Labour in denial on the UK’s economic problems

Yesterday’s debate on the rising cost of living reminded us just how driven by soundbites modern Labour politics is.

Ministers stuck doggedly to their task – to put the word “world” or “global” in front of anything unpleasant that is happening to the economy, and to claim endlessly that everything being done in the UK meant we could ride out the “world” storm better than most. They failed to engage with any of the points and questions raised.

I asked them what the true UK borrowing and unfunded pension liability total now is. I suggested it is a massive £1500 billion. There was no denial from the Treasury bench.

I asserted that the Bank of England had been gravely damaged by taking away its responsibilities for banking supervision and debt management, leaving it unable to control or understand the money markets. There was no reply.

I argued that the Monetary Policy Committee was far from independent, as the government overruled it with a change of target and refused to explain why some members were reappointed and others were not. Again there was silence.

I pointed out that they had raised taxes on North Sea oil fields, yet now had the temerity to go and tell other oil producers to raise output, when their actions had reduced potential output from the North Sea. There was no response.

I questioned why they had spent 11 years dithering over whether to have more nuclear power stations and other non carbon power generation. Wouldn’t we be in a better position if we had more non carbon capacity now? The comments went unanswered.

I asked why they had failed to reform the Common Agricultural Policy so farmers grew more corn and has less set aside, to help with food prices. There was no substance to the response.

The Minister responding to the debate was one of the more intelligent ones. She must have been told to keep her head down and not be drawn on anything different, so she did just that and spoke like someone reading from the whips pager. The only Labour backbencher to stay during the middle section of the debate expressed surprise that I had produced an interpretation of the UK Credit Crunch and the poor conduct of the authorities that was entirely new to her. Some of her colleagues who had heard my case looked as if it were not permitted to use arguments outside the prescribed spin doctor approved list. The arguments are those I published in the Conservative Economic Policy Review and have frequently voiced on this blog and occasionally in the media. Analysis so often gets crowded out by the fatuous soundbites of the spin doctor clash.

The Conservative front bench stuck to the line that the government had failed to mend the roof when the sun was shining, to which the government had no economic answer. It confined itself to pointing out that it had mended some school and hospital roofs, deliberately evading the point of the metaphor that they had debauched the public accounts in a time of plenty. The Lib Dems (Vince Cable) promised a demolition job on the seven Conservative proposals to improve the situation. I only counted Mr Cable dealing with five, and agreeing with at least two of the five, so it was a bit like being savaged by a hamster. There were no Lib Dem proposals on offer yesterday to get out of the stagflation that is now upon us.

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9 Comments

  1. Tony Makara
    Posted June 25, 2008 at 2:09 pm | Permalink

    Most bizarre to me is the claim on the official Labour website that we have FULL EMPLOYMENT IN A GLOBAL ECONOMY. This 'fantasy' doesn't exactly fit snuggly with the 'fact' that we have 5.4 million people having to claim out-of-work benefits. That is a number greater than the population of Scotland. If a government wants to win back the trust of its people the first thing it should do is stop lying to them via its official website.

    Gordon Brown has certainly been trying to propagate the idea that all Britain's economic woes have been Made in the USA. This is utter nonsense from a bankrupt government that has spent and borrowed so much that it doesn't have the fiscal capacity to pay for tax cuts to revive the ailing economy leaving only one option available, the BOE cutting interest rates, which in turn will weaken Sterling and increasing import inflation. Labour's credit-driven economy is now trapped between stagnation and stagflation and these problems are very much Made in Britain by Brown and Co.

  2. mikestallard
    Posted June 25, 2008 at 5:46 pm | Permalink

    It is truly scary this.
    First of all – one and a half TRILLION? Well done for winkling that out. It equals the amount of personal debt in the country. And how much will it cost to repay that, I wonder?
    Second of all – it is manifestly obvious from both your blog and the fact that no back bencher from Labour bothered to stay and listen and from the idiotic comments of the government that they really do think that the situation is not getting desperate.
    Thirdly – add to this the scary piece by Lord Tebbitt in the Mail today about Brussels and the TUs and – bingo! – it's back to normal with Labour.

  3. Glyn H
    Posted June 25, 2008 at 5:56 pm | Permalink

    Thank you for some sane and apposite comments! Regarding Browns ludicrous claim that Mrs T caused todays lack of social mobility (as usual his rhetoric (and his actions) seem either malevolent or incompetent) did you see Roger Bootle in the S/Tel pointing out that it was the UK, as a new net oil exporter in 79/81 that pushed the pound high and thus 'did' for British Industry?

  4. Matthew Reynolds
    Posted June 25, 2008 at 6:34 pm | Permalink

    The Bank of England should get its old powers back while the inflation target should be a pepetual two year one of 2% on the credible RPI-x measure . It should have members who are appointed for single non renewable ten year terms . There should be a Growth Rule designed to limit public spending growth to below average GDP expansion so that the UK does not spend what it cannot afford over the economic cycle while allowing the public sector to expand in a recession to offset the fall in demand while government gets smaller as a share of GDP during a boom . This would allow the Golden Rule to function properly by ensuring that there was the control of public spending needed to produce a balanced budget over the economic cycle . Fuel Duties should rise by 10% plus prices every year with the money used to axe VED and extra taxes on North Sea Oil . This would reduce reliance on foriegn oil as we would be encouraged to use less while more fields in the UK where exploited much more as it apid to do so while taxation was simpler overall. To prosper from the end of VED road users would need to use less road fuel thus boosting the fuel efficient vehicle market by making it pay to be green . Mortgage regulation should be streamlined as the Americans are doing to stop fraud & abuse while making sure that red tape does not prevent people from getting on the housing market . Stamp duty needs axing on shares transactions to boost pension funds and to help The Square Mile do better to avoid a recession while exempting the first £500,000 of all property deals from stamp duty and cutting rates to 1% . That would boost the housing market at a dicy time . With major cuts in the cost of QUANGO’s as many are axed , merged or hived off and the end of complex relief’s corporate tax can be cut to 12.5% making the UK a good place to do business meaning lower unemployment and replacing tax credits & age related allowances with a basic personal allowance of say £12,000 p/a ( partly funded by sacking all the jobsworths hired by Gordon Brown to vote Labour and scrapping tax breaks for those who use accoutants to dodge their share of taxation). Any EU regulation found to harm the UK economy should go as well and it should be comulsory to cut the paper work business that Whitehall imposes on business overall every year . As many nuclear power stations as needed should be built to cut CO2 emmissions & keep us free from needing energy from unstable places . I think all that could help tackle the economic mess caused by Labour .

  5. Matthew Reynolds
    Posted June 25, 2008 at 7:34 pm | Permalink

    The Bank of England should get its old powers back while the inflation target should be a pepetual two year one of 2% on the credible RPI-x measure . It should have members who are appointed for single non renewable ten year terms . There should be a Growth Rule designed to limit public spending growth to below average GDP expansion so that the UK does not spend what it cannot afford over the economic cycle while allowing the public sector to expand in a recession to offset the fall in demand while government gets smaller as a share of GDP during a boom . This would allow the Golden Rule to function properly by ensuring that there was the control of public spending needed to produce a balanced budget over the economic cycle . Fuel Duties should rise by 10% plus prices every year with the money used to axe VED and extra taxes on North Sea Oil . This would reduce reliance on foriegn oil as we would be encouraged to use less while more fields in the UK where exploited much more as it apid to do so while taxation was simpler overall. To prosper from the end of VED road users would need to use less road fuel thus boosting the fuel efficient vehicle market by making it pay to be green . Mortgage regulation should be streamlined as the Americans are doing to stop fraud & abuse while making sure that red tape does not prevent people from getting on the housing market . Stamp duty needs axing on shares transactions to boost pension funds and to help The Square Mile do better to avoid a recession while exempting the first £500,000 of all property deals from stamp duty and cutting rates to 1% . That would boost the housing market at a dicy time . With major cuts in the cost of QUANGO's as many are axed , merged or hived off and the end of complex relief's corporate tax can be cut to 12.5% making the UK a good place to do business meaning lower unemployment and replacing tax credits & age related allowances with a basic personal allowance of say £12,000 p/a ( partly funded by sacking all the jobsworths hired by Gordon Brown to vote Labour and scrapping tax breaks for those who use accoutants to dodge their share of taxation). Any EU regulation found to harm the UK economy should go as well and it should be comulsory to cut the paper work business that Whitehall imposes on business overall every year . As many nuclear power stations as needed should be built to cut CO2 emmissions & keep us free from needing energy from unstable places . I think all that could help tackle the economic mess caused by Labour .

  6. Adrian Peirson
    Posted June 26, 2008 at 12:43 am | Permalink

    No answer may mean you are asking the right questions.

    Keep at them.

    Where is our Fish, why is our farming in decline, being destroyed.
    Why are our Industries in declinem where is our Gold.
    Our Money is not Money, it is the Receipt, Brown has sold off the Gold at Rock Bottom Price ( Coincidence ? )

    We are left playing with the receipts, the real Money has gone.

  7. David Eyles
    Posted June 26, 2008 at 1:13 pm | Permalink

    Well done for putting them on the spot; although it does beg the question as to what is the point of the HofC if they choose not to answer your questions. Where is the accountability?

    Unusually, I have to take issue, very mildly, with Matthew Reynolds who seems intent on fiddling with markets via taxation to acheive his desired ends. In particular, his suggestion of yet more tax on road fuel would be devastating a) to inflation and b) to anyone who lives in the countryside.

    To give an example from our own farm: I regularly need to transport 30+ ewes in a trailer. As these weigh aprox 70 Kg each plus the weight of the trailer and, very quickly, I reach the maximum legal towing weight of such trailers of 3500 Kg. The only working vehicle on the market that will do this (legally) is a Land-Rover. Mine is 12 years old and I need every one of its 2500 cc to pull that lot. Similarly, to transport an 850 Kg Suffolk horse in a horse trailer weighing just under a tonne, means that we need the 2000 Kg towing weight limit of our (newer) Freelander.

    Diesel costs are hammering the countryside and everything we buy; are inflationary, and given that most of the cost is tax, is uneccessary.

    The real long and medium term answer to our economic problems is to reduce the cost of government by cutting out the waste in government itself and reducing the legislative burden upon business. Thus the economy will be stimulated from two directions at once.

  8. adam
    Posted June 28, 2008 at 2:09 am | Permalink

    Just raw Vince Cabal(?) say "it is important Oil prices should remain high and mps shouldnt pander to 'populist arguments' wanting them to fall.

  9. mikestallard
    Posted June 28, 2008 at 10:05 am | Permalink

    Please may I come back?

    I have kept all figures in billions of pounds sterling.

    The figures which we, the general public are regularly given are these:
    £700 billion or so – annual budget for all tax and spend on the departments and ministries of government.

    Now you come up with the fact that we are (at least) £1,500 billion in debt. (That seems to me to be disaster.)

    Then, in the Telegraph yesterday we got an article saying that the deliberately bloated Civil Service costs a massive £161,000 billion per year.

    Frankly, I've lost it. Can you help please?

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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