust”. Brown
cannot escape his earlier boasts of monumental achievement as the monument
crumbles.
Worse, the voters now look back on the period of stable growth he presided
over at No 11 and put it down to smoke and mirrors. If the times were good
for a decade that was because Margaret Thatcher had done the heavy lifting
and later those clever Chinese churned out ever cheaper goods. The bust of
the public finances was Brown’s doing alone.
Number 10 believes that if the prime minister can just get through another
hellish by-election at the end of the month in Glasgow East, the voters will
gradually come to see him as an authority figure once more. They will
contrast Brown’s economic expertise with Cameron’s paucity of experience and
see the error of their ways. Well, that’s the theory, folks.
Backbench Labour MPs who tore up the budget before the Crewe by-election and
are seeking to tear it up again over fuel duty and car tax will not be so
sanguine if the Scottish National party takes Labour’s 25th safest seat.
Such a loss north of the border could be portrayed as heralding the break-up
of the union and with it Labour’s ability to win another general election.
Number 11, stung by rumours of reshuffle – Darling is the only politician with
ratings lower than Brown’s – rebuffs all attempts to set the chancellor
against an interfering prime minister. With a lift of his quizzical
eyebrows, Darling acknowledges that if his master wants to focus on the
economy he is bound to feel a bit squeezed.
Privately he is scotching rumours he might be moved and has repainted the walls
of his flat at No 11 to his taste to show he means to stay. But his team
lacks bottom. Many senior civil servants have left the Treasury or moved
with Brown to No 10. As for his ministerial lineup, Yvette Cooper is showing
some fight as chief secretary, “Kitty in the City” Ussher has her admirers
but is just back from maternity leave and Jane Kennedy is only about par.
Brown’s own long service at No 11 may be held against him in the polls but it
stands him in good stead against rivals.
Sure, MPs doubt his leadership and communication skills – deputy leader
Harriet Harman’s secret chats with small groups of backbenchers unearthed
more discontent with the leader than the economy – but however bad things
are none of his younger rivals has been tested in the Treasury’s fires.
In a downturn, David Miliband, James Purnell or even a cunning old fox like
Jack Straw would find it hard to stand the heat. That is why the older
Blairites, unreconciled to the PM despite talk of a rapprochement, can’t
find a candidate to rally round.
The party that can draw on a first division of economic talent, is,
surprisingly, the Liberal Democrats. Apart from the reassuring figure of
Treasury spokesman Vince Cable, a former chief economist at Shell, other
frontbench heavyweights – Chris Huhne, David Laws and Steve Webb – have a
wealth of practical expertise in finance, economics, pensions and taxation
law that the government and the official opposition struggle to match.
Cable has played the part of Old Testament prophet well. Long ago he thundered
that easy credit, personal indebtedness and the housing bubble would lead to
a crash. Nor is he short on answers. On Monday he will advance an
imaginative proposal to increase a hundredfold a government scheme to
encourage housing associations and local councils to buy up property which
cannot be sold in the current housing crash. At one stroke the poor will be
housed, building companies rescued and the banks will lose their worst
collateral for debt. I do hope the Lib Dems won’t mind when yet another of
their ideas is stolen.
For the Tories, the shadow chancellor George Osborne won his spurs by
proposing the popular inheritance tax cuts that helped to scuttle Brown’s
election plans last October. Brown and Darling were induced to copy him on
both inheritance and a tax on nondomiciled residents.
Bad imitation really is the worst sort of flattery: the voters didn’t respect
them for it, and the City looked at their version of nondom tax and capital
gains revision and snorted “half-baked”. Indeed, Darling has earned himself
the nickname of Mr Magpie for stealing Osborne’s policies, while the
Financial Times has paid tribute to the shadow chancellor’s innovatory
proposals for reform.
Lately Osborne has successfully created a narrative around the idea that
Brown’s splurge on public spending has left no money to reflate the economy
in hard times. His plain talk of “no rainy day money to mend the roof” is
intellectually underpinned by the European Union and the OECD in their
criticism of government extravagance. But as the voters become distressed by
their empty wallets, they would like to hear from Cameron as well.
If anything, the Tories suffer from too stark a division of labour: Osborne
leads on the economy and Cameron on social policy.
Now in a week when there were four more knife killings, I wouldn’t advise the
Tory leader to give up on his theme of “the broken society” – he will visit
Easter-house, one of the most deprived areas in the United Kingdom, this
week (it’s in the Glasgow East seat) – but he needs to seal the deal on the
economy.
“I want people to know that Cameron has a good first in PPE from Oxford, is
comfortable with numbers, budget deficits and macro-economic policy,” says
an ally. In that case, he should stop lending his name to stodgy articles
and let us see the evidence . The prime minister jeers that Cameron was a
youthful special adviser to Norman Lamont when the pound decoupled from the
European monetary system. So what? At the same age young Gordon was setting
out his plans to nationalise the commanding heights of Scottish industry.
Brown needs to find his footing and Cameron needs to find a voice on the
economy. That’s the contest that will now largely decide the next election.
