Lord Young resigns after outcry at ill-judged 'never had it so good' claim

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David Cameron's enterprise adviser resigned yesterday after he undermined the Government's attempts to show a caring face by saying that most Britons had "never had it so good".

Lord Young of Graffham, a 78-year-old former Cabinet minister who served under Margaret Thatcher, bowed to Labour demands for him to quit for saying that many people had gained from low interest and mortgage rates in what he labelled a "so-called recession".

Mr Cameron was swift to condemn the remarks but did not sack his unpaid adviser, who was conducting a review of the red tape affecting small firms after completing an inquiry into Britain's "health and safety culture".

Lord Young apologised for what he admitted were "insensitive and inaccurate" comments, but initially looked set to hang on to his post. After judging that the storm had not died down, he offered his resignation and the Prime Minister accepted it. He told Mr Cameron in a letter: "I have considered my position overnight and in view of the reaction to the reporting of the interview I gave earlier this week feel that it would be right to resign forthwith from my position as your adviser."

Tory MPs hope Lord Young's departure will limit the damage from the affair, which threatened to undo painstaking efforts by Mr Cameron and the Chancellor, George Osborne, to soften the "uncaring" image associated with the Conservatives during the recessions of the 1980s and 1990s.

Lord Young inadvertently echoed Harold Macmillan, the Tory Prime Minister who said in 1957: "Most of our people have never had it so good." At the time, living standards were rising during the post-war boom, helping the Tories win a resounding victory at the 1959 general election.

Ed Miliband, the Labour leader, said families and small firms struggling to make ends meet who heard Lord Young's comments would ask: "What planet is this guy on?" He said: "He was right to go. I don't think his points were valid. I think they were, frankly, insulting. I am afraid it shows a Government that is out of touch."

Ironically, the veteran Tory's unexpected political comeback won him the accolade of "peer of the year" in The Spectator magazine's annual awards on Wednesday – the day before he told The Daily Telegraph that the Government's spending cuts, totalling more than £80bn over four years, would merely return state spending to where it was in 2007 – a time, he said, when people were "not short of money".

Although his remarks were condemned by Labour and the trade unions, some commentators argued that he had a point. Mark Littlewood, head of the Institute of Economic Affairs, said: "He is, in many respects, right... While we should be sensitive to the fact that 100,000 people a year are expected to lose their jobs in the public sector, we should remember they are a tiny minority [of the workforce]."

And Lord Jones of Birmingham, the former Labour trade minister and ex-head of the CBI, said anyone with a job and a tracker mortgage in late 2007 would have had "a good recession".

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