How can we trust the Tories with the economy?

I bet you saw what I did there. It wasn’t very subtle, was it? But I have rarely encountered mainstream media commentators subvert this attack line, one of the anchors of the conventional wisdom that has infected British politics for decades. Labour governments always end up running out of money, and Tory governments are required to step in and clean up their mess. The only argument for Labour to occasionally get in is to make investments in public services after the Conservatives have bequeathed them sound public finances. Tory competence contrasted with Labour chaos has become one of those things that people reflexively say, without any need for recourse to examination of the historical record. Extraneous as it might seem, however, it is a very worthwhile exercise to perform.

Looking over roughly the past half century, average output per head (GDP per capita) grew at a fairly consistent rate from the early 1970s until the global financial crisis in 2007-2008, whether Conservative or Labour governments were in power. Some of the bigger shocks of that period, in the 1970s and early 1980s, can be attributed to sharply rising oil prices, a global problem that would have been challenging for whoever was governing. Even the supposedly wretched years of Labour rule before Margaret Thatcher came to power in 1979 stayed on trend. Admittedly this is but one measure of economic performance, but it is a significant one. And from this evidence you’d say it has hardly mattered who was in government then, no? Perhaps, but governments aren’t passive actors in the running of the economy. And closer examination of the past fifty years reveals that the worst economic calamities have largely either been presided over, or are largely attributable to policy shifts instigated by Conservative governments.

To take the most serious downturn prior to the Great Recession in the early 1990s, that was unequivocally a Tory failure. Black Wednesday, the day in September 1992 that marked Britain’s exit from the European Exchange Rate Mechanism (ERM), was the result of botched economic policy and an ill-advised attempt to peg sterling to the Deutschmark at an unfavourable exchange rate. The trauma of that day was such that the Conservative Party’s reputation for competence was shredded, and confirmed the outcome of the next general election, even though it was still over four and a half years away.

The Great Recession itself is more vigorously contested, which is revealing more of the media’s reporting of the crisis than the actual difficulty of divining its origins. That it was a financial crisis is undeniable, and that it can be traced to shifts in policy direction on both sides of the Atlantic dating back to the early 1980s is not particularly controversial. That is not to gloss over New Labour culpability, and the ‘light touch’ regulation of the City championed by Gordon Brown. Insofar as this concerns Britain, the Great Recession is a bipartisan achievement. The economic stewardship of one particular tribe isn’t singularly at fault here, though enabling the financial sector to run amok is hardly a left wing policy.

As for Labour ‘overspending’ in the run up to the Great Recession, it merits pointing out (for the umpteenth time) that the Conservative party never opposed Labour spending plans at the time, certainly no great vigour. It is perhaps fair to quibble that they should not have been running deficits in the years prior to the crash, and it is certainly fair to allege that a lot of money was spent unwisely – ill-thought through IT projects alone account for a lot of squandered cash. On the other hand, show me a democratic government that doesn’t commit blunders aplenty. People can look at it from all sorts of exotic viewpoints, and many people hostile to the Brown government do try, but the fact remains that the UK’s fiscal position was not especially perilous or unmanageable on the eve of the global financial meltdown.

The overall economic record therefore is not especially conclusive, and if anything is less flattering to the Conservatives. How have they fared in government since 2010? They have certainly played the politics impeccably, their party spokespeople from Prime Minister David Cameron on downwards remaining relentlessly on message as they framed the economy around Labour’s record. The Big Lie of contemporary British politics still has plenty legs, abetted both by a largely foreign and non-dom owned print media that takes a nakedly partisan interest in UK politics, and also by the standard media practice in other outlets of giving equal weight (and credence) to both parties to an argument and calling that balance. The supine performance of the Labour party in this respect, particularly during that crucial summer of 2010, merits passing mention here, but one is limited by time to truly examine their wretched attempts at communication over the past half decade.

George Osborne’s actual record as Chancellor of the Exchequer is a curious one, and unsurprisingly at odds with his own rhetoric. The primary objective of his time in office has been ostensibly to tackle the deficit, the issue that has been elevated to pre-eminent importance in the media, and used to justify every harsh policy the Conservatives have introduced. I’m usually happy just to leave it to others more qualified than I to criticise his fiscal policy gimmicks, which are evidently devoid of any actual basis in economics. However, I will note (as many others have) that the deficit hasn’t been reduced as forecast when he came into office, so his signature policy of austerity has plainly failed on its own terms.

Or should I more correctly say, its oft stated terms. For it is widely believed that the spending cuts serve a different purpose for the Conservative party. That is, they wish to permanently shrink the state, but would rather achieve that outcome by stealth as a by-product of spending cuts that are presented as a necessity rather than a preference. And this belief in a Tory smokescreen is not restricted to Osborne’s political opponents or ideological enemies in the economics profession and the commentariat. It also includes those who sincerely believed in the need for tightening in the immediate aftermath of the financial crisis, yet who do not believe that government debt, mostly owned by UK citizens thereby making it an asset, is impoverishing the citizenry.

But Osborne isn’t quite the out and out austerity headbanger. It’s more accurate to say he is selectively austere. He finds plenty of money for megaprojects, after all. Indeed, it is arguable that, following the omnishambles budget of 2012, it was an injection of sneaky Keynesianism that brought about a reversal in his party’s fortunes. Not that Osborne would likely admit to that. In the way that the papacy has traditionally felt compelled to present a narrative of consistency going all the way back to St Peter himself, however absurd and patently ridiculous that might appear, so the Chancellor talks of staying the course according to his “long-term economic plan” in almost every interview.

How does all this square with the man who bestrides the conference hall as master of his domain, with the premiership his for the taking when David Cameron steps aside? Perhaps we should applaud his political nous, his ability to both create his own reality and repeatedly sow discord within the Labour Party. He thrives when he should be flailing. And it is not just the Chancellor. The entire government, including the vast network of Osborne acolytes distributed across its various departments, have displayed admirable message discipline over the last five and a half years. With the new Leader of the Opposition supposedly being a no-hoper, some of more bullish Tories feel there is an historic opportunity for long term Conservative rule to be locked in, and with it the diminution of the final vestiges of the post war social democracy created by the Labour government of Clement Attlee. It could ultimately represent a completion of the project started by Margaret Thatcher in 1979.

There are dangers lying in the way of achieving this new national consensus, however. What they want to implement next won’t be easy, and is already encountering resistance. It is beginning to sink in that cuts to tax credits will hurt many of their voters who believed austerity would most affect others, the shirkers of media and Tory lore. The cuts that are intended to be frontloaded in this parliament could become toxic for the Conservatives before too long. And to what benefit? For the foundations of this Tory supremacy are less than secure. The recovery, geographically uneven as it is, has been one of the slowest on record and remains fragile, and there are other lingering weaknesses in the economy. Productivity remains stubbornly low, and the precariat represents a new and growing social class. Under the Conservatives and this “Chancer” of the Exchequer, the UK is not terribly well equipped to deal with the next economic shock.

The question, then, is what would it take for people to make the connection that the Tories are not such a safe pair of hands? Will there be a growing perception that stagnating living standards weren’t a necessary sacrifice, or will it require a shock, one that also provides an iconic image to irrevocably lodge in the public consciousness. David Cameron was a special adviser to Chancellor Norman Lamont in 1992 on the occasion of Black Wednesday, and can be seen in the background during a number of that day’s events, though his presence is mostly known only to political anoraks. Does a similar day lie ahead for this government, this time with Cameron front and centre along with his Chancellor, trying to put a brave face on it, protesting that events have conspired against them?


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