Tories and economic incompetence


10:03 am - May 5th 2009

by Don Paskini    


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A historical fact occurred to me yesterday: over the past half century, every time a Conservative government has come to power, it has introduced disastrous economic policies which have plunged the economy into far greater crisis and made their government desperately unpopular.

The last time that a newly elected Conservative government managed even minimal competence was when they were led by Winston Churchill in 1951. The last time they managed this feat with a leader who had no previous experience of being Prime Minister was in the 1920s.

Of course, history is not always a good guide to how a party will govern. But since the current Conservative economic policy is ‘ask us after the election’, their candidates for parliament are mostly unembarrassed Thatcherites, and many of their highly regarded thinkers spent the past few years urging that Britain should be more like Ireland or Iceland, the signs are that they aren’t likely to break their 58 year run of messing things up if they do win the election.

Which makes it all the more important that if Labour is defeated, the party could work out quickly how it needs to change and what the lessons of the past twelve years are, in time to fix the problems that the Tories will cause.

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About the author
Don Paskini is deputy-editor of LC. He also blogs at donpaskini. He is on twitter as @donpaskini
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Story Filed Under: Blog ,Conservative Party ,Economy ,Westminster

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Reader comments


First & foremost – honesty. Honesty & not treating us with contempt & mistrust. If we had a ruling party (frankly I don’t mind which – I’d sooner it be the LIbDems but I’m a realist) who spoke to us like equals & not naughty children, who put the people first & who didn’t try to screw everything they could out of the system for themselves, I’d be a happy bunny. I don’t think we’ll get that without electoral reform though because the current system favours oscillating between two let’s face it pretty similar parties.

Same with the Republicans/Democrats I think – the pattern is that the right drive the bus off a cliff, the left fix it, then the right accuse them of profligacy. This is playing out right now over in Washington, right according to the playbook (Reagan’s huge deficits and Clinton’s remarkably good economic record are the other great example).

It’s slightly different here now because, although the right dutifully drove the bus off the cliff we’re going to turn to the even further right to fix it, because the left doesn’t exist. This doesn’t inspire me with awesome confidence, frankly.

Yeah – the UK was *so* much worse off in 1997 than it was in 1979 – right.

Still, I guess the Tories don’t have much to worry about if this is all you can come up with.

in time to fix the problems that the Tories will cause

Oh, the irony…

Tom – you may have spotted that Labour has been in charge for 12 years, and where is the bus now exactly?

“A historical fact occurred to me yesterday..”

Mmmmm, smell that bullshit.

Why not be even more blatant, and open the piece “Based on something I just made up..”

@cjcjc, I think that was rather Tom’s point.

On a wider point, I think this article, considered as a call-to-action, should cause any realistic, thinking lefty to despair. It is impossible to “learn lessons”, “revive the left” or any of the other worthy aims held by other writers on this site unless you first admit what you got wrong, and stop blaming the other side. As a liberal I very much want there to be a coherent socialist party so’s I can argue with y’all, but it’s not going to be born from this kind of blinkered partisan barking.

If you have a suggestion for an economic way forward, however broadbrush, let’s hear it without the party politicking. If you don’t, go back to your wilderness and prepare for opposition*.

* And that’s if you’re lucky.

Cjcjc: in a hole created by Americans.

Three men on a boat caused the 1929 crash but the economy is considerably more quantuumentangled than it was then.

But, more importantly, you seem to have missed the OPs point about Thatcherite policies. New Labour didn’t change them in any substantial way. They tried a few socialist-looking things (minimum wage; good idea, badly executed and you can say that about most) but the macro-economic policies are still very much Wahay! Bucketsofcash! But only for our mates. New Labour had their own North Sea oil & gas equivalent; the internet boom, just really getting off the ground in 1997 and the dominant market force in wealth creation for most of the term they were doing ok in.

Once the internet boom ran out and the global effects of Bush’s war were felt, whoever was in power was going to look like they’d buggered it up. New Labour were going out this time anyway; If Brown had been competent and a long-term thinker he’d have already lost an election; possibly by going to the country after the fall of the Mock. The Tories could have bleated about it being Labour’s fault all they wanted but come the next election the voters would still have associated them with the bad times. Major didn’t lose because of the 80s boom, he lost because of the early 90s recession [1] and the fact that most of us were just sick of them after 18 years.

In fact, there’s a plus-point for the Tories over New Labour. We all got sick of them in only 12 years.

[1] On which, a note. Both unemployment and year-on-year economic shrinkage were worse the year I came to the country than they are at the moment. Yes, I suspect this one is going to be worse than the last one; but it isn’t yet.

“Same with the Republicans/Democrats I think – the pattern is that the right drive the bus off a cliff, the left fix it, then the right accuse them of profligacy”

I’d agree that’s true in relation to Heath in the early 1970s. However Labour could only fix it by going to the IMF and adopting “right-wing” spending cuts. The recovery was then botched by the winter of discontent, inflation rising again and absurd tax rates.

Can’t really say the Tories botched it in 1997. Don’t know about about the economy in 1964 to comment.

A historical fact occurred to me yesterday: over the past half century, every time a Conservative government has come to power, it has introduced disastrous economic policies which have plunged the economy into far greater crisis and made their government desperately unpopular.

Wouldn’t that sentence make just as much sense if you removed the word ‘Conservative’ entirely? Which government, over the last 50 years, can claim unalloyed success in its management of the economy? Might it not be the case that, whilst governments can certainly make things worse, nobody has yet figured out how to avoid economic crises even with the best policies?

I tend to think that politics today focuses too much on management of the economy, and ignores the good things that governments could do in other areas. The government actually has very weak powers to ‘control’ the economy in a positive way, but has very real powers to control the police, education, healthcare and other services and what it should do with those powers is actually worth debating, in a way that economic policy largely isn’t. In fact, in believing in the powers of economic policy, we end up with worse government; if Brown hadn’t believed that he had abolished boom and bust, he might have been able to take some sensible precautions about the bust before it happened.

This, by the way, is why I’m in favour of devolution: putting the running of services in the hands of people who don’t spend half of their time trying to ‘run’ the economy and who don’t live with the delusions that come with that.

Can someone explain why the “winter of discontent” was such a good idea?

#11

Giving something a snazzy name doesn’t mean it was actually worse than the unemployment that followed under Thatcher.

However, rather than argue about governments 40 years ago, I’d rather look at what parties are likely to do if they form the next government.

That bastion of civil liberties, David Davis, wrote an article the other day suggesting child benefit could be means tested, tax credits abolished and winter fuel payment and free tv licences for the elderly axed. David Cameron wants an inheritance tax bonanza for a small number of estates but wants to rein spending in on big construction projects. None of these ideas seem particularly good for the things that matter to people when they think about the economy – whether they have jobs and whether they can afford to pay for stuff they need.

“That bastion of civil liberties, David Davis, wrote an article the other day suggesting child benefit could be means tested, tax credits abolished and winter fuel payment and free tv licences for the elderly axed.”

Not sure what those have to do with civil liberties.

I didn’t mean to suggest they had anything to do with civil liberties. Perhaps it was clumsily worded. But for me those suggestions outweigh everything he’s ever said on civil liberties.

Just following from Tim#12 – A point here might be that despite the winter of discontent, the three day week and the numerous strikes, the GDP growth figures for the 70’s were better than the 80’s (don’t have the figures to hand).

Tim F, I take it you wouldn’t defend in its entirety a tax credit system which slings a couple of hundred quid a year at a family with a household income in excess of £60,000? As for winter fuel payments, Polly bloody Toynbee gets one now, for goodness’ sake. So, on a lesser but more numerically significant scale, does my mum, who lives in a property in Surrey worth over half a million quid.

I simply cannot understand the mentality of Labour members/supporters who defend an entire rotten system on the grounds that the Conservatives oppose it, when it results in such horrific injustices as these. Granted that you’ll never be happy with abolishing any of these benefits outright, what on earth is wrong with means-testing child benefit (and the others for that matter)?

Also, in the current circumstances the traditional argument that Margaret Thatcher was justified in killing manufacturing quicker than it could kill itself & using unemployment as a political weapon because the economy needed to be reoriented around services and the financial sector… well, that argument looks slightly less than convincing. Hell, even Mandelson has made some nods towards a planned economy driven by advanced manufacturing.

I say that not to endlessly debate about history, but to point out that anyone willing to use unemployment as a tool to reshape the economy better be right about the kind of economy that will see Britain prosper in the long-term. If they’re right, they have to persuade people that unemployment was a “price worth paying”. If, like Thatcher, they’re wrong then they’ve made ordinary people pay the price while setting us up for a fall. Worse still, the current crop of Tories seem to have no vision at all. They’re willing to adopt measures leading to greater unemployment without even having an idea about the kind of economy they want when the recession is over. At least the government is starting to talk in terms of an industrial strategy again – that’s an anathema to the Tories.

#16

What’s wrong with means-testing child benefit is that many people who need it won’t claim it because it’ll be more complicated, and there may be a stigma attached depending on how it’s done and how small the group of people is that it goes to.

Also universal take-up gives it more longevity politically – middle-class people will defend it too if it’s universal, whereas it’ll be easier to diminish i’s real value over time (or give it to a smaller and smaller group) if it’s means-tested.

Also it’ll create lots of bureaucracy to means-test it.

Also I actually think it’s right for single people like myself to subsidise the bringing up of children. I’m willing to accept that means some richer families will be able to claim it too.

I’m actually surprised at making these arguments to a Lib Dem as I thought you were all in favour of universal benefits and that was the main reason why you opposed tax credits. It’s unusual to find a Lib Dem arguing that the reason tax credits should be opposed is that sometimes they might find their way to a wealthier family. I don’t think tax credits are perfect, and mistakes are sometimes made, but they’ve improved a lot and helped hundreds of thousands of people on low incomes. Generally I’m in favour of universal benefits and services but I acknowledge the fact that tax credits help lots of people on low incomes in a fairly stigma-free way and there’s no way that getting rid of them and replacing them with universal benefits would help people on the lowest incomes as much unless you found a way of increasing the tax take dramatically, so they’d be left with a gap between what they’re earning now and what they would be earning.

Hopefully that explains some of the potential inconsistencies in my position, but as David Davis hasn’t explained the inconsistencies in his I think it’s legitimate to accuse him of hypocrisy for arguing that tax credits should be got rid of because they’re too bureaucratic, but then argue that child benefit should be means-tested.

They’re willing to adopt measures leading to greater unemployment without even having an idea about the kind of economy they want when the recession is over.

Well, the problem is that the kind of economy which planners want may not produce the kinds of things which the world ends up wanting to buy.

I assume (hope) they want the kind of economy which is flexible enough to adapt to changing global circumstances and are not so stupid as to try to decide in advance exactly what that is going to look like.

I disagree with you completely. I don’t want a rigid bureaucratic Soviet-style economy; I do want a democratically planned economy and am not ashamed of saying so.

I think government can set a vision and a framework for business to operate in. I think government can help encourage types of businesses, making decisions about where the country’s strengths lie, what kind of jobs people want and how to prepare people for those kinds of jobs, in ways that individual businesses just can’t*. I think that is exactly what the government should be doing in areas like advanced manufacturing and green technologies. I’m pleased that the government seem to be more receptive to that idea now than maybe five years ago.

I can see why you’re attracted to the Tories though, because they clearly don’t have a vision of where they want the country to end up – and don’t think it’s right to even have a vision. Ideologically they reckon that wherever business takes us will be the right destination for the country.

*(For example, without the intervention of this government, apprenticeships would likely have died a death. Now you have government encouraging some businesses to train more apprentices than they need to create skilled workers who can take jobs at companies that aren’t of a size to be able to run their own apprenticeship schemes. This couldn’t have happened without a government planning ahead with an idea of the kind of jobs that needed creating to sustain long-term growth.)

21. Shatterface

Alix (16) has a point.

A progressive taxation system should be matched by a progressive benefit system.

Paying benefits to someone at a flat rate and taxing the recipient progressively is inconsistant, wasteful and silly.

The problem is that means tested benefits are intrusive and beurocratic – but that doesn’t seem to be a problem where tax is concerned.I

Of course, all benefits could be means-tested efficiently and quickly with the advantage of an enormous centralised database containing all our personal details ;p

@TimF “What’s wrong with means-testing child benefit is that many people who need it won’t claim it because it’ll be more complicated”

Ah, so you do then concede that there are enormous problems with the tax credit system?

Whoops, I see we’re arguing in a circle. Yes, DD can’t have it both ways but then, as you suggest, nor can you.

“It’s unusual to find a Lib Dem arguing that the reason tax credits should be opposed is that sometimes they might find their way to a wealthier family”

Er, is it? I’ll take your word for it, but the fundamental reason why Lib Dems oppose tax credits is that they’re inherently unfair. Personally I’d junk them and put the saved money into child benefit, jobseekers and income support, all of them broad-band means-tested in the same way the tax system is.

What you might be talking about is a citizens’ basic income, which is something Lib Dems are sympathetic to, hasn’t been a policy since the early 1990s. But that presupposes an end to all benefits.

Read the last two paras of my comment at #16.

I do though think that the stigma would be much worse if tax credits were limited to a smaller range of people as you seem to be suggesting, and means-testing benefits is worse than means-testing tax credits, because tax credits can be seen as a tax cut whereas benefits are more of a hand-out.

I can see that the last point may seem tenuous to some (especially if you don’t accept that tax credits are targeted tax cuts), so I’d still refer you back to my comments at #16 which are more important.

#25 obviously aimed at #23 not #24

on CBI, I still don’t know enough about it but I’m suspicious that some of the poorest families would receive less than they do at the moment. Ditto with your idea about scrapping tax credits and replacing them with (presumably higher) means-tested child benefit. I’m also concerned this would make the benefits trap larger since tax credits reward those who work some hours.

I am interested in ideas around significantly expanding child trust funds (originally a liberal idea, I think, although it’s Labour that introduced them and Lib Dems seem to oppose them now) but setting them up in such a way that they can only be used for certain things (eg further education, training etc).

27. Lilliput

“Also I actually think it’s right for single people like myself to subsidise the bringing up of children. ”

Tim f – as a single childless person, I have two questions:

Why is it right?

Would you think its right to force people to subsidise other people’s children if they don’t think its right?

I am democratically helping businesses to plan – through my personal spending decisions – everyday; as is everyone else.

I would rather decide what I want thanks, rather than have it decided for me.

That is certainly the difference between us.

The problem is that the rest of the world might decide it wants something different to what the planners think it wants: then what?

Obviously I don’t object to general educational initiatives such as subsidising apprenticeships – rather different from Mandelson deciding say that in 10 years’ time we’ll all want electric cars.
What happens if we don’t?

29. Shatterface

Unfortunately, Tim (24) the database is precisely there to administer taxes and benefits, the guff about law and order and terrorism us just there to sweeten the pill.

You don’t think the electoral register is a register of the electorate, do you?

oh, and on DD’s hypocrisy versus mine:

I’m generally in favour of universal provision but willing to deviate from that from time to time when there doesn’t appear to be a better way of getting help to people who need it the most.

DD presents himself as generally against bureaucracy except where this might reduce the overall amount the state pays out.

I think it was Ken Livingstone who said that consistency isn’t necessarily a virtue.

#29 – I was making a light-hearted point, but certainly databases would have to be a lot more joined up to make paying out of benefits according to income scales, family circumstances etc automatic, and I thought liberals opposed this centralisation of personal data, believing it was ok to have separate databases dealing with specific tasks but that once you correlate this data into a single source moral and logistical dangers are created.. I’m not a liberal though so I might have misinterpreted the liberal position on this.

#27 – I think bringing up children constitutes work which should be rewarded financially, and I think it benefits us all (more so if the parent is good at it!). We all subsidise the education of children; I don’t see why the rearing of children should be different. That was only a part of my argument for child benefit though.

#28 – I don’t see how you can differentiate apprenticeships from a planned economy just by saying they’re educational. They’re vocational and they are only useful if you have a vision of a particular type of economy you want to nurture. Also, I don’t think that individual spending decisions can perfectly create the kind of economy we all want on their own (there’s certainly a role for them though). I think representational democratic politics can help with that.

32. Ken McKenzie

@27: If you have no kids, it’s other people’s kids who will be running the country when you are old. Not only do you need them to exist in the first place, but you need them to be good at it.

If you think you shouldn’t have to support other people’s children, you shouldn’t expect them to support you later. Of course, the advantage is that they will whether you or they want you to or not.

Hi Alix,

Interesting comments.

On #7 – that calls-to-action are better without the partisan criticisms of the Tories, there is quite a widespread assumption that if the Tories win power, that they’ll be in for at least two terms, whereas I think we shouldn’t assume this, based on previous examples of the Tories in government. So Labour, and/or some kind of Lab/Lib coalition, should be preparing in the event of defeat to be ready to govern and learn the lessons of New Labour by 2014 at the latest, rather than spending the next decade on re-enacting the 1980s.

On means-testing child benefit – I wrote on this at http://don-paskini.blogspot.com/2009/04/tories-plan-cuts-for-families.html

Basically, it would mean spending lots more on bureaucracy, at least a quarter of the poorest families would miss out (take up of child benefit is just about universal, whereas I can’t think of a means-tested benefit which has a take up amongst those eligible of more than about 75%), and if the government needs the money, a fairer way to raise it is through, say, raising income tax.

Two other things:

If you scrap tax credits and put the money into child benefit, income support and JSA, then lots more people would be better off if they gave up their jobs and claimed JSA or income support instead.

And there is no reason why citizens’ basic income can’t be combined with other benefits, indeed it is a fantastically bad idea to try to replace most existing benefits with basic income.

A serious suggestion.

“Which makes it all the more important that if Labour is defeated, the party could work out quickly how it needs to change and what the lessons of the past twelve years are,”

How about if you’re going to embrace Keynesian economics then do so properly? If you’re going to have a fiscal stimulus when growth is below trend, then you also go on and do the other side, have a fiscal contraction when growth is over trend?

As Brown most noticeably didn’t.

35. Shatterface

What’s the take-up of working tax credits?

As, essentially, a tax rebate rather than a benefit I’d assume the Right would be in favour of them, as should the Tax Payers Alliance, etc.

However I suspect many of the recipients do not understand them in the way the benefit system is understood.

A historical fact occurred to me yesterday: over the past half century, every time a Conservative government has come to power, it has introduced disastrous economic policies which have plunged the economy into far greater crisis and made their government desperately unpopular.

1945-1951 Six years of Labour government
1951-1964 Thirteen years of Tory government
1964-1970 Six years of Labour government
1970-1974 Four years of Tory government
1974-1979 Five years of Labour government
1979-1997 Eighteen years of Tory government
1997-2010 Thirteen years of Labour government

Four Labour governments, governing for a total of thirty years, giving Labour governments an average life of 7.5 years.

Three Conservative governments, governing for a total of thirty-five years, giving Conservative governments an average life of 11.67 years.

This is not the pattern I would expect to see if Conservative governments were less competent and less popular than Labour ones.

tim f: “I want a democratically planned economy”

right, so you want the government to do the planning over the heads of the people and whether I get to build my extension depends on how the votes of a handful of swing voters in marginal constituencies are manipulated by dog-whistle politics on separate issues.

Yeah, thanks.

How big is your extension?!! Are you looking to engulf an entire village, or vast swathes of countryside? Are you maybe confusing the different meanings of the word “planning”? Certainly your extension is likely to be subject to planning law. I’m talking about the government getting elected on a platform of pursuing a particular economic strategy geared to develop an economy with differerent strengths to housing and financial services. A “democratically” planned economy is hardly “over the heads of the people” – if anything the kind of economy we’ve had for the past 30 years is “over the heads of the people” where the government – elected after all by the people – is pushed further and further out of the picture.

thomas @ 37, quite.

tim f

I thought liberals opposed this centralisation of personal data, believing it was ok to have separate databases dealing with specific tasks but that once you correlate this data into a single source moral and logistical dangers are created.. I’m not a liberal though so I might have misinterpreted the liberal position on this.

It’s not just the liberal position it’s how competent and trustworthy database designers design databases. It’s not just the liberal position but a long-held principle given statutory weight by the Data Protection Act 1998. If you store lots of data in one place, and give lots of people access, you have increased the risk of something horrible happening.

40. WhatNext?!

Central planning went out with the likes of Hitler and Stalin surely? Not to mention the Austin Allegro.

What is very clear is that Governments are utterly useless at managing things, and should stay out of the way as much as possible.

What Governments can do is nudge society in the “right” direction. Look, for example, at the beneficial effect on cars and their efficiency through changes in taxes, particularly in relation to company car drivers. This was done incrementally, thus allowing car makers and drivers to adapt, and those that wish to pay the extra still can. Efficiency has been driven by the needs of drivers and the ingenuity of the car makers.

As regards payment for raising children, the rights and wrongs are irrelevant. Like the rest of Western Europe, our demographic situation is catastrophic and more children are urgently needed (the situation would have been less pressing if the private pensions hadn’t been all but destroyed).

“Like the rest of Western Europe, our demographic situation is catastrophic and more children are urgently needed (the situation would have been less pressing if the private pensions hadn’t been all but destroyed).”

You’re not one of those people who’s concerned about “over-population” then? Of course if we increased immigration (migrants are mainly young people of working age after all) we could deal with the demographic imbalance without needing to pay increased costs for early education of young children.

Central planning went out with the likes of Hitler and Stalin surely?

Almost all the nations who made signifigant steps in terms of economic development in the 20th century used some form of central planning. Japan targeted specific industries for subsidies and ran export competitions. Korea, Taiwan and Singapore used similar methods. As for Hitler, he’s not often criticised on his economic record. There are precious few examples of economies that achieved wealth without some degree of central planning.

There are still issues here, there are plenty of examples of bad central planning and there are clear limits to how it should be used, but it should not be discounted simply because the some of the results have been less than perfect.

“I don’t want a rigid bureaucratic Soviet-style economy; I do want a democratically planned economy”

If you really want the second, you will end up with the first. Planned economies are far less efficient than markets because they require an almost omnicognisant planner to be anywhere near as useful as a market.

As for tax credits, the system is barkingly insane: You earn money – pay tax on it – apply, (via an expensive bureaucracy), to get the tax / some of the tax back.

Outside of a Kafka novel, it should be obvious that the basic allowance needs to be raised to take these people out of the tax system altogether.

Finally on the “historical facts”, what state has every Labour government left the public finances in by the time the electorate tells them to sling their hook? Anyone?

Finally on the “historical facts”, what state has every Labour government left the public finances in by the time the electorate tells them to sling their hook? Anyone?

OK, as it happens.


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