In such turbulent and volatile times it is tempting to suggest that Conservatives should concern themselves more with political positioning than making a cool assessment from economic first principles.
There is little doubt that for a few months around the turn of the year the ‘do nothing Party’ tag resonated with the public at large. No longer – it is fast dawning on a bewildered British public that frenetic government-by-daily-initiative is no substitute for sound judgement and longer-term thinking.
Whilst superficially the spirit of the age leans towards ever more government intervention and expenditure, so David Cameron’s vision of a smaller state and promoting thrift (which all Conservatives should wholeheartedly support) carries short-term risks. In the medium and long-term it will be vindicated. Moreover, it is a clear sign that we are serious about the challenges ahead of government.
The next big question on the domestic economic agenda is quantitative easing – the printing of money by the Bank of England, necessary (or so we are told) to reflate the economy. An attractively easy option, but the wrong solution to our economic woes.
Because every other government initiative over the past five months has failed to get the economy moving does not mean we should resort to printing money without a crystal clear analysis of its dangers.
At the heart of the credit crunch afflicting the global economy is not the quantity of money, but the velocity with which it circulates through the financial system. Printing new money runs the risk of undermining further trust and confidence in the UK government in the bond markets with future inflationary consequences. The current level of government debt already baffles most of the general public. Amidst the mindblowing announcements that total public debt now stands at over £2 trillion, we need to educate the public to understand the plain truth.
In the past five short years we have added more to the national debt than we had previously borrowed in the 300 years since the UK was created. And this borrowing has not been investment at all, but for current consumption. For every £5 the government will spend in 2009, it will have raised only £4 in taxes. This is the lamentable legacy we pass on to future generations of taxpayers footing the bill for today’s consumption.
Printing money now would simply represent more of the same. I fear it will lead this nation to fiscal and monetary ruin. Conservatives should not now shy away from making the case that enough is enough. After all, sticking closely to the financial orthodoxy of so-called banking industry experts over recent years has got us to this place. For the sake of future generations of taxpayers, Conservatives must now stand up and be counted. We must call time on unsustainable government debt.