2005 BRITISH ELECTIONS DIARY # 2
by John O'Sullivan
Benador News
April 13, 2005

If Labor has one overriding advantage in this election, it is the
economy. Almost all the economic indicators—steady growth, low
inflation, and low unemployment—are strongly favorable. On present
trends in both countries, Britain is poised to overtake Germany as the
largest single economy in Europe within a decade. It has already done
so in terms of per capita income. As a result Labor now has a healthy
lead over the Tories as the party most trusted to deliver good
economic management. If Blair wins, that record will be the reason. An
American cannot quite grasp how bad that is for the Tories; economic
competence had been their main advantage over Labor since 1931!
These headline statistics, however, obscure three underlying truths
about the recent performance of the British economy:
1. As the "Economist" points out in its excellent election briefing,
the recovery for which Blair and co. now claim credit began not in
1997 when they were first elected, but in 1992 when the Tories still
had more than four years to run. All the favorable economic trends
began in that year; they were kick-started by Britain's departure from
the ERM (exchange realignment mechanism) in that year; and they had
their roots in a series of economic policy decisions taken either in
the 1980s under Mrs. Thatcher or during the chancellorship of Norman
Lamont. The one policy change contributing to Britain's current
success that Labor brought in was Finance Minister Gordon Brown's
decision to give the Bank of England independent control over monetary
policy. This change, as the Economist notes, was "the culmination of a
process that started" under Lamont. (And it has long been rumored that
Brown granted independence to the Bank after strong private urgings
from Lamont whom, significantly, he criticizes only on strictly
partisan occasions when it doesn't really count.)
2. The Tories lost their reputation for economic competence as a
result of, first, joining and, then, falling out of the ERM. ERM
membership had inflicted a much more severe recession on the British
economy from 1990 to 1992 than would otherwise have occurred. And the
Tories made a virtue of this severity—Prime Minister John Major at the
time saying "If it isn't hurting, it isn't working." When Britain was
forced out of the ERM, however, the economy began the strong recovery
that now benefits Labor. Inevitably the blame for this needless hurt
fell on the Major government which was in office at the time. In
reality, support for joining and staying inside the ERM had been
strong across the political spectrum, including moderate Tories, the
Labor party and Gordon Brown!
3. While Brown has presided over a flourishing economy, he has also
been quietly weakening it by piling a large regulatory burden on
businesses, shifting resources from the public to the private sector,
increasing the costs of pensions, and imposing a range of "stealth
taxes." According to the British Chamber of Commerce, for instance,
the regulatory burden between 1998 and 2005 was equal to approximately
$75 billion. Business profits are low for this stage of the business
cycle. Productivity is static too. So the financial pages of the
newspapers are making three predictions: there are likely to be tax
hikes, a pensions crisis, and a fall in house prices early in the next
government.

Neither Brown nor Labor has been much worried by these likelihoods.
Newspaper articles and Tory attacks could be easily brushed off.
Indeed, in the first economic skirmishes of the campaign, Brown and
Blair had great sport denouncing the Tories for promising to spend too
much and cut too much simultaneously.
Today, however, an economic concussion grenade landed in the middle of
the Labor campaign disorienting everyone. A report from the
International Monetary Fund predicted that the economy would expand by
a slow 2.6 per cent compared to Brown's targeted figure of 3.4 per
cent. Public finances were thus, it argued, spiraling dangerously out
of control. The chancellor would have either to slash spending or to
raise taxes.
The economic and budgetary assessment was bad enough. What made it
worse was that it came from the IMF. Again, no American can really
appreciate the tribal memories that an IMF intervention stirs up in
Britain. It was in the 1970s, under the Old Labor government of Jim
Callaghan, that the IMF briefly took over the management of the
British economy from the Treasury and insisted on public sector cuts
in return for a substantial loan. The news that the IMF was calling
for such cuts again briefly reminded everyone of those years when the
British economy was rent by strikes and stagflation, when rubbish
piled up in the streets and the dead went unburied. Was it all
happening again?
Almost certainly not. We live today in a post-socialist world. The
labor unions no longer have their old powers. Brown and Blair moved
swiftly to reassure the markets that all was well. For a moment,
however, doubt about the economy's future under Labor had been
ignited. Reality about Britain's shaky public finances had intruded
into the manifesto dream. And once reality intrudes, then the picture
of Labor's economic superiority is bound to be seriously amended.



My reason for being in London is to write political commentaries for
the London Evening Standard for the duration of the election campaign.
Today, my assignment was to comment on the Labor manifesto, presented
to the media by Tony Blair and a line of New Labor ministers. With the
permission of the Evening Standard editor, Veronica Wadley, here is
the column:

"How does the Labour manifesto look from the inside? Not exactly from the
inside, of course. That perspective could be provided only by the
scribblers in Labour HQ--and they aren't talking. Yet.
And while I'm not turning Queen's Evidence myself, I will confess that I
used to be a manifesto-writer for the Tory Party. In fact I wrote the 1987
Tory manifesto.
That gives me, I think, two privileged insights into Labour's production.
First, I know some of the tricks of the trade. Second, I was writing--like
Labour's current authors--for a party that was seeking its third election
victory after eight years in government.
That presents a very obvious dilemma. If your manifesto is chock-full of
fresh ideas, then the punters may wonder what you were doing in the
previous two terms. And if it isn't full of fresh ideas, maybe that means
your leader and government are clapped-out old warhorses who should be put
out to grass.
We solved that problem--as "The Economist" generously acknowledged
recently--by presenting Thatcherism as a rolling program. In the first
term, we had put the economy right; in the second, we had restored the
capital-owning democracy through council house sales, privatization and
savings incentives; in the third, we would extend ownership and choice to
those still trapped in poverty, dependency and inadequate state provision.
It was a good story--and basically true. And it enabled Mrs. Thatcher to
slip neatly between both horns of the dilemma.
Labour realizes that it faces the same dilemma well enough. Thus, Mr.
Blair says he wants to make the changes introduced in his first two terms
"irreversible." He also wants to "accelerate the pace of change." And he
declares, in a slightly curious metaphor, that Labour's policies have been
"refreshed."
All this serves to reconcile his overall claim that "never has a governing
party proposed a more wide-ranging programme of change for the country"
with his eight years in office.
But there is a snag. By this stage in her government, Mrs. Thatcher had
tamed the trade unions, broken inflation, won the Falklands War, defeated
the miners' strike, reformed and privatized loss-making state industries,
cut taxes substantially while achieving budget surpluses, and gone
three-quarters of the way to winning the |Cold War by both installing U.S.
missiles in Europe and pioneering a warm diplomatic relationship with
Mikhail Gorbachev.
That was quite a trampoline from which to launch a third term.
Not only does Mr. Blair lack such a substantial record. Not only are his
most substantial achievements either manifestly unpopular (the Iraq war),
still controversial (Lords reform, tuition fees), or pale versions of their
original radicalism (foundation hospitals.) But many of the programs in
today's manifesto are promises he advanced in the two first terms but
fulfilled only at considerable expense but with disappointing results:
shorter NHS waiting lists, a greater parental say in running schools,
stricter measures against anti-social behaviour, and after foundation
hospitals--foundation schools.
This dressed-up return of old New Labour ideas reflects the very different
political situations of Mrs. Thatcher and Mr. Blair at the end of their
respective second terms. In 1987 Mrs. Thatcher was at the height of her
political powers. She dominated the administrative machine and the
policy-making process. And though squalls lay ahead with Nigel Lawson over
"shadowing the D-Mark," she and her Chancellor were as one.
By contrast the prime minister has never been more politically weak. His
chancellor dominates the administrative machine and the policy-making
process. They are known to differ profoundly on the very "New Labour"
proposals that Blair trumpets today as in previous manifestos. Even if
Blair remains in Number 10, his programs will be implemented, if at all,
only in the timid and gelded form that the chancellor wishes.
That political reality explains exactly why the Labour manifesto is about
three times as long as the Tory manifesto. If the familiarity and fragility
of the Blair program are to be disguised, they have to be hidden in a large
phalanx of standard departmental proposals--the kind of thing that every
Permanent Secretary has in his bottom drawer to foist on innocent new
ministers or (as in this case) to meet desperate ministerial requests for
something "new." Thus we get "exacting targets" for reducing red tape--that
one is recycled from Jim Callaghan's day--more sport in schools, and lots
and lots of intrusive little government.
I tried to keep that kind of thing out of the 1987 document (I didn't
always succeed.) But I intuit that my New Labour counterparts had to be
less choosy. As a result along with recycled "New Labour" ideas, you get
something old, little new, something borrowed, and something blue. Indeed,
quite a lot in the manifesto is borrowed and blue--notably, its ideas on
yobbishness, crime and immigration--with Labour being simply less
embarrassed about spending money on them.
Maybe Tony Blair's "refresh" metaphor was a Freudian slip. Isn't "Refresh"
the computer key you press when the machine fails to obey your instructions
the first time?"




There was a fascinating moment in today's manifesto press conference
that illustrated Blair's extraordinary sensitivity to media reactions.
In the course of extolling the National Health Service, the minister
in charge of it, John Reid, said that it evoked extraordinary levels
of loyalty and affection from the British people. That is entirely
accurate—the NHS is a sort of left-wing version of the Monarchy. It
may not cure people, but it makes them proud to be British.
Then Reid went on to illustrate his argument by citing an opinion poll
in which respondents had described the NHS as a greater political
achievement than winning the second world war. Watching this on
television, an Evening Standard writer snorted: "Well, if we hadn't
won the war, there wouldn't have been an NHS."
Moments later, when someone in the conference asked about the
comparison, Blair quickly intervened, took over from Reid, and said:
"Well, let's be clear, winning the war was more important than the
NHS. If we hadn't won the war, there wouldn't be an NHS."
Blair didn't know what the Sun headline would be, but he was morally
sure he wouldn't like it. And he stopped it in advance.
After which he probably gave some quiet advice to Reid borrowed from
Basil Fawlty: "Don't mention the war!"


In one respect, the Weekly Standard and the Guardian, the American
Right and the British Left, agree. They all have the same opinion of
Tony Blair. Private Eye, the satirical magazine, expressed it as
follows:
"The Prime Minister has warned that in the run-up to the general
election, the British public should prepare themselves for what he
dubbed 'a rather nasty right-wing campaign.'
"A Labor spokesman said: 'There's going to be a lot of unpleasant
right-wing campaigning over the next few weeks, and if those
wishy-washy Conservatives don't like it, they know what they can do.'
"




Ends.

Printer-friendly version   Email this item to a friend