If the Tories play their cards wisely, next Wednesday could act as a launch pad for a breakthrough in the opinion polls, leading to an outright victory in the general election. But if David Cameron and George Osborne misjudge the mood of the nation, they could scupper their hopes in the same way that John Smith ruined Labour’s prospects with his misconceived response to the Tory pre-election Budget of 1992.
The similarities between the 1992 and 2010 elections are quite striking. In both cases the Opposition seemed to be playing into an open goal — an unpopular and uncharismatic Prime Minister, foisted on the nation without the benefit of an electoral mandate; a governing party that appeared exhausted and bereft of ideas; a severe recession that inflicted damage on middle-class voters. Then as now, the task of defending the Government’s dismal record seemed hopeless. Yet against all these odds, John Major won in 1992. Could the same thing happen for Gordon Brown?
It may be impossible to imagine Mr Brown winning, but if we look back at what happened in 1992, we find that John Major did not win the election that year. It was Neil Kinnock and John Smith who lost it. The standard line is that “oppositions don’t win elections; governments lose them”. But the 1992 election shows that this adage is sometimes wrong — and the Tory response to next week’s Budget will tell us whether this year could be another case in point.
While the Budget won’t change voters’ perceptions about Labour, it will give the Tories a final opportunity to clarify their economic policies and show where the differences between the two main parties really lie. The Tories seem to hope that denouncing Labour’s fiscal plans and warning of national bankruptcy will be sufficient, but this strategy will not work.
The Tories made three closely related mistakes in devising their economic and electoral strategy at the nadir of the financial crisis in the winter of 2008-09.
First they assumed that the economy would continue to deteriorate despite the enormous stimulus administered by the Government. Then they therefore reasoned that Labour’s Keynesian policies of expanding public borrowing would be perceived as a dismal failure by the time of the election. And that in turn convinced the Tories that fomenting public panic about a government debt crisis would be sufficient to win the economic debate.
All three of these assumptions have gone wrong. The public mood is surprisingly upbeat because although economic conditions have remained fairly weak they are much better than expected at the depth of the crisis. This rebound has vindicated the policies of fiscal stimulus in the post-Lehman mini-Budget, including the temporary VAT cut the Tories vehemently opposed. And while all this extra borrowing has produced huge government deficits, dire prophecies of rising interest rates and credit downgrades have proved wrong.
It is possible, of course, that the “day of reckoning” so eagerly anticipated in Tory pronouncements has merely been postponed and that conditions will drastically deteriorate after the election. But predicting national bankruptcy does not make an attractive manifesto. And from a strictly economic standpoint, Tory attacks on Labour Budget numbers make even less sense.
In the “battle of economists”, the 20 economics professors and EU officials who seem to back the Tory demands for faster deficit reductions have been trumped by 60 other professors, plus the OECD and IMF, who have endorsed the Labour and Liberal Democrat positions that further deficit consolidation should wait until growth gains strength in 2011 and beyond. In any case, the Tory promises to announce a few billion pounds’ worth of extra spending cuts immediately after the election are arithmetically trivial in comparison with the £90 billion long-term deficit reduction that Labour has already announced.
Assuming that the new Budget confirms these Labour plans for long-term fiscal consolidation, how should the Tories react? The answer is simple. Instead of quibbling about Alistair Darling’s figures and forecasts, the Tories should endorse his budgetary numbers and promise to carry out essentially the same macroeconomic programme.
They could then point out the real objection to the Government’s fiscal plans: while the deficit reduction targets announced in Mr Darling’s successive Budget statements would, in theory, be quite sufficient to stabilise Britain’s public finances, Labour has refused to explain how these targets would be achieved.
This lack of information on public spending will be the true “black hole” in the Budget. It is the Government’s refusal to discuss specific cuts in public spending that the Tories should be attacking, instead of challenging Mr Darling on abstract macroeconomic assumptions or fiscal forecasts that mean nothing to the public and are not worth the paper they are written on.
The Tories should also be presenting the electorate with their own agenda for cutting the cost of the public sector and setting proper priorities for public spending — health or education, nursery schools or universities, pensions or policing and so on. The Tories should also be identifying specific cuts in wasteful public spending, ranging from fraudulent or overly generous benefit payments to unnecessary weapons programmes. And they should be spelling out their plans to improve the productivity of the public sector by changing working practices, cutting pay and pensions, privatising social services and so on.
The loss of control over public spending is the issue on which the Tories should be fighting the general election, but to do this they would have to identify specific Labour policies that they would reverse. The Tory high command believes that such specificity would frighten the voters, Their hope is simply to stand back and watch Labour lose the election, goaded on by bogus hysteria about bankruptcy and personal attacks on Gordon Brown. We, therefore, face an election in which the Opposition will try to distract attention from the very issues on which the Government is most vulnerable. How lucky for Labour — and how unfortunate for Britain.
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