Peter Riddell: Political Briefing
2 for 1 tickets to Casablanca, this coming Monday
It wasn’t chance that David Cameron chose to challenge Gordon Brown about the
economy yesterday. Mr Cameron does not do anything on a whim. The message of
the polls and focus groups is that the Government is very vulnerable on the
economy as the credit crunch bites. Most problems are in the financial and
property sectors, but there is a sense of limbo, of waiting for a nasty bump.
Yesterday’s exchanges were, however, only partial truths, and need to be
supplemented by the less partisan testimony given to the Treasury Select
Committee two hours earlier by Mervyn King, the Governor of the Bank of
England. The Conservatives argue that the Government failed to prepare for a
slowdown by increasing public spending and running a lax fiscal policy,
which does not permit any relaxation now.
Mr Cameron said the Treasury’s Red Book showed taxes going up in the Budget,
on petrol, buying a car, on shopping, while Mr Brown maintained: “We are
injecting more money into the economy this year.” He pointed to the 2p cut
in the basic rate of income tax to 20p, forgetting to mention the abolition
of the 10p starting rate from next month.
Both party leaders are correct. It all depends on which taxes and timing.
Indirect taxes have risen, while, overall, taxes are being reduced
marginally in the coming financial year as a result of the Budget decisions.
And taking account of decisions announced in the 2007 Budget and the
PreBudget Report, taxes will fall by £1.8 billion in 2008-09, helping to
push up borrowing. Taxes overall will rise in later years, though not enough
to bring public finances back on track, in the view of most economists.
Moreover, as the Financial Services Authority admitted yesterday, the Northern
Rock affair exposed serious shortcomings in the tripartite system of
regulation set up in 1997-98.
Mr Brown argued that Britain’s problems were of a different kind and scale
from those in the US or Germany. So far that is correct, and the main
emphasis has been on providing liquidity to restore confidence and to
protect depositors, while ensuring, as Mr King emphasised, that the risks
relating to losses on lending remain with banks.
The other key issue is the housing market. Nick Clegg, the Liberal Democrat
leader, argued that the position is similar to that at the start of the 1990
housing crash, with orders to repossess properties now at more than 95,000,
just below the earlier level, while house prices are falling.
Mr Brown was correct that, in some key respects, the economy is better placed
than before. Inflation, interest rates and unemployment are much lower than
in 1990. But no amount of robustness in defence will be sufficient if, and
when, the slowdown bites. There may not be mass redundancies as seen in the
early 1980s or 1990s, but living standards could be squeezed.
As Richard Lambert, of the CBI, has cautioned, the slowdown may be prolonged.
There may be no contraction, but recovery may be delayed until later in
2009. It is likely not only to be a hard slog for Mr Brown, but also a long,
drawn out one before he can think about an election.

Peter Riddell has been a leading political commentator and an Assistant Editor for The Times since 1991. He writes mainly, but not exclusively, about British politics and has published several books on British politics, including not one, but two, on Margaret Thatcher
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Would the media please challenge the Tories to say unequivocally that they will reduce public spending and therefore taxes? I am especially thinking of excess bureaucracy, quangos, centralisation, green-excuse taxes and patronage - jobs for the boys - their supporters. I have heard nothing which makes me understand that the Tories will be anything other than a slight variation on this government. This is the voter's nightmare!
I would be surprised if my pessimism is not widely shared.
P.S. Don't even get me started on education . . .
Les, Ramsgate, Kent
History repeats. We are starting to see the pattern of the seventies. The armed forces sent into action with inadequate equipment. Every week another defence project delay or cancellation. Taxes rising to the 40% of GNP level. Stealth nationalizations when Labour can sneak them through. Worried reports from the IMF. Rising Government debt and deficit. Falling manufacturing competitiveness. Declining educational standards. Declining NHS service. Explosive growth in the least productive part of the economy - the Civil Service. Billions for Labour appointees in quangos.
I wonder when people are going to wake up to the fact that Labour has "form". All we need now is "Crisis? What crisis?"
jon livesey, Sunnyvale, CA/US
Brown's other mistake was delegating industrial policy to the City. This is not the USA.... They invest and we sell everything off.
DickW, Aberdeenshire, Scotland
Surely the figures are fudged. Unemployment is most certainly when you consider that so many are working part-time and having their extra pay paid by the state. The figures of people actually paid by the state should be published and made clear to the public. There cannot be as yet huge redundancies as in the 80`s and 90`s because of this artificial propping up. There are serious discrepancies in the facts we are given and I for one fear the economic future of this country and despair at the paucity of intelligence and integrity of this government.
liz kemp, peterborough,
i am furious, with all the debt we are taking on in this country the largest national debt in europe plus we are taxed to the limit, i can hardly afford petrol and morgage costs, i hear gordon brown gleefully anouncing we are going to pay to educate 8million children in africa!!! that can only come from us taxpayers. what right does he have to spend our money so wastefully! very very angry, karl ,southport
karl jones, southport, merseyside
I never believed in Labour's economy management competency. During Brown's 10 year Chancellorship it was the Worls economy which was helping him as this country was not locked to Euro zone. Except giving power of setting interest rate to BOE Brown did nothing and he was signled out as Iron Chancellor from every one from BBC to this columnist. People have not forgotten Brown's stealth taxes, and he got away with it saying that he is put ting money into public services and Tories would cut it. But that argument he lost it now as billions poured into the black holes of NHS and education have not yielded tangible benefits. Now Brown who took credit for his economy wizardry now blames the World for the down turn. Voters have become cleverer now., c Cameron has to go on attacking Brown about tax` increases, public service woes, economy downturn, immigration and crime. Nice to see for a change the commentator doubting the invincibility of Brown.
Gerry, LONDON,
Gordon Brown will be proved to have been the most disastrous Chancellor this country has ever had - a total incompetent ! Both public and private debt have soared during his period. Our children and grandchildren will be paying the debts off for many years to come. This happens every time we get a Labour government. Will we never learn ?
Derek Green, Shipley, West Yorkshire, England
Speak for yourself ... I'm waiting for the general election and nothing else .
Benzo, Nr Chelmsford,
And getting considerably less for our money.
Albert Hall, kettering,
A change of heart by this columnist to give the Tories any credence! Anyway, we all know elections are won by spin, pr, media impression, not hard facts and figures. That is how Labour won and ground the opposition to the floor for so long, pure rhetoric.
As to the FSA: their competence is now clearly disastrous - chickens coming home to roost from Labour's social engineering attack on appointments by merit alone, letting in people who can hardly count to high responsibilities in all manner of state agencies, including the Revenue, police, navy, home office, quangocracies etc? Stalin and Mr Bean combined.
Timon, Oxford, UK
Irregardless of what you have written, we are paying considerably more in tax!
roger Kingston, york,