This perhaps is the quandry behind the lack of anything that will stick to our dear leader. Brown hasn’t done that much in the past year which the Conservatives, in their heart of hearts, would disagree with. He has continued the ‘lasiz faire’ economics which was laid down by Thatcher, Howe and Lawson 30 years ago. Regulations have been dispensed with and direct taxation has come down, even if there has been a dramatic rise in indirect taxation over the past 10 years. Brown’s big failure, which has led to the credit crunch and this recession, has its seeds in his adherence to the listed ‘Thatcherite’ principles.
Had Brown imposed stricter regulations on our Banks, they might not have over-extended themselves by importing sub-prime principles to our mortgage markets or by going after, excuse the pun, a quick buck, by buying up American sub-prime debts. Brown has instead, left the stable door open. Even now, Brown and Darling are reticent to take action against the banks who have refused to pass on any of the 2% in interest cuts.
Of course, many people take their lead from the top, and this government has not set a good example with the extensive use of the capital projects version of the second mortgage, PFI/PPP. As much as £40 billion has been spent on expensive refurbishment projects for our Hospitals and Schools, with large sums not actually going towards funding the building works, but towards consultation fees for the various firms involved. At the moment, none of these fees will appear on any government books, as they have been deemed to be ‘off-sheet’. We have been promised that these will appear on-sheet by 2011, after the next election.
In the mean-time, on Monday we have the most important Pre-Budget report since… well the Budget was held at this time of year (1996 I believe). Targeted tax cuts have been hinted at, with the Conservatives claiming that this is irresponsible. One way that New Labour could be really responsible would be to raise income taxes for higher earners.
Raising the top rate of Income tax above its current rate of 40% is another course of action which Brown could have adopted, to slow the economy down. Again, Brown stuck to ‘Thatcherite’ principles and kept income tax for big earners low, the sort of big earner’s whose irresponsibility have led to the current recession. This course of action would be preferable to the other alternative being touted on Robert Peston’s blog, that of VAT being raised to 22.5%. VAT, apart from being a regressive tax, tends to be most penal on the low earners who would gain from tax cuts.
What Brown has successfully done again is marginalise the Conservatives. Cameron’s sudden policy announcement, that they would drop the policy of keeping in place the next cycle of public spending, which ends in 2011, shows a nervousness that perhaps the (poor) tactic of blaming Brown of economic miss-management has not gone as planned. The Conservitives now find themselves where they were in 2001 and 2005, arguing for economic policies which are not universally popular or acclaimed. Brown is at fault for the recession, because he followed the Thatcherite policies which brought us here. Promising more Thatcherisim to get us out of the recession, at a time where the right wing orthodoxy is being more and more questioned, is entirely the wrong tactic for Cameron. This move only brings the date of the next General Election closer, an election which could be very uncomfortable for Cameron.