Media Recognition Of The Need for Change.
In a Daily Telegraph article of 26/11/20, entitled ‘Britain is facing ruin, but deluded Tories are still refusing to accept it’, and sub-titled ‘Rishi Sunak knows the dangers, but his party has embraced a destructive economic illiteracy’, Allister Heath claims that ‘Britain is permanently poorer and the British state weaker as a result of the Covid induced by collapse of GDP and the gargantuan debt binge that has kept us going’; that ‘our economy is more socialised than it has ever been outside of war’; that ‘we have resorted to the printing presses to finance spending in a shockingly unprecedented way, pushing the great fiat money experiment close to breaking point’; that ‘we will spend a lot more every year even after the virus is gone, which will necessitate tens of billions worth of tax hikes or spending cuts merely to stabilise the debt’; and that, this, in summary, is the economic devastation described or implied by the Office for Budget Responsibility (OBR) in what is easily the most terrifying official economic assessment from a developed nation that he has ever read’. He goes on to say that ‘there is no consolation in the fact that much of the spending was necessary and affordable (in the sense of being able to borrow more) while interest rates are dementedly low’; and that ‘growth will bounce back with the vaccine’; that ‘we remain in what the Chancellor correctly described yesterday (25/11/20) as an economic emergency, one which will scar our private sector and society, damage our long term economic performance, shift us towards a social democratic European economic model and leave us stuck with a debt level of over 100 percent of GDP.’
Indeed, he adds that ‘the scale of the catastrophe is even worse than the official forecasters admit’; that nobody knows what the impact of extreme quantitative easing (QE) will be on the structures of the financial system’; that ‘the cultural damage is unquantifiable with a return to welfarism, statism, an exodus of foreign workers, and a growing sense that money is free and government doesn’t really suffer from a budget restraint’; and that ‘the OBR is optimistic in other areas where it thinks the economy will only be 3 per cent smaller permanently than it would otherwise be which, as Pantheon Economics says, implies that “scarring” will be less than half the scale seen after the previous three recessions’; and that ‘incredibly, the total cost of servicing our debt will fall to a new historical low of 1.7 per cent of government revenues next year’; and that ‘we have been able to borrow longer term than other countries, locking in this cheaper financing – but what happens if and when interests rates go up’? At this point, he goes on to say that ‘we are, to paraphrase of Bill Cross, writing at the time of the last financial crisis, “lying on a bed of nitro-glycerine”; and that ‘in a crucial line, the OBR explains that the impact of each percentage point rise in short-term interest rates on the deficit has risen from £6 billion (0.2 per cent of GDP) to £12 billion (0.5 per cent of GDP)’. At this point Allister Heath states that ‘Rishi Sunat understands all this and can surely barely sleep as a result’; but that ‘what if a future banking, or trade, or military crisis sends interest rates up by 3 per cent, thus sending the deficit to £36 billion immediately and sending borrowing rates even higher’?
For comparison, he recalls that ‘every big economic crisis overshadows politics for at least a decade, such as that of the stagflation of the seventies’, in which includes ‘the recession of 1982, the boom, bust and ERM crisis, culminating in the nightmare of 1992, the financial crisis of 2008, and now the Great Pandemic’; and, set against this experience of past economic carnage, he expresses surprise that ‘our political landscape remains stuck in an absurd state of suspended animation’ with ‘our political classes continuing as if nothing had happened’; that ‘the Government clings to an obsolete manifesto predicated on the very opposite of a Covid shock’: on ‘an assumption of being richer than we were’; that ‘the supposedly austere 2010s were over ’; that ‘we could afford to live beyond our means’; that ‘incredibly the Government is sticking with its promise of years of French-style debt-fuelled public bingeing on grands projcts – some useless (H2S), others worthwhile (roads, hospitals, broadband) – and lots more cash on day to day spending, not least on the levelling-up fund despite the radically changed economic background’; that ‘the only cuts recommended at the Spending Review were symbolic: the welcome reduction in foreign aid from 0.7 per cent to 0.5 percent of GDP and a botched public sector pay freeze which will see most public sector wages rise at a time when the private sector is being furloughed or fired’; that ‘Sunat rightly didn’t extend the increase in universal credit, but that was always meant to be temporary’. He accepts that ‘the aid cut was red meat to the Right’, but asks why it didn’t go further, why their was no public sector recruitment freeze (excluding the NHS), and ‘why there was no build-back-better by using this crisis as an opportunity to reform the public sector fundamentally’? ‘Why no war on waste, no cuts to various departments, why no delays to spending promises, why is the living wage shooting up again guaranteeing more job losses in hospitality? Allister Heath ‘doesn’t blame Sunat.’ He recognised that Sunat’s speech ‘almost deliberately emphasised the extremity of its internal contradictions, its cognitive dissonance, the inconsistency between economic reality and the politics, and its identification of the economic emergency’, though he did recognise that Sunat ‘did little to tackle it’.
In conclusion, Allister Heath speculates that ‘the Chancellor, a free marketeer and fiscal conservative, perhaps couldn’t convince Boris Johnson that now was the time to tackle the public sector’; that ‘instead he set the scene for a future ideological reckoning in the Tory party, one which will determine whether we become more like Italy or more like Singapore’; that ‘Sunat knows full well, the challenge isn’t just about the deficit: it’s also about growth and competitiveness’; that ‘Brexit needs to be accompanied by radical cuts and changes to tax and regulation, as well as longer-term reforms to training and education, to succeed’; that ‘massively increased taxation would kill that dream and Johnson’s legacy stone dead’; that ‘this Spending review didn’t tell what Rishi-economics looks like; that the Chancellor will soon have to put his cards on the table and stake his career on his vision’; that meanwhile he must explain to his increasingly economically illiterate party that it cannot continue its debilitating descent into proto-socialist stupidity’; and that the Tories must get real, or else they will never be forgiven for ruining the economy.
Having written to my previous MP, following the referendum concerning my perceived need and opportunity to replace belief with knowledge in post-Brexit policy-making, to which his only reply was to state that leaving the EU would be a dawdle. He ignored my definitive knowledge/belief differentiation in his reply. However, Allister Heath’s article encourages me to hope that my campaign for knowledge to replace belief at least in Tory party circles may yet be seen to fill the hole so ably identified by the article referenced above, in respect of its speculation vis a vis the attitudes of Rishi Sunat and Boris Johnson.