The politics of sluggish growth: good for the Tories, bad for Labour, and as for the Lib Dems we’ll see
by Stephen Tall on October 9, 2012
Today saw the publication by the IMF of its latest growth forecasts. UK growth prospects are downgraded once again. Growth in 2012 is now forecast to be -0.4% (the most recent quarter’s strong showing is anomalous) and an anaemic 1.1% in 2013. As The Spectator’s Jonathan Jones observes, the only thing new here is that the IMF is falling ‘into line with the consensus’.
On the face of it this is bad news for the Coalition, further evidence that the economic strategy of deficit reduction driven forward by David Cameron and George Osborne, and endorsed by Nick Clegg and Vince Cable, was foolhardy. For the record, I largely accept the argument put forward by Samuel Brittan and Jonathan Portes among others that the slashing in 2010 of capital expenditure (as distinct from current revenue spending, which has risen) was a real error, one which at the very least contributed to the UK’s return to recession. Though it is important to note that the Coalition’s plans with regard to capital spending echoed Labour’s plans under Alistair Darling.
Quite simply, investment is the easiest tap to turn off if you’re a politician looking to reduce the flow of spending in a hurry. All parties looked too eagerly for a quick fix to the deficit believing the economy was on the mend anyway. Moreover, both Tories and the Lib Dems in particular took the view — not unreasonably in some cases, including the flawed Building Schools for the Future programme — that too much was being spent on prestige capital projects for too little gain. So capital expenditure was cut and our weak economy, buffeted by global uncertainty, was plunged back into a double-dip.
A gift for Labour to exploit, yes? Well, maybe. But the fundamentals of the election pitch the Coalition parties will make in 2015 are largely unaffected: Labour landed the UK in an economic mess; we’ve begun clearing it up; we deserve some more time to make it come good.
I’m wary of historical analogies, but the next election could easily become another 1992, when mega mid-Parliament Labour poll leads melted away as the economy crawled out of recession and the prospect of a Neil Kinnock-led Labour party winning drove voters back into the arms of the Tories. ‘Hold onto nurse for fear of something worse’ became the unofficial slogan of that Tory campaign, and could easily become so again. It’s safe to vote Labour when the economy’s doing okay (as it was by 1997, and again in 2001 and 2005) but not when it’s teetering (1992, 2010). I’m caricaturing for effect, but I’m sure Labour strategists are aware of the risks that sluggish growth could inflict on their chances in two-and-a-bit years’ time.
Could the Lib Dems also benefit from such a pitch? Perhaps. It’s certainly what the party leadership are counting on, out of necessity apart from anything else. Historically, economic trust has been one of the party’s weakest suits — unsurprisingly since we’ve not been in charge of the economy for a century — with Brand Vince not always rubbing off on Brand Lib Dem.
But the next election does offer the party an alternative narrative to the Tories. Assuming the economy has returned to growth, albeit weakly, by 2015 the Lib Dems may well receive some dividend from the electorate for our part in offering stable (albeit misguided) government at a time of crisis. As importantly, the party will be able to point to our economic priorities during that time: helping tens of millions of the lowest-paid by raising the income tax threshold while the Tories focused on tax-cuts for the highest-paid.
That narrative in two words: fairness and responsibility. And that narrative in a sentence: fairer than the Tories, more responsible than Labour.