Thursday, November 20, 2008

Alan Duncan: Brown is the Manager of Decline

Alan Duncan is making a speech tonight to the Chemical Industries Association which spells out in very stark terms the difference between the Conservative and Labour approaches to the economic crisis. I'm quoting a long extract from it because I think it's the best exposition of the Conservative approach that I have seen yet.

The tragedy for Britain is that just when we'd like to be able to draw on reserves and savings to boost activity after a downturn in the cycle, we find there's nothing there. This makes the choice we face about how to alleviate current pain far more difficult than it should be. Some say we must have a Keynesian fiscal stimulus - others say that by piling debt on top of debt it would make things much worse.

Gordon Brown, the architect of our debt mountain, wants to reduce taxation by increasing borrowing. It is far from clear that such a general spending splurge would in any way have the desired affect. At the very least, it would lead to tax increases later; at worst, it could lead to a systemic deterioration in the whole country's economic condition.

In short, it could prompt a collision between fiscal policy and monetary policy. Low interest rates remain the most immediate and the most potent instrument for assisting cash-flow and helping people service their debt. But if the country's fiscal deficit suddenly grows at a time when the overall economy is contracting, there is a serious danger that long-term interest rates would have to rise both in order to sell the gilts it needs to finance its deficit and also to stop the pound from going into freefall.

And so it might turn out that greater borrowing, instead of stimulating the economy, could in fact sink it. But there is a further danger. The Government, and others, insist that these supposedly stimulating tax cuts should be temporary. We would therefore face the prospect of taxes going up again, and by more than would otherwise be the case, just as Britain is emerging from recession.

What David Cameron proposed on Tuesday better understands the modern world and is better attuned both to the challenge of recession and the opportunities for recovery. We do not want to see unfunded tax cuts and a massive increase in borrowing now; nor do we want to jeopardise the low interest rates that people need. Consistent with that view, we have announced that our public spending plans from 2010/11 will diverge from Labour's published figures and take a lower path.

In the world after Keynes, cash and capital moves around far more quickly. Greater borrowing is not an instrument whose effects can be applied within the boundaries of a self-contained economy. Gordon Brown's plans put our recovery at risk because just when we would be coming out of recession, his earlier fiscal laxity would be hurting our international competitiveness.

In the same way as we are ill-equipped to cope with this stage of the economic cycle now, Gordon Brown seems determined to set us up to be even more ill-equipped for coping with the recovery. Fiscal indulgence now would become a drag-anchor on recovery later .

A temporary tax cut is meaningless to the investor who wants a stable picture for the long term and if excessive borrowing has created systemic deterioration all it will do is make the recession longer and deeper. Temporary measures funded by borrowing and lasting tax increases will prove detrimental in the long term.

Gordon Brown has become a manager of decline. David Cameron is the architect of long-term prosperity. That is now the difference between the two parties in Britain.

This is the message which every member of the Shadow Cabinet needs to put out to the country. Relentlessly, and in language which everyone can relate to. There's no doubt that the mantras which Labour Ministers are uttering - downturn started in America - help families and businesses through the downturn - etc are having an effect. They may appear to be meaningless drivel (and they are) but I suspect to the man in the street they sound believable, at least in the short term. The Tory approach is geared to the long term, but we have to bear in mind that in the short term Brown might just possibly dash for an election. I still think it is unlikely but no one can rule it out.


Anonymous said...

It's just as well you mentioned that Alan Duncan is speaking about the economy and offering a Tory answer to Brown Labour because I'm sure we wouldn't have noticed otherwise.

Did he pass is past Osbourne or are these his own words?

rob's uncle said...

It's possible, of course, that Brown is right and Duncan is wrong in this matter. We will get a better idea after the event.

Anonymous said...

"downturn started in America - help families and businesses through the downturn"

Until we can manage a message in 11 words or less, and not 11 paragraphs or more, the war of the votes cannot be won.

Old Holborn said...

Whoops a daisy

Ed Balls just told Parliament that he couldn't let anyone read the Baby P report because his hands were tied by the Information Minister.

Information Ministry has just released a press statement telling him to fuck off, they said no such thing

Read the statement HERE

Anonymous said...

rob's uncle said...
It's possible, of course, that Brown is right and Duncan is wrong in this matter. We will get a better idea after the event.

November 20, 2008 7:40 PM

No, rob's uncle, it not possible Brown is right. You'll find out in 1 to 2 years when the UK can no longer borrow abroad to finance the deficit.

if you have a mortgage, I suggest you pay it off ASAP.

The soup queue awaits.

Anonymous said...

Alan Duncan is one of a small number of Tory spokesmen who can articulate an argument succintly, effectively, charmingly and confidently. He should be out there every day spreading the word. I know Osborne means well but he is no challenge to the Labour propaganda machine. Although Brown was amusingly satirised with the Glasgow East byelection in Downfall, his megalomaniac character is showing more in his approach to the economy - and people are falling for it just as they did for Hitler.

Please let's get rid of Brown and Mandelson before they destroy the UK completely

evil g said...

The Conservative long term strategy looks like it could see them loosing the next election, whenever that might be. They might be right in the long term, but being in opposition will be no consolation.

The Conservative policy is too long term. Letting the recession take its course is not a popular policy when people are loosing their businesses and homes.

If the Labour policy is popular, as it clearly is, and if sounds credible, as it does, even if it is wrong in the long term, it should be copied. Labour and its friends in the media are being shown an open goal.

Anonymous said...

The proponents of these stimulus theories presuppose that the key to our problems is to get aggregate consumer demand - which is supposedly in freefall - moving again. This decline in aggregate demand is also important because it will offset any increase in the money supply. Hence it is argued that any increase in the money supply arising from their policy pronouncements will NOT be inflationary as the increase in demand for money will offset it.

Three points occur:

First, if the tax cuts are cited as temporary then I doubt if aggregate demand will change much. Rather, people will be fully aware that the tax cuts will be shortlived and so will probably save the exta income they get to keep. So on its own terms the policy just wouldn't work. In addition, even if savings do increase the increase in govt borrowing (if not monetised) will divert the increased pool of savings to the govt rather than private enterprise.

Secondly, I dont think the level of aggregate consumer demand is the problem. Rather its a lack of saving. Economic growth is a product of (private sector) investment and that investment is begat by savings. If anything, its a contraction of consumer demand that we want. In its place an increase in savings would provide the pool of funding required for an expansion of private sector investment. However. as I say above Labour's fiscal stimulus package would most likely hinder this process, diverting saved funds to govt coffers rather than those of private companies.

Finally, has aggregate consumer actually fallen? Information released today and discussed on this evening's PM pogramme (radio 4 - 20/11/2008)) suggests otherwise. The actual fall in retail sales has been much less than was previously forecast. And this is crucial: The increase in public sector debt will most likely be monetised (because of its sheer scale). If that is so, then significant price inflation will result at the same time as rising unemployment.

Anyone for a rerun of the 1970-1979 Heath/Wilson/Callaghan governments????

Anonymous said...

I know that this is awkward but this did start in America.

The techniques of securitisation, the credit agencies that failed to value the assets correctly, mark to market accounting.

I think that people on this board, and Iain, are denying the truth of this simply because they are against the government.

Brown is getting away with this because it's true.

rob's uncle said...

Anon 8.15: I'm far too old [64] to have a mortgage - I stand on the other side of the table as a cash-rich creditor now happily buying cheap assets.

I remember Barber's 'dash for growth': do you?

I hope however to survive to find out who's right in this matter in 2 or indeed, 20, years.

Wrinkled Weasel said...

Alan Duncan is making a lot more sense to me than his leader.

Lola said...

"Gordon Brown, the architect of our debt mountain, wants to reduce taxation by increasing borrowing. " or more accurately "Gordon Brown, the architect of our debt mountain, wants to reduce taxation by increasing taxation (in the future)".

When will they learn that tax raised to 'create' (in the absolute sense of from 'nothing') jobs in the public sector destroys jobs in the private (wealth craeting) sector.

Anonymous said...

The problem is that there are 3 classes of electorate.

1) Thick as two short planks and accepting anything that is free.

2) The totally indebted and looking for a way out.

3) The reasonably intelligent, that understand the financials and the horrors that face us.

One and Two will vote for Gordon as One has the memory of a retarded goldfish and Two is fighting for his existence. Three will think of the future and vote Tory.

I don't believe for one moment that we are getting through to One as they don't want to know. Only when they start losing their jobs and can't afford to go out to the local, will they pay attention. Until then we'll have to suffer the Despot!

Anonymous said...

Of course this is not an example of you promoting a Tory position, is it? No, perish the thought.

Iain Dale said...

Of course it bloody it. Mainly because I happen to agree with it. Are you suggesting I should only comment on Tory positions I disagree with?

Anonymous said...

Yesterday you were professing your independence from the Tory Party - today you are flying promotional kites for Shadow Cabinet Ministers based upon advance copies of their speeches - which you are presumably releasing with their consent. In future perhaps you could put a flag on your posts indicating which are advertorials on behalf of the Tory Party and which are your own thinking.

Iain Dale said...

Desperate stuff. I made clear in response to an allegation that I am not paid by the Tory Party. however, I make no secret of the fact that I am a Conservative and proud of it. That means that I am quite happy to promote Conservativism and Conservative politics. But it also means that I am free to criticise Tory politicians and policies when I think they are wrong. As I often do. If you bothered to take off your blinkers you might even recognise that.

Anonymous said...

And you really believe that the distinction between advertorials and your own thinking is crystal clear at all times? Worth bearing in mind that one of the criticisms of the Lobby is that its failure to attribute its sources allows it to be used as a vehicle for political spinning - I think you are being incredibly naive if you think that "Tory" bloggers are not being used in the same way!

Lola said...

Symmasar and Anon 12.43 - Good Grief. Pathetic.

Iain Dale said...

Well, that's a fair point. Obviously I get press releases from various sources, including the Tory Party. 99% of them I ignore. Only if I think someone is saying something different from the norm do I write about it. I posted this because,as I said, I thought it was the clearest exposition of the new Tory position I had seen. I don't think I would class it as an advertorial, though.

Of course, everyone in politics wants their views portrayed in the best light possible. I thought this was a positive contribution and said so. But there have been many occasions in the past (Andrew Lansley's ill judged extra £28 billion springs to mind) when I have been less than complimentary about Tory initiatives. It's just that people tend to forget those!

But I recognise the point you make.