Adrian Hamilton: The bitter politics of debt reduction

In hard times there is virtue in the politician who proposes harsh measures
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The Independent Online

Pre-election fever certainly sharpens the political debate. The prospect of power and the hope of a change in it does wonders for the appetite for debate. It also, more regrettably, narrows the terms of argument, nowhere more so than in the area that matters most - the recession and what do about it. Just as the Afghan question has been reduced to an argy-bargy over helicopters and who's to blame for the lack of them, so the economic debate has been reduced to a slanging match over how much needs to be cut from public expenditure and who is being more honest in saying so.

Gordon Brown has only himself to blame for this. Having started by defining the issue – rightly so – as one of who had the most effective plans to deal with the gathering downturn, Labour has almost willingly allowed itself to be forced onto the question of public spending cuts.

Admittedly Cameron's tactics have been clever. Against Brown's taunts that he had no plan of his own to cope with the recesion, he was able to hit the ball back into Brown's court by accusing him of reckless spending and of attempting to deal with excessive debt by putting the country into even deeper debt. That in turn induced Brown and his advisers to try and turn the tables on the Tories by demanding that Cameron own up to just how much he was planning to cut public expenditure, in the hope that by doing so he would lose the votes of all those whose jobs would be imperiled as a result.

"Mrs Thatcher, milk snatcher" was the Labour cry that went up when Maggie Thatcher was education minister and withdrew free milk from schools. Only she returned as a Conservative leader who won a decisive victory on a policy of pain and parsimony in 1979.

Which is where, if the polls are to be believed, the Tories stand today, not unpopular for their call for spending cuts but positively welcomed for it. In hard times there is virtue in the politician who proposes harsh measures, particularly if it is accompanied by the plea that we shouldn't make future generations pay for the profligacy of today's.

And on that score, it has to be said, the Conservatives appear to be winning the argument. Poll after poll has shown that, while support for Cameron and the Tories remains basically rather soft , they are perceived as sounder and more honest than Brown on the all important issue of economic competence, for all Brown's clear credentials in the field.

You can understand his frustration – on show again at his monthly press conference yesterday. Here he is, the man who instituted bold moves to save the banking sector and revive demand, a figure respected for his leadership around the world, only to be judged at home as a politician who is trusted less with the economy than his juvenile opponents.

I have a lot of sympathy for him. Putting aside the question of his overall fitness as Prime Minister – the evasions, the shallowness and the sheer pettiness of his party political tactics – Brown does deserve credit for what the UK Government has done to combat this recession. Not all the measures have been effective. The VAT tax reduction, the complexity of many of the individual support schemes and some of the individual bank bailouts look pretty ill-judged in retrospect, as they appeared at the time.

But the overall strategy of pouring money into the financial system, reducing interest rates and reflating demand was not only right but has worked. If there are signs of a bottoming out of the recession – which there certainly are – then Brown has a right to some of the plaudits.

And yet he is caught in a political dilemma. On the one hand, he needs an early economic upturn to accompany him to the election. On the other hand he needs things to continue to be bad if he is to justify his persistent demands for more reflationary measures. If things are improving, then the focus must inevitably turn towards reducing the debt that is being rapidly built up. If things are not going as well as ministers are hoping, then the focus has to be back on the reflationary measures that may be needed to prevent the country sliding into a deflationary spiral.

In other words, the more successful he is, the more the opposition can claim he needs to haul back on public expenditure. The less successful he is, the more the opposition can claim that he has failed in his measures and proved over-optimistic in his forecasts.

The trouble is that no one does know what precisely is happening with the economy. There are indications that the financial rescue package is working, that the banks are in better shape, that lower interest rates are helping the housing market and that depreciated sterling is aiding foreign sales.

But then unemployment is moving remorselessly upwards, and is likely to go on rising until well into next year; retail sales are still poor; the markets are way below their levels of two years ago and through great swathes of industries such as car manufacturing a fundamental restructuring is still only just beginning.

From a political point of view, the economy has to be seen in terms of rising or failing. In the eyes of most people, it isn't a matter of what's up and what's down, it's a bleak question of struggling on until the ground seems finally firmer under their feet. They know, as politicians don't seem to, that this recession is different from its predecessors, that it marks the end of an era when growth could be taken for granted, consumption was a matter of habit, borrowing a matter of course and jobs an issue of choice. What they don't feel for the moment is what will replace it.

If only Gordon Brown could have the courage just to say to the public: "Look, I don't really know what is going to happen with the economy. Things might get better over the coming months. But then again they get worse. We're just going to have to remain balanced, erring on the side of more spending if they get worse or less if they get better."

But then, in an election period, no politician admits to ignorance and no political leader is going to discuss options. Everything is turned on scoring points from your opponents – which is where we'll be the next ten months, until whichever party wins comes in, takes a look at the books, says that they are far worse than they thought and action must be taken.