“Anyone in management not planning to spend considerably less in the next year is living in cloud cuckoo land.’ This was the bleak, yet candid, commercial assessment of a high profile businessman in my constituency.
Most people in the political world accept that the same strictures must apply to government. At some point, some unpalatable and politically difficult decisions will have to be made on public spending. But in the final year of this parliament, how open and honest should the political class be with the electorate about the scale of the troubles that lie ahead? Should we Conservatives be the first to tell some home truths about our nation’s economic future?
I have long argued that we should tell it as it is to the electorate and believe we must continue to do so for one compelling reason: in the event that we are elected, it is crucial that we have a strong and clear mandate to do what is necessary to put the public finances back on track. After the next election it will not be enough simply to freeze or trim public expenditure. Instead much more radical solutions will be necessary. Policymakers will need to re-evaluate where the State’s empire should properly start and end.
I accept that this message is not an easy one to deliver. Indeed there are some sound political reasons to avoid even starting down such a path.
For a start, the extreme economic volatility of recent months is likely to continue well beyond the forthcoming election year. There can be few certainties about the state of the economy to be inherited by any incoming administration. Specific policy commitments are arguably unwise.
It is also worth reflecting that for many, this recession is still ‘happening to someone else’, with the real pain and anger being felt by only a minority. For those in (relatively) secure employment – including most in the public sector – the cost of living has fallen dramatically over the past year. Many with tracker mortgages are paying less than half the cost servicing housing debt than they were a year ago. Similarly a visit to the supermarket or filling station has become noticeably cheaper in recent months.
In these tumultuous times, the overwhelming emotion for many is utter bewilderment. Understandably most electors fail to grasp the magnitude of the current economic difficulties, when unfathomable levels of spending and debt running to hundreds of billions of pounds are routinely banded around in news coverage. Reducing departmental government expenditure by a few billion seems small beer when compared to the colossal sums expended in the banking bailout. So why try? In the run-up period to the general election, do we really need to rock the boat on public spending? It will be unpalatable to many that taxpayers’ money can happily be spent bailing out banks and bankers whilst public services are cut back. Similarly to the 750,000 more working in the public sector than twelve years ago, the prospect of public spending cuts is unlikely to appeal.
It is also conceivable that this state of denial will continue, especially as government continues to lead the public to believe that it will always be there to cushion the blow.
The Conservative leadership is mindful of the experience of the last two general election campaigns, when our proposals for what in the current situation seem like pathetically modest savings in government expenditure were misrepresented as ‘severe public spending cuts’ by our political opponents. Moreover, a bleak and uncompromising economic message runs counter to the positive, optimistic outlook that the Party has sought to project under David Cameron’s leadership.
As a counter to the more general state of disillusionment with the political process, we must offer a positive programme that does not focus solely on the blame game. This requires avoiding an economic message that looks dangerously unappealingly in the face of unrealistic spending pledges made by a Labour Party with nothing to lose and a Liberal Democrat Party unlikely to be probed deeply.
Putting these concerns to one side, there is no doubt that an incoming Conservative government will have to be incredibly robust about the extent of the public sector’s scope. Indeed matters are far more serious than in 1979. At least then we inherited an economy which, courtesy of the IMF, had been subjected to monetarist policies for two and a half years. Three decades ago the tough decisions on spending had already to a large extent been made.
Even if the government’s own, almost certainly optimistic projections on public spending come to pass, during 2009 it will raise only £4 in taxes for every £5 it spends. Remember too that we are only at the early stages of the recession. Things will probably get much worse before there is any sign of global economic recovery. Today we must start to come to terms with the fact that there are entire areas of current central and local government activity that arguably should no longer qualify for public funding. The overall state of the public finances suggest that even in the areas of education, health and defence – which during more economically clement times the Party pledged to ringfence – further scrutiny will be necessary. Whilst there has been a marked improvement in school and hospital infrastructure over the past decade, much of this has been financed via the PFI, which will need to be paid off balance sheet for many years to come. Even here there will be no short-term public spending benefit to be derived from putting any future infrastructure commitments on hold.
I cannot accept that everything that government does today is essential. In a brighter economic climate we can be more expansive, but for the foreseeable future there are whole silos of expenditure that will have to be removed from the public purse. (Click here to see the Guardian’s fascinating diagram on departmental spending). In truth, such radical plans can only really be carried out in the first weeks of a new government with a strong mandate. The planning must start now.
Whilst it is prudent to avoid overly detailed commitments along the lines of the James Review before the 2005 election, it may prove unexpectedly popular to the electorate if before the next election we display awareness of the seriousness of our nation’s economic plight. As Nick Wood pointed out in his article on Tuesday, in 1979, contrary to the myth that has since grown-up, we were clear with the public in advance of the election about the necessary medicine our economy required. It may be no coincidence that we were swept into office with the then biggest swing at a post-war election.
At a time when people are paring down personal and company budgets, the call for restraint by government will surely become even louder. I detect the public becoming weary of frenetic activity by political leaders, which yields little result other than to rack up yet greater national debt. Furthermore, a rather interesting phenomenon has revealed itself in my postbag in recent weeks. Constituents who are encountering the benefits system and Jobcentres for the very first time after being made redundant are finding that in spite of paying into the system for years, they either do not qualify for assistance or are bitterly disappointed with the help they do receive. Add them to the legions of pensioners dependent upon income from hard-earned savings and there may soon be significant demand for more value from a smaller, cheaper state by a hitherto silent majority.
A message of responsibility and thrift; the appeal of representing reinvigorated values of reward for work; the encouragement of innovation and flair; a choice apart from the activist, intrusive government that we are told is the essential response to this crisis – these are all positive things that can accompany our levelling with the public sooner rather than later.
The momentous change that Conservatives aspire to offer our nation requires an explicit mandate.