29 November 1995
We’ve seen it all now. There are the Tories, wallowing desperately behind in the polls, the party steeped in misery, a general election heaving into sight. Just the moment for a cynical electioneering budget. And what does Kenneth Clarke do? He acts responsibly. He gives us the Budget we’d have expected had there been no political pressures. He looks to the long term. What the devil is he up to?
As Conservative MPs tried to come to terms with their shock, most seemed to assume it was the markets that were to blame. Had Clarke behaved instinctively and gone for a big headline tax cut, interest rates would have been rising within weeks. Instead, fingers crossed, they will fall.
That was a factor, no doubt. But the more one pores over the detail, the more one is driven to the conclusion that the Chancellor may really mean what he says about sound public finance. I know this is a extraordinary thought. My hack’s mind scrabbles for a more familiar explanation. But there it is. Perhaps Clarke has been corrupted by high-minded persons in the Treasury.
Perhaps there has been a thin man struggling to get out of his substantial frame all along. If not Cripps, then at least middle-period Roy Jenkins. He may have decided that if the party is going to go down, it might as well go down having done the right things, rather than the wrong ones. There is still another budget to go, another chance to be cynical; but it will come so close to the next election that it may be too late even for cynicism.
What is clear is that Clarke still sees himself as a standard-bearer for One Nation Toryism and a future Conservative leader. By putting the old public spending Autumn Statement and the Budget together, the Chancellor’s speech is turning into a Prime Ministerly tour of domestic policy, rather than a narrowly economic report.
Yesterday, Clarke was able to discuss education, the NHS, social security policy and housing, alongside the dry familiars of Budget-day oratory. He made his social priorities clear and, picking up a recent phrase of Chris Patten’s, absolved himself and his Chief Secretary, William Waldegrave, of being “slash and burn” artists when it came to social spending.
Yet if, on the tax side, this was a fairly prudent and scattered package, aimed at lower-income workers and savers in particular, there is cause for some worry about spending. The traditional thing is for Tory administrations to cut taxes too far before an election. This time, perhaps, they are going to cut spending too far.
Politically, no targets are softer than “bureaucracy” and young layabouts, students and other riff-raff. Who’s going to speak up for those targets of Treasury rigour? But the savage ”efficiency savings” may well be storing up serious pay and manpower problems in the Civil Service after the election. And the restrictions on housing benefit for under-25s, plus the privatisation of the student loans scheme and the higher duty on high-octane cider won’t do much for the Tory yob vote.
In fact, taking everything into account, this Budget won’t do much for the Tory anything vote. To that extent, it takes its place with all the post-1992 Budgets. There has been low-inflationary growth, yes – up to 4 per cent last year. There have been green shoots by the acre. All the time, Britain has been “turning the corner”.
But the high streets have still been disfigured by boarded, poster-covered shop fronts; house-prices have not risen; consumer spending has not leapt ahead. Jobs have become less secure, contracts thinner. For the average punter, it has been a damned long corner we have been turning.
The gap between Budget-day rhetoric and daily life has been punishing. Yesterday, as on many days before, John Major hailed “the best economic outlook for a generation”. The key word is outlook; it has been as though a strong economy is something only to be glimpsed in the distance, never somewhere we actually live.
Tax cuts and higher allowances help. They, at least, are jam, not the promise of jam. But there is a deep crust of scepticism to be pierced before voters will believe that the economy is really coming good.
Some of the fault for that scepticism lies with us, the voters, and not merely the politicians. We have this terrible capacity to look back and turn brief glittering moments into golden ages. This time, we have retrospectively turned the unstable boom years of the latter Eighties into normal life. Unconsciously or otherwise, we judge today’s Budgets and promises by the unsustainable 6 per cent consumer growth spending of the Lawson years and the leaping house price boom of 1985-89. We have remembered the up- side of the wild years and decided we have a right to that kind of growth every year.
This is the economic delusion that is equivalent to the moral delusion of judging today’s street violence and family breakdown against the unusually conformist, disciplined and crime-free world of the post-war, frugal Fifties.
Politicians deserve blame too, however, for selling false prospectuses. It was Lord Lawson himself, now a thinner, wiser man, who celebrated his golden, virtuous circle and spoke in June 1987 of high growth being “much more than a recovery from recession, or than the operation of the normal cyclical pattern ... Instead of wondering whether the recovery will last, people are asking what has caused this transformation.”
Now they know. Egged on by a triumphalist press, swaggering Conservatives fuelled a borrowing and spending splurge for which they and the country are still paying, and will continue to pay for some years.
Although subsequent Chancellors, and John Major as Prime Minister, tried their best to develop a populist Churchillian rhetoric of austerity and grit – “if it isn’t hurting, it isn’t working” – “a price worth paying” – they never questioned the underlying popular assumption that the Eighties were normal. Hang on, they implied, stay with us, and ordinary service will be resumed.
But it won’t be. In our lifetimes there will never again be years of massive privatisation and financial deregulation. We won’t see millions of people make a paper fortune on their family homes. We are still over-borrowed and under-invested from the last time round. Job insecurity, in the white-collar professions as well as manufacturing, is probably here to stay, one penalty of the globalised economy. False booms will be punished more swiftly.
For many years ahead, economic life in Britain is likely to feel much more like this chilly, disturbing “recovery” of 1994-95 than like the roaring Eighties. Until politicians are able to confront voters with these truths, Budgets are bound to be disappointing. Or, if not, irresponsible.
Perhaps, after the ERM debacle of 1992 and the broken tax pledges, the country is finally fed up with the hype. That seems to be what Clarke thinks: by the debased standards of these occasions, this was an honest Budget and an honest, unswaggering speech. Honesty? Is that the secret plan? It’s one heck of gamble.
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