There’s a well entrenched assumption in
British political culture that the Labour Party is spendthrift and the economy
is not "safe" in their hands, whereas the Tories are financially
prudent and can be relied upon to steer a steady economic course.
This idea is based on the easy presumption,
in which there is some truth, that the Labour Party places priority on decent
public services over low taxes whereas the Tories will give priority to keeping
taxation levels as low as possible and urge the public services to
"improve" themselves by being more efficient.
It is an easy
story to put across, Conservative politicians proclaim it solemnly and
their sycophantic press supports them with gusto.The economic history of the post war years tells
a different story.
After 1945 our governments tried to maintain the £ sterling
as a world reserve currency. This led to what were called "stop-go policies.”
When efforts were made to modernise and stimulate the economy by private and
public investment price levels would rise, imports would be sucked in and
exports become more difficult to sell. The balance of external payments would
go into deficit and the result would be pressure on the value of the £. The
government would then be forced to organise a "stop" to the renewal of the
economy by raising taxes and cutting expenditure, until "confidence"
in the £ was restored and the economy was allowed to "go" again.
This "stop-go" cycle followed a regular rhythm.
Happily, the possibility salvation came in
the 1970s with the discovery of oil in the North Sea. When this came
"on stream", rather than having to import oil (a major drain on the
balance of payment) we became a net exporter. Here at last was the necessary
breathing space and opportunity to build the modern economy and high grade civil
society which had so often been frustrated in the past.
Unfortunately, in the same period neo-liberal
economics became fashionable. Margaret Thatcher became prime minister in 1979 and the bonanza of North Sea oil was
squandered on financing a cruelly high level of unemployment rather than
building the Sovereign Wealth Fund that other beneficiaries created.
The Thatcher government and its Conservative
successors also introduced the policy of "privatisation": selling off
publicly-owned assets ranging from the public
utilities (electricity, gas and water supplies) to the railways in order to
"promote efficiency" and, incidentally, to finance tax cuts. Former
Conservative Prime Minister Harold Macmillan called it "selling off the
family silver."
Among the privatisations was the selling off
of public housing to tenants at discount prices while not permitting local councils
to retain the money and use it to build replacement houses. The aim was
to create a "property owning democracy," with the property owners more likely to vote Tory
than if they had remained tenants. That aspect of the policy has been a
failure, as almost half (40%) of the former council houses are now owned by
"buy to let" private landlords charging extortionate rents,
double what the councils were allowed to charge .
A knock-on effect of this policy is the huge
rise in private house prices. In my younger days the average mortgage needed
to buy a house was about twice the annual average wage. Now it is about
six times the average wage and beyond the reach of most young people without the
aid of the "bank of mum and dad."
An off-shoot of the policy of selling off
public housing has just come to light.
In 1996 present TV Star Michael Portillo, then Defence Secretary in John Major's
government, sold off 57 000 homes belong to the MoD but retained the responsibility
for their maintenance. The nett loss to the public purse on this bizarre
arrangement is estimated so far to be
between £2.2bn* and £4.2bn*
The financial deregulation (the Big Bang) introduced
in the Thatcher years led directly to recklessness in the banking and
money market sectors and the financial crash of 2008/9. Public funds were used to bail out the banks, and the
Tories, when they returned to power in 2010, used the resulting internal deficit
in the public accounts as an excuse to
run the period of public sector austerity. This has led to a much weakened public sector, most notably
in the running down of spare capacity in the NHS, which has made it incapable of
maintaining many of its normal functions while dealing with the pandemic.
The financial irresponsibility of the Johnson
Government in dealing with the pandemic has
been and continues to be scandalous. Highlights,
or rather lowlights, have been the £37billion* spent on the allegedly “World
Beating” test and trace system which failed miserably. Other contracts were given via a VIP lane,
exclusive to those with contacts to Tory MPs and Peers, for masks, PPE and other
equipment and services, to companies with no or little experience of the product and which often
failed to deliver.
The money spent on Chancellor Rishi Sunak’s “eat out to help out” scheme, which probably
helped to spread the virus, pales into insignificance compared with the irresponsibility
revealed by Lord Agnew’s resignation last
week, in which, among other things, “Business Bounce Back Loans” to help companies
remain solvent during lockdowns, were given out
without adequate checks. More
than 1000 which received one were not even trading when Covid struck. There were multiple applications from the
same addresses. One of the purposes of
the scheme was to maintain employment. 1 500 loans to firms were made. There are only 1 400 private sector firms in
the UK with employees. The total to be
written off in fraudulent claims is estimated at £4.3 billion*
In summary, the economic and financial errors
made by successive Conservative governments, particularly during and since the
Thatcher era are:
1. Squandering of
the income from North Sea Oil on financing a high level of unemployment rather
than building up a Sovereign Wealth Fund.
2. Privatisation of public assets, particularly public
housing at knock-down prices and without replacement, helping to lead to the present housing crisis
3. Financial deregulation leading to the 2008/9 financial
crash.
4. The post-2010 austerity regime which weakened the
public services, especially the NHS
5. Reckless financial irresponsibility, especially that
which favoured their supporters, in
dealing with the COVID pandemic
And I haven’t even mentioned Brexit.
* Just to put
these billions into perspective, the amount re-announced this weekend which is
going to transform 20 (sic) cities
and towns as part of the “levelling up” programme (presumably in order to
distract us from “Partygate) is a mere $1.5 billion
T
