Monday, 26 May 2008

Will a New Crew(e) Make a Difference ?

Having been on Jersey for most of last week, I missed the excitement of the Crewe & Nantwich by-election but judging by the threads on it all got very exciting and febrile and a number of triumphalist Tories got rather carried away.

They now have two easy years watching the denouement of the Labour Government in general and Gordon Brown in particular. There seems an almost visceral contempt in many circles for Brown and the Government which I don't share. I suppose that since I was never (unlike many Conservatives) a convert to or taken in by "New Labour" I don't have the sense of being betrayed or deceived. I feel some sympathy for Brown but none at all for Labour whose fiscal irresponsibility and rampant authoritarianism are condemning it to disaster.

So it now looks increasingly likely that the Conservatives under David Cameron will form the next Government sometime in the late spring of 2010. As that prospect becomes more likely so the examination of Tory policies will become more stringent and David Cameron will be forced to firm up his ideas on tax, spending, Europe and a range of other issues where, up to now, he has largely ridden the wave of Labour's own implosion.

Max Hastings penned this article in Saturday's Daily Mail. While it illustrates the "shopping list" that Cameron will have to deal with, it also wonderfully illustrates the mediocrity and near incoherence prevailing in most Conservative thinking.

Although starting reasonably, if unimaginatively, Hastings starts with his tried-and-trusted assault on the "public sector". Now, I've argued here and elsewhere that while there may be some waste in central Government, there is very little in local Government and it is frankly ridiculous to predicate the possibility of tax cuts on an unquantified and speculative concept of Government waste. Reviews such as James and Gershon have purported to show possible savings but the devil is in the detail and it seems more likely to me that while the State won't grow it won't shrink either.

One area - the rising cost of adult social care - is the elephant in the room on this. Costs in this area are rising yet every family wants someone else to pay for the care of loved parents or grandparents. The unpalatable truth is that as people live longer and require more care for longer, the cost of this will continue to rise and will do much to wipe out any "savings" envisaged by Conservative thinkers.

Needless to say, as this is a Daily Mail piece, immigration will follow close behind. Now, the key facts about immigration are that the Conservatives were the leading advocates of enlargement of the EU (as a bulwark against Franco-German "federalism") and must have known that as Europe was a free and single market. Once countries like Poland, Hungary and others were allowed in, they would be as able to enjoy the benefits of free movement of capital and labour as anyone else (such as British people buying homes in France and Italy). There must also have been an awareness of the wage differential between Britain and Poland which would have made it so attractive for skilled Polish workers to come to Britain.

The other key point about immigration is that as the economy slows or contracts, the incentive for migrants to come to Britain will disappear. Perversely, by wrecking the economy, Labour will take the most effective action to reduce immigration. I suspect that within three or four years the whole immigration question will have slipped beloe the radar.

Together with immigration is the long-held Tory opposition to the Human Rights Act, reporting of which has been almost exclusively to persuade the public that it is a charter for criminals to abuse. Maybe but I'm only slightly less comfortable with giving Ministers powers on these matters. We need, as Liberals have long argued, a comprehensive Bill of Rights which establishes the responsibilities and obligations of individuals and Government.

I'm happy to accept Hastings' argument on education but he has no answer. Tories are happy to blame teachers but the real culprits are too often the parents who are trapped into a lifestyle which encourages material acquisition in front of proper parenting. The "answer" to antisocial behaviour isn't legislative but cultural and requires a complete re-evaluation of how families live their lives starting with the role of the media and advertising.

The REAL unknown for society is how we will cope with energy and raw material prices far higher than anything we have known recently. The problem with the price of oil recently (still over $130 a barrel as I write) has been the rate of increase (over 40% in a year) as well as the lack of market stability. IF the oil price stabilises at say $105 - $115 a barrel, it will help but the days of cheap fuel are over and inflation in raw materials is likely to continue.

I don't know to what extent George Osborne has factored in this new economic reality to his calculations for the fiscal period 2010 - 2014. MY guess is that he now knows that mirroring Labour's projected spending levels in health and education along with trying to find extra money for the armed forces, Police and prisons will be next to impossible without tax rises.

Reducing public spending as a share of GDP is fine if the economy is growing - indeed, spending can even rise in absolute terms if growth rates are strong enough - but if the economy is growing very slowly or even contracting at a time of increasing demands on public finances from increasing unemployment and falling tax revenues, the circle becomes impossible to square without either severe cuts or much higher taxes.

IF we are in for a prolonged period of much lower economic growth, then I don't see how Osborne can match Labour's spending commitments plus his Party's own without either large spending cuts (back to this chimera of Government "waste") or a raise in taxes which would be politically unacceptable.

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