What a Labour adviser should say to the PM

To:Prime Minister
From Political Adviser

I am writing today because your political strategy runs the risk of being undermined by events.

Of course you are good at crafting an economic policy to make it as difficult as possible for the Tories. It was one of your best victory rolls, after all those years of condemning some Tories for wanting tax cuts, to go for broke by offering tax cuts the Tories cannot match because of the financial position. Following this up by making public spending plans much tighter for the years after the election, and warning of tax increases then too, puts the Tories into a bind which the BBC will try to tighten round their necks. We can get the interviewers to taunt the Tories, asking them, if they will really cut spending by more than the figures we are proposing, and asking them which taxes they will increase to cut the deficit after a year or so of our extra spending and borrowing.

You should be aware, however, that some of the Tories are no longer playing that game. There might be some salvation for them by pointing to the need for restraint and tough decisions, if the policy we are following does not start soon to fire some economic recovery. They can concentrate their fire on the repossessions, the job losses, the large borrowing figures, and any weakness in sterling and bond markets that we experience from here. Events do matter, and sometimes events can overwhelm the best political strategy or the most successful spin.

I know you now have two brilliant spin doctors on board and making a difference. I think you have done a great job getting attention to yourself and getting people to change their image of you. However, the image of crisis leader will only be sustainable if there are signs that the crisis is passing.

The crisis has two related characteristics. There is the banking collapse, and then the deep problems in the rest of the economy. Unless we can sort out the banks, we cannot recover the rest of the economy. If the banks cannot or will not lend to the everyone else, we will see many more business failures and job losses.

You set out a three part programme for dealing with the banks. The main money was to be committed by short term loans and guarantees. Apparently little of this has happened. You need to revisit the terms, as the banks will need this money and help to start them lending again. The third part, the bank share purchases, is very popular with our left wing, but will mean increasing pressure on you, and blame, if the nationalised banks have to repossess and are unwilling to lend to all and sundry. We are also losing lots of money on the shares. You need to reconsider this part of the deal as well.

You are now proposing a reflationary package. It will not work until the banks are fixed. The banks are the mechanism by which the reflationary money circulates and multiplies, to create and maintain jobs and businesses. It would be better to fix the banks before overcommitting. Markets can be spooked by a government which wants to borrow too much. The more long term support you give the banks the more you need to borrow anyway, so there is the danger of overload.

You have put a lot of political capital into your plans for rebuilding the banks. You also need to help do this to get the economy going again. Please have another look, as the current programme is not working. The spin was great. The reality is undermining it. There will be no recovery until you really fix the banks, however much you borrow. And whilst it hurts me to say so, the Tories are right when they say there are limits to how much you can borrow, given the commitments you are taking on for the taxpayer.

This entry was posted in Blog. Bookmark the permalink. Both comments and trackbacks are currently closed.

6 Comments

  1. duncan robertson
    Posted November 23, 2008 at 10:37 am | Permalink

    the crisis however, is due to get much worse before getting any better

    gold & silver are presently being suppressed by proxies acting on the behest of the usa admistration

    i say, gold and silver are due much higher

    as for the stock market, i say its due much lower, then shall stagnate for much time prior to any sustained rally coming onto the charts

    kindly

  2. Bazman
    Posted November 23, 2008 at 12:28 pm | Permalink

    Looks like Labour have got the Tories on the run playing them at their own game of staying in power whatever happens and I for one remember the run down down Britain and desolate North presided over by the last Tory government. Do you all not remember how run down large areas of Britain were? Cutting everything and making everyone unemployed or a wandering minstrel. Self employed accountants yes, but self employed labourers? Come on! How many Bill gates, Honda's or IBM's did this create. None. So would say a labour government is not a bad thing. It was noticed by myself that the Tories had little to say about sky high house prices, record levels of dept, low wages being driven even further down by allowing employers to exploit foreign labour for their own ends and not the customer or consumer. Letting the banks do what they like and predicting meltdown should there be any interference of any kind, but what happened anyway. Hope you all saved a bit to use as a war chest? Wanna sell that big flash flat screen TV and 4 wheel drive for the market rate. Porsche Cheyenne for 10 grand and a Porsche Boxster for under 8 these days I hear. Looks like my Mondeo will be staying well maintained, but I'll give you a hundred quid for the TV and I love that watch! Tag Heuer is it? Nice very nice indeed.
    Cynical seems a pretty good place to start.

    • mikestallard
      Posted November 23, 2008 at 7:14 pm | Permalink

      What is a Porsche Cheyenne?

  3. Brian Tomkinson
    Posted November 23, 2008 at 2:56 pm | Permalink

    We are always being told that the government has given the banks £37billion but the banks are still refusing to lend. Regardless of the wisdom of this funding, have the banks yet received the money and if not isn't that why they are not lending?

  4. John
    Posted November 23, 2008 at 3:04 pm | Permalink

    What an advisor should say to the idiot Brown. "Go for god's sake go."

  5. mikestallard
    Posted November 23, 2008 at 7:15 pm | Permalink

    I want to say that your advice to the Prime Minister is one of your better offerings!

  • 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.

  • John’s Books

  • Email Alerts

    You can sign up to receive John's blog posts by e-mail by entering your e-mail address in the box below.

    Enter your email address:

    Delivered by FeedBurner

    The e-mail service is powered by Google's FeedBurner service. Your information is not shared.

  • Map of Visitors

    Locations of visitors to this page