Douglas Carswell, MP for Harwich and Clacton: So much for the idea that Britain’s “special relationship” with America is dead. The United States Congress will now follow Parliament in having a decisive say over military strikes in Syria.
As for the notion that the House of Commons decision to veto military strikes has weakened the United Kingdom, when was the last time a decision made in Westminster recalibrated policy not just in Whitehall, but in Washington and the wider West?
David Cameron should take this as an opportunity to try to reshape the Western policy towards the Middle East.
Ten years ago, Western powers invaded Iraq in order – so the liberal interventionists told us – to bring democracy. Those who confidently predicted the spread of democracy across the Arab world turned out to be disastrously wrong. Or did they? Perhaps they had a point?
In 2011, people in Tunisia, Egypt, Libya and elsewhere rose up against tyranny, demanding the kind of economic and political freedoms that much of the rest of the world takes for granted. The desire for democracy turns out to be universal after all.Yet still we in the West buddy up to the regions autocrats and tyrants. This – not the failure to bomb Damascus – has been the biggest flaw in Western policy in the Middle East.
Democracy, it turns out, comes to the Arab world not through Western force of arms, but because Arab people demand it. If we want to see the spread of democracy in the Middle East, we should think less in terms of military action and more about how we might lend legitimacy and moral support to those Arab leaders who insist that authority comes from the ballot box.
We cannot act in defence of democratic values in Syria two months after we failed to speak out in defence of the democratically elected Government in Egypt. We cannot act when hundreds of civilians are murdered in Damascus, but continue to arm the Egyptian junta that slaughtered a thousand in Cairo. We cannot champion the right of self-determination in one part of the Arab world, yet ignore those who seek basic human rights in another.
The West needs a coherent, consistent strategy to promote democracy in the Middle East. Now is the chance for Britain to help make it happen.
Max Wind-Cowie, Head of the Progressive Conservatism Project at Demos: Last week's result was an affront to David Cameron's personal authority, the authority of the office of Prime Minister and Britain's standing as a world player. We were in Suez territory.
Having said that, the Prime Minister was wrong to say that 'Parliament has spoken' and wrong to effectively rule out action altogether.
This result was not born of principle. It sprang from poor party management and senseless opposition opportunism.
No. 10 is guilty of letting PR crowd out the basics of political tactics, let alone strategy. They mistakenly assumed that the argument was won long before it had really been had. This error hurt the PM on Syria as it has hurt his Leadership before. Mixed with unforgivably low politicking on the part of Ed Miliband, it helped produce an almost accident defeat for Cameron, for British strategic interests and - most importantly - for Syrian civilians.
But just as that result stems from longstanding weaknesses, so what comes next must be framed by longstanding strengths. David Cameron is a popular man. He is seen as a leader and a decision maker. Folk think he's tough but also that he listens. Use all of that to regain some authority, Prime Minister.
Cameron should use the breathing space creates by US and French debates to start again. A specific plan for limited action - with clear stated objectives and metrics for success - must be put together. Combined with the evidence laid out by Senator Kerry & the UN, a powerful case for intervention can still be made. As Fiona Melville has already suggested, Cameron should then take his case to the public directly. Using a TV address, the PM should go over the heads of MPs and demand the public's support in this terrible but vital question. I suspect that, as we usually do when asked, the British people would rise to the challenge. And then, finally, Cameron should call another vote - on a specific and clear strategy for intervention this time - calling Miliband's bluff.
If he doesn't, if matters rest here, then not only will we be abandoning our responsibilities as a nation but David Cameron's personal authority will struggle to recover.
Alistair Thompson, Managing Director, Media Intelligence Partners: It would be simple, but wrong to bring forward the plans for the expected reshuffle in a misguided belief that some mid-level ministerial musical chairs is all that is needed.
Moving a few people around will not address the real problem, which is Mr Cameron’s relationship with his own Party. He is still viewed by many of his own backbenchers as aloof, someone who wants to reign not rule.
The PM knows he has a problem, hence why he is focussing on the economy and has started to ditch controversial legislation although he continues with HS2. He will be helped by bringing in Lynton Crosby.
But the gulf between his inner circle and the rest of the party must be closed. The summer charm offensive had started to bear fruit. He should replace the Chief Whip with a senior backbencher like Liam Fox, or Andrew Mitchell and unite the leadership of CCHQ under one chairman, either fully or partially elected by the Party’s members, with aim of reversing the dreadful decline in membership. Finally he must bring in talent to No 10 from the right of the Party and most definitely from outside his immediate group of friends
Dr Alan Mendoza, Executive Director of the Henry Jackson Society: Just about the worst thing that David Cameron could do now is to pander to his backbench rebels. Their actions have weakened Britain’s credibility with our allies and undermined our ability to influence global affairs.
Some rebels of a more isolationist tinge may of course be satisfied with that outcome. A British Prime Minister – knowing that in the globalised world of 2013 there are no faraway countries of which we know little without the power to affect us – cannot be.
So instead, he needs to show resilience in another area of international policy to demonstrate that our national resolve to determine our own destiny and to advance the interests of the free and civilised world is undimmed.
Iran would be the obvious option – the Iranian nuclear programme is UN-condemned after all, and the strategic implications of a nuclear Iran would directly harm British national interests.
And he must not be timid.
Over Syria, Mr Cameron led from the front, but allowed a great moral and strategic issue of our time to be reduced to a question of chemical weapons use. He then bartered over linguistics, rather than engaging in a sustained effort to tackle the myriad myths about intervention and to educate political and public opinion on the real issues at stake. When it comes to the next challenge, boldness and clarity will reap better rewards.
Christina Dykes, adviser in political leadership: Assad has no friends in the Commons. MPs competed to roundly condemn him. The split was on whether Britain resort to military action now, rather than at all.
After the Iraqi debacle MPs' caution should have been anticipated but the Prime Minister failed to read the mood. His plans were too vague; too imprecise and too hopeful.
So if Cameron believes in his cause, which he undoubtedly does, he needs to show that military action is the last resort not the first. So collect the evidence from the UN inspectors; make sure that Ban Ki-Moon understands the UN has to deliver or be shamed into obscurity; and look at other ways of punishing Assad (can his overseas assets be seized for example?).
Above all Cameron has to learn that impetuous and good political management are seldom bed fellows.
Christopher Howarth, Senior Analyst at Open Europe: David Cameron’s Syrian fiasco will reverberate through many aspects of politics. But how will it affect the UK’s international standing?
The US may now look at the UK in a different light but, ironically, within the EU the UK’s reputation may improve. Europe tends to dislike what it perceives as rushed and unilateral military action (a UK/US-led operation is seen as unilateral). Parliamentary opposition to military action is something most EU states can easily understand and the UK’s break with the US may seem refreshing.
However, there is an important exception - the French Government. France and the UK are the only two EU states with the capability and (until now) the will to act. Recognising this, the FCO have been at pains to improve Anglo-French defence and foreign relations - UK help for France in Mali being a recent example. The FCO realise that if France and the UK cooperate they can be a powerful force within the EU and indeed the world. The most serious ramification of Syria is that these plans for Anglo-French defence cooperation may have taken a knock.
We have been here before. The last time UK foreign policy went spectacularly awry was in Suez. Then as now the UK bailed on France. We remember Suez as a lesson in the need to work with the US, for the French it was a lesson in the folly of trusting Anglo-Saxons. Things are nowhere near as bad this time but the relationship needs to be repaired.
Of course Syria is not Suez and the lessons will be different. Eden was tripped up by opposition from the US and Tory liberal internationalists, appalled by the naked pursuit of British interests. Cameron’s Tory opposition came from the descendants of the traditional wing who backed Eden, but who fail this time to see a British interest. After Suez, liberal policy makers agreed that the UK’s role in the world had shrunk and that it was a mistake to act without the US.
This time it is important to ensure that we do not accept any further shrinkage and that future US action is not spurned by the UK and an already sceptical EU. Like Anthony Eden, David Cameron has come unstuck on an area of policy that seemed to be his primary interest. Unlike Eden, Cameron has the opportunity to move on and repair the damage.
Chancellor George Osborne in Downing Street on his way to delivering the Budget in the House of Commons, © i-Images
David Green: The Budget failed to end Coalition policies that obstruct economic growth. In particular, ‘green’ policies are forcing up the cost of electricity and endangering major industries including steel, ceramics and chemicals. Economic self-harm will not make any difference to global warming. UK emissions are less than 2% of the world total. Whether carbon emissions are a serious problem or the result of a global-warming scare story, closing down our two main aluminium smelters (in Anglesey and Lynemouth) has not reduced global emissions. Thousands of jobs have gone and aluminium is simply being made in other countries.
The Budget should have cut taxes on ‘the rich’. It is accepted by all the main political parties that the energy and initiative of our small and medium enterprises is vital to economic recovery, and they got some encouragement today. However, over 80% of business start-ups are funded by personal savings. Only a little over 10% comes from banks. If we want to reinvigorate entrepreneurship, we need to allow individuals to become wealthy. Heavy taxation has squeezed out middle-class wealth. There are not enough people with the spare cash to back businesses. When we have flourished in the past we have had a large economically independent middle class. Raising the tax threshold to £10,000 is useful, but the Government should have cut the higher rate of income tax to 40% and increased the threshold so that no one who earns under £100,000 pays it.
The main problem with the childcare subsidy is that it is a tax break paid to couples so long as they pay someone else to look after their kids. It would be better (for the children and economically) if the Government let couples keep more of the money they have earned so that they can decide whether to care for their own children or pay someone else. The French system of income splitting is one approach. And allowing couples to transfer their unused personal allowances to the other partner is another.Robert Halfon MP: This was a cost of living Budget. It has put fuel in the tank of the British economy. Families in my constituency of Harlow will be especially glad that the Chancellor has listened once again, and helped millions of car-owners and businesses who are struggling to fill up their family car. This matters not just because of the economic case, but because of social justice. Fuel duty is a toxic tax. It is shockingly regressive. It hits the poorest Brits the hardest. It is crushing the incomes of the lowest paid, and people outside of London in particular. That's why the Chancellor's historic three and a half year freeze on fuel duty – which is a cut in real terms – has been so important. This Budget proves that Conservative Ministers like George Osborne and Sajid Javid are doing everything possible to keep petrol and diesel prices down.
Jill Kirby: With his growth, debt and deficit targets all way off course, the Chancellor had to convince us that this Budget really will make a difference to our troubled economy. Cutting corporation tax, employer’s NI and accelerating the £10,000 tax personal allowance are all good, non-gimmicky measures to boost growth. But I’m perturbed by the Chancellor's increasingly broad hints that he's going to let inflation take care of the country's debt problem. Rather than take radical steps to get public sector net debt under control, George Osborne acknowledged it will remain on a rising path for years to come. At the same time, we’re told that the government will take advantage of its ability to borrow cheaply by guaranteeing home loans for those who can’t raise a deposit. George, you've told us that the way to get out of debt is not to borrow more. Yet this “dramatic way” to help homebuyers sounds to me like another form of debt. Presumably it’s to be paid off by house price inflation. But we've been down that path before, and it didn’t end well.
Aside from my concerns about the Chancellor’s monetary activism, I’m pretty disappointed (although not surprised) that the Conservative pledge to recognise marriage in the tax system has now clearly been postponed beyond the next election. One-earner families have been told that trying to look after your own children (rather than put them in daycare) is not “the right thing to do”. Now they learn that childcare will be tax free from 2015, but a mum (or dad) who sacrifices earnings to look after young children will get no tax break at all, not even to the extent of transferring some of their unusable personal allowance. For all those families struggling hard to make ends meet while they try to do the best by their children, this is a bitter blow.
Andrew Lilico: As I listened to George Osborne speaking, I couldn’t help but wonder what he said that Alistair Darling couldn’t have said. His main measures were a plan for the government to guarantee a huge £130 billion of mortgages, a change to the Bank of England remit, and a cut to Employers’ national insurance. His key announcement was that the deficit is going to fall even more slowly – much as it has not materially fallen in 2012/13 versus 2011/12, it is now scheduled to barely fall in 2013/14 versus 2012/13.
The £130bn mortgage guarantee scheme is yet another deeply misconceived attempt by the Government to subsidise mortgage lending, presumably in the hope of stimulating a housing construction boom to get growth going. The last thing Britain wants is to duplicate the errors of Fannie Mae and Freddie Mac.
The change to the inflation remit does little more than set out explicitly what we already knew: that the Chancellor thinks it’s fine for inflation to be as far above the 2% target as the Bank of England likes, for as long as it likes; insofar as it adds anything it appears to be an attempt to commit that interest rates won’t even rise when there’s a recovery – even worse for inflation.
A cut to employers’ national insurance is a good scheme, usefully balance against measures elsewhere. If only it had been done in 2010, first thing, it might have made a difference. Now? Too late, too late – I fear it is too late.
Ruth Porter: The Chancellor rightly concentrated on three key themes – aspiration, simplifications and making Britain an attractive proposition for investment. He failed, however, to properly see these through.
The limited tax cuts are welcome, as is the simplification to corporation tax. The reality, however, is that there remains a need for substantial supply side reform across planning, childcare and energy if costs are to be brought down.
One of the key lessons to be learnt from this recession is that the government should not be underwriting the housing market. The announcements made by the Chancellor today on housing are storing up big trouble for the future and are unlikely to make a meaningful difference to the chronic housing affordability crisis we have in the UK.
David Skelton: The “Boddington’s Budget” will go down well with hard-working people up and down the country. A further fuel duty freeze and a cut in the cost of a pint are popular announcements, which will be welcomed by hard-pressed people, as well as long-struggling pubs.
Below the headlines there are some other interesting measures. Reforming public sector pay to reward success, rather than purely how long you've been in the job, will go a long way to increasing productivity. A cut to national insurance contributions for small business will help would-be entrepreneurs. And measures to help boost growth outside of the South East, including with an industrial strategy, are very welcome.
The growth and debt figures were disappointing. We need to get the banks lending to business, to create more private sector jobs, so it isn't particularly helpful to offset the cut in corporation tax with an additional bank levy.
More also needs to be done to encourage house building. Although measures to help first time buyers are welcome, the Government is still on track to preside over the lowest level of house building since the 1920s. More radical planning reforms, combined with the introduction of measures such as self-build, should be introduced to get Britain building.
George Trefgarne: Judging by the positive reaction of house-builders’ share prices on the stock exchange, we can expect a new building boom following the Budget. Interest rates will stay, in the chancellor’s words, “lower for longer” as he is tinkering with the Bank of England’s inflation target. And the Help to Buy scheme is a major innovation which introduces generous subsidies not just for first time buyers but for almost everyone.
Owning your own home is of course a classic Conservative policy. But it would be a mistake to see this latest wheeze as a re-run of the 1930s, when Tory chancellor Neville Chamberlain encouraged a housing boom to bring a successful recovery. On that occasion it was a private sector phenomenon funded by the healthy and growing balance sheets of the building societies.
Today, the banks and lenders remain in disarray. The Osborne version is therefore more like the promise by Harold Macmillan to construct 300,000 homes a year as housing minister in 1950s. Throughout his life Macmillan was an enthusiast for Government intervention in the economy and he relied heavily on the public sector, via Treasury subsidies to local authorities, to fulfil his housing promise. He had to do something because millions of homes were destroyed in the Blitz and many families were living in slums.
In the aftermath of the financial crisis, George Osborne is himself doing a SuperMac via his own taxpayer funded grants and guarantees, worth some £4.1bn over the next three years. Macmillan was famously soon able to claim that “We have never had it so good,” but as Prime Minister he took his economic interference too far. It culminated in a surge in inflation which was difficult to tame for nearly three decades. Let us hope Mr Osborne is not following a similar path.
David Cameron delivers his speech on Europe at the Bloomberg HQ in London, © i-Images
Richard Ashworth MEP, Leader of Tory MEPs: "He has set out his vision for the future of Europe and the UK's relationship with a reformed EU. The speech reinforced his preference for membership, but made clear this cannot be taken for granted. I call on fellow Conservatives to rally behind this vision, support the strategy and meet the challenge of helping the EU become a more flexible and friendly place for Britain. We will get a vote on membership, appropriately, once the renegotiation process is completed, some time in the next parliament. It was a thoughtful speech. These were core Tory aspirations which should reassure the party faithful and the country."
Martin Callanan MEP: “David Cameron has given the right speech at the right time and I fully support it.
As someone who’s taken part in many Euro negotiations, I think David Cameron’s European agenda is eminently deliverable and he is right to try.
Britain is in a strong position to ask for a more flexible arrangement and if the EU is to hold together through this crisis then it needs to realise that the model of ever-closer union is antiquated and needs to change. It's not only the UK that is more than reluctant to become part of an inward-looking fiscal and political union.
Of course, European federalists will scream that David Cameron’s agenda is undeliverable and will undermine the Single Market. This is complete nonsense. The only thing the Prime Minister wants to undermine is the outdated principle that only one-size-fits-all is the way forward for the EU.
As parts of the EU continue to integrate then the likelihood of the UK leaving will only increase, unless we can forge a new flexible alliance that allows national governments to ask at which level powers are best exercised.
The British people should have their opportunity to finally have their say. If only we had resorted to asking the people about the relationship they want with Europe in the past then it would not face a crisis of legitimacy today.”
Nadine Dorries MP: “On Monday afternoon a former Labour Minister asked me why I thought Labour were only 5 per cent ahead in the mid-term polls.
This speech will in part answer his question.
Not only are the British people fully realising that Labour left us with the worst deficit in the Western world and are to blame for almost bankrupting the country, they will now see a Prime Minister who has stepped out of No.10 with a well thought-through vision for the future and a plan to deliver.
With one hand tied behind his back by his Lib Dem partners, David Cameron promises to draft legislation in this Parliament ready to enable an in/out referendum in the first year of the next, should a Conservative Government be elected.
The speech fills a political vacuum and introduces a degree of gravitas to a government which has been tainted by the accusation of pursuing issues which don't matter in times of austerity, such as gay marriage and Lords Reform.
This speech won’t make me vote for an increase to the EU budget at a time when we are cutting some council budgets by 20 per cent, and I will remain someone who wants a self-governing nation which places equal importance on trading with all countries in the world, not just those in Europe – but this speech is audacious and brave. It shines a spotlight on the future under a majority Conservative government and it’s a future many will want to share.”
Matthew Elliott: “Big speeches, like Budgets, take a while to digest. But taken at face value, this was an extremely bold speech delivered in a typically measured way. While the precise details of the renegotiation will be subject to endless debate over the next five years, the five principles set the bar pretty high. The debate will now turn to whether the PM will be able to achieve these objectives and, if Treaty change happens before the election, whether the renegotiation will also come sooner. For Eurosceptics, one thing is clear. The starting pistol has been fired on a referendum. We must now shift our focus from debating amongst ourselves and instead take the fight to those who argue that it is too risky to negotiate a better deal for Britain. Let battle commence.”
Daniel Hannan MEP: “This is an extraordinary moment. A British Prime Minister has promised an In/Out referendum. Instead of the ministers and mandarins deciding whether the deal is good enough – which is what has led us to the present mess – the electorate as a whole will decide. As recently as two years ago, David Cameron said he saw no need for an In/Out referendum, because he wanted to remain in the EU. What has changed his mind? Partly the People’s Pledge, one of the most successful campaigns I’ve ever been involved in. Partly the heroic 111 MPs who showed which way Parliament was moving on this issue. Partly the eurozone crisis. And partly UKIP. Which is why it is so puzzling to see friends in that party sulking this morning when they should be awarding themselves a medal. The PM has just embraced the policy they have been demanding for 20 years. That policy doesn’t become wrong just because someone else is proposing it. Stop carping, my UKIP friends, and start preparing for the referendum.
Thanks to all ConHome readers who signed the People’s Pledge. And thanks to everyone who made the argument for a referendum within the party, patiently and courteously. It worked. This is your victory.”
Bernard Jenkin MP: “The Prime Minister’s speech represents a watershed. His commitment to a referendum is historic – a pledge to re-engage the British people with the question of our EU membership. Our EU partners must decide whether to accommodate our legitimate wishes for democratic self-government while we remain signatories to all the EU Treaties up to and including Lisbon, or if the repudiation of the ‘ever close union’ means a new treaty between the EU and the UK, based purely on ‘trade and political cooperation’. That is what the British people want and should be the mandate for renegotiation contained in our 2015 manifesto.”
Andrea Leadsom MP: “David Cameron is right to say that Europe must change and the EU needs to serve the interests of the British people much better. The status quo in Britain’s relationship with the EU is no longer an option, and the Prime Minister seeks to negotiate a deal that promotes our national interest. It is also right to seek fresh consent from the British people.
The speech sets out a clear choice for the country: under a Conservative government, the UK will negotiate a new settlement with the EU and voters will be given a say.
I believe the country will unite behind this approach and we can focus our efforts on a robust but achievable renegotiation.”
Andrew Lilico: “This speech will unite the Conservative Party and divide the Labour Party. The considerable majority of Conservatives would prefer to stay in the EU on renegotiated terms, whilst those that want to leave will have a better referendum than they ever hoped for – not simply a status quo versus leave referendum, but a referendum in which the status quo isn’t even an option! When Cameron and Hague have tried to avoid talking about the EU, it has created splits in the party. Engaging properly will, by contrast, build political capital for deficit reduction, welfare reform and other policies. Spot on.”
Louise Mensch: “As a libertarian, I’ve always been in favour of hunting. And the sound we just heard was Cameron shooting Farage’s fox.
This was a very Tory speech. One many in the party have been hoping for years he would make. Ask for a mandate for total renegotiation, and if we don't get it – a straight in/out referendum.
Maximum leverage on the Eurocrats. And a major shift for the PM. This speech saw the George Osborne/Michael Gove wing of government triumphing over the Nick Clegg one. Previously, with one eye on coalition, Cameron had stated he would never want to leave the EU. Now he says he wants to stay – but only if our demands are met.
Canny Tories will take this and run with it. There is no huge appetite to walk out of the EU right now. Taking our powers back or we quit; that’s what voters want.
Ed Miliband and Nick Clegg are left totally flat-footed. Cameron’s move is both populist and measured. He leads; they splutter. George Osborne is a tactical genius. Miliband had a chance to offer a referendum ahead of Cameron at party conference season, but he fluffed it. He will forever be playing catch-up.
One last point: I *loved* how Cameron stuck it to Clegg towards the beginning of his speech. Europhile former MEP Clegg had huffed saying that Cameron's speech would be delivered ‘as Tory leader, not as Prime Minister.’ Cameron put the squawking yellow budgie firmly back in its cage today: ‘I speak as British Prime Minister...’
And after this move today, he probably will speak again as Prime Minister when he presents our non-negotiable demands to the EU in 2015.”
Mark Reckless MP: “In the early hours of Friday 7th May 2010 I made a speech at what is now called Medway Park.
After I had thanked constituents, campaign team, police and officials I repeated my campaign promise that I would use my election to fight for an In/Out referendum so that Britain could again be an independent country.
The local BBC reporter covering the Medway count asked me afterward if that was party policy. I said ‘No, not yet’.
It is now.
Within eighteen months, 81 Conservative MPs voted for an In/Out referendum.
A year later I got a majority in Parliament to cut the EU budget.
Now the Prime Minister has promised an In/Out referendum.
It is therefore time for everyone, whether they believe in an independent Britain, or simply in democracy, to get behind the Prime Minister and campaign finally for that In/Out referendum.”
Laura Sandys MP: “I welcome the strength of the PM’s commitment to shaping and winning the debate around a reinvigorated European settlement with the British people. Mainstream Conservatives share the PM’s desire for Europe to be a success and support his personal commitment to the UK’s continued and growing influence in the EU.
Despite the frustrations of all international organisations, we would not contemplate leaving the UN Security Council, NATO, or even the IMF. It is therefore extremely reassuring that the Prime Minister, while offering a referendum, will be supporting Britain’s role as a vocal and leading member of the largest trading bloc in the world.
The referendum offers an opportunity to reboot our relationship in Europe and will reconfirm the nature of our relationships with the EU. We have a challenge to help shape Europe around Cameron’s growth strategy. This we believe is a strategy that can be won across Europe, further strengthening the economic value of Europe to Britain.”
Throughout this week we've compiled a special Jury to answer five questions:
Here are four answers to the fourth question — from Eamonn Butler of the Adam Smith Institute, Philip Booth of the Institute of Economic Affairs, Ryan Bourne of the Centre for Policy Studies, and the ConservativeHome columnist Andrew Lilico.
Eamonn Butler: “We need some principles with the strength of constitutional law. Not principles like Gordon Brown's 'Golden Rule', or the Maastricht Conditions, that were abandoned at the first sign of a problem. Balanced-budget rules, maximum-deficit rules. But the most useful thing we could do is this: establish the principle that every Bill coming before Parliament must contain an estimate of its future costs over the coming years, decades and generations. Then politicians would not be able to vote benefits for this generation without paying any regard to the future cost. It would get us out of Ponzi-scheme politics.”
Philip Booth: “In the short term, there must be radical spending cuts, welfare reform, other supply-side reform and rises in state pension ages in order to raise economic growth, reduce taxation and reduce borrowing. This could change things really quite quickly. Indeed, we have such a dysfunctional tax and benefits system that we could create a win-win-win situation quite easily. This goes back to Reagan's 1964 line that there are simple answers but no easy answers (in terms of the vested interests that would be disturbed). This does not remove the fiscal headwinds. In the long term, we must move to much greater pre-funding of health and pensions for the younger generation. This would raise savings, make provision more efficient and responsive, and also create much better economic incentives for the types of behaviours that will help deal with the many problems that will be thrown at us over the next 50 years.”
Ryan Bourne: “There needs to be a combination of measures on the supply-side to raise the UK's underlying growth rate alongside attempts to constrain the growth of debt through fiscal policy. The Government have made a start on the latter, but thus far the bulk of any deficit closure has come through cuts to capital expenditure and raising tax rates, which evidence suggests has a more damaging effect on growth than cutting current expenditure. Over the next five years the Government must deliver on the current spending cuts it has outlined, but even this is unlikely to be enough given the somewhat optimistic outlook of the Office for Budget Responsibility in the future. In the shorter-term, the government can constrain spending through limiting the growth of streams like benefits, aid and public sector pay. Though it is appealing to suggest much larger immediate cuts elsewhere to eliminate the deficit, this ignores the ongoing commitments the government faces. It is more sensible and immediately palatable to take steps today which will make big savings in the future: reassessing retirement ages, the provision of state and public sector pensions, eligibility for a range of state transfers, and reassessing the scope of government departments. This method tends to be politically reasonable, as you can set clear future dates or cut-offs for various spending streams.On the supply-side, key is to adopt measures which increase labour supply and encourage entrepreneurship/innovation: again, older retirement ages; tax reform which broadens bases and lowers marginal rates; welfare reform which makes work pay - particularly by shifting to more work conditional benefits from unearned income streams (the Government should look at 'earned income tax credits' here); a competitive corporate and investment tax regime; taking small businesses outside of as much regulation as possible; and pursuing a competitive energy policy (I.e. not adopting a unilateral carbon price floor!).”
Andrew Lilico: “The key need for the UK economy is, as it has been ever since 2008, to increase our medium-term growth rate. Without reversing the decline in the medium-term growth rate, then unless there is inflation, UK households will default on their huge mortgages, the UK banks will go bust, and the UK sovereign as the backer of those banks will go bust. The right fear for the UK government is not that the government goes bust because of going the way of Greece. It is that it goes bust because we go the way of Spain or Ireland.
The right solution is to increase the medium-term growth rate. The best ways to do that are: (a) to cut government consumption spending; (b) to increase the efficiency of government consumption spending (which means greater use of markets and profit motives – things still anathema); to increase workforce participation by increasing the retirement age (more workers equals more growth); accelerate household deleveraging (so they don’t go bust) by (i) stopping attempting to encourage them to borrow more, and (ii) raising interest rates; liquidating zombie companies holding growth back, but kept going by ultra-loose monetary policy, so that new growing companies can replace them (again, by raising interest rates); facilitating lending growth by healthy banks, by de-nationalising banks and imposing losses on their bondholders so as to recapitalise them and create a class of investor in them with an interest in restructuring them – banks should be broken up in the process of renationalisation so that there are more smaller and more competing banks, and new entry should be facilitated by the willingness to see market exit (i.e. banks going bust and being liquidated).
The government has shown a distinct lack of fear. Not being afraid isn’t brave when fear is warranted, as it is now – it is foolishness. Fear should have driven panic (which was warranted) and panic should have driven drastic action (which was necessary).
Alas, none of this will happen until we face disaster – probably in the form of high inflation annihilating savings and debts, followed by interest rate rises inducing another deep sting-in-the-tail recession (much as in 1980) and mass unemployment. I am more pessimistic now than I have been at any point since August 2008 (if you recall my articles pleading for Brown to act then). Politics has failed us.”
> Tomorrow: How long can Britain continue to borrow at the current low interest rates?
Throughout this week we've compiled a special Jury to answer five questions:
Here are two answers to the third question — from Eamonn Butler of the Adam Smith Institute and Philip Booth of the Institute of Economic Affairs:
Eamonn Butler: “Politicians have discovered that they can fund spending and benefits for this generation by passing the cost onto future generations through borrowing. But why should future generations sign up for this one-sided contract? I was one of those who, in the mid-1970s, joined the 'brain drain' rather than take the same sort of deal then. So I know that young people in particular are mobile, and once you have lost their talents, you have usually lost them for good. I am unusual in that I came back and helped Margaret Thatcher tackle these problems.”
Philip Booth: “Yes, though there are not a great many safe havens that young people might find attractive! Most countries have either similar demographic problems to our own or a similar debt position or a slightly better situation in one respect and a much worse situation in the other. The outcome is grim across OECD countries, though the problems are not always the same.”
> Tomorrow: What can and should still be done now to reduce the danger of a future debt burden?
Throughout this week we've compiled a special Jury to answer five questions:
Here are two answers to the second question — from Philip Booth of the Institute of Economic Affairs and ConservativeHome columnist Andrew Lilico:
Philip Booth: “In considering the burden of debt, there are three big issues in my view. It is true that we have had debt levels like this before and ‘grown’ out of them. However, this is the first time that such huge debts have accumulated in peacetime to finance current government spending (though, under the Brown days, you could argue that at least some of the problem was caused by the "one-off" banking crisis). Even in the 1970s debt did not change much as a proportion of national income. Wars come and go, but the political pressures for big government in a democracy, predicted by public choice economics, just intensify. Secondly, we are close to our taxable capacity - increases in tax cannot be used realistically to deal with the deficit/debt. Thirdly, we have huge forthcoming social insurance obligations due to having pensions and health systems that rely mainly (in the case of pensions) and totally (in the case of health) on taxpayer funding on a pay-as-you-go basis. Such obligations, calculated in inter-generational models, probably come to about four times the explicit national debt. Even if one ignores those calculations, at the very least it is fair to say that the coming fiscal headwinds are huge (as, indeed, is indicated in the OBR's fiscal sustainability reports).”
Andrew Lilico: “Britain’s debt burden is only not unprecedented if measured solely in terms of direct liabilities through government bonds. But in the past when government’s had higher debt to GDP ratios than today they did not have our implicit liabilities – they did not have unfunded public sector pension liabilities, or state pension liabilities, or guarantees to the banking sector. Furthermore, when our debts were higher in the past things did not turn out happily. Remember: our post-World War 1 debts may have been higher on narrow gilts definitions, but (a) nominal GDP fell 28% from 1920-1923 and did not exceed its 1920 peak until 1938; (b) we had a ‘voluntary’ bond swap in 1932 which vastly wrote down our first world war liabilities; (c) the US first overtook us as the major world power and then dismantled our Empire; even after all that we still gave up and inflated our debts away in the 1970s. I think saying ‘Our debts were higher in the past and it turned out okay’ is wrong on both counts – they weren’t higher then; and it didn’t turn out okay then.”
> Tomorrow: Is there a danger that the most talented young Britons will leave high taxed Britain in future years for less indebted nations?
Throughout this week we've compiled a special Jury to answer five questions:
Here are two answers to the first question - from Dr Eamonn Butler of the Adam Smith Institute and from Ryan Bourne of the Centre for Policy Studies:
Eamonn Butler: “Last time we had a debt burden this high, at least we had use the money to save Europe from Nazi tyranny. This time, there is not a lot to show for it. We've actually borrowed the money to fund our own past extravagance, and to bail out overstretched banks that should have been broken up and reconstructed by market forces. It took a very long time to pay off our war debt, and it will take a very long time to pay off this one. The difference is that we are simply adding and adding to our present debt, and have scant plans ever to pay it off.”
Ryan Bourne: “Newspapers often focus on the effects of the rocketing debt burden on our immediate ability to borrow. Though this is important, the main reason we should be concerned about the current high debt burden is because economic evidence suggests debts at our current levels lead to protracted economic stagnation and slow growth. The Chancellor knows this. His Mansion House speech cited the important work of Reinhart, Reinhart and Rogoff, who found that during episodes in which gross government debt crossed 90% of GDP, the typical episode lasted 23 years and was typically associated with slower annual growth to the tune of 1 percentage point per year. The cumulative cost of this over the whole period on income is stunning. And the alarming fact is that the UK's gross debt was this week forecast to peak at 97% of GDP in this Parliament.
The question then becomes: why does high debt lead to slow growth? Might the causation work the other way? Of course, this is possible. Large exogenous shocks can lead to huge increases in debt. But the duration suggests high debts and slow growth are self-reinforcing. The problem is that the policies typically used to deal with the debts slow growth through the discouragement of investment: whether it be because of a burst of unexpected inflation, higher taxes, financial repression or the confiscation of wealth. Many of these policies have been mooted or attempted across the Western world in recent years, and we're likely to see a variety of them in the coming years. This means that without other substantial supply-side measures to raise the medium term growth rate (including restraining government spending in itself), and with the demographic pressures round the corner, it could be a tough couple of decades.”
> Tomorrow: It may not be unprecedented by historical standards but isn't today's UK borrowing significant by international standards?
Lord (Michael) Bates: "British interests are in seeing continued economic recovery in the UK’s largest export market and to avoid being dragged into more costly (human and financial) military engagements. Romney may be slightly ahead of Obama in the first but behind in the second. In navigating the perilous global icebergs into clearer seas we need a ‘Steady as she goes’ hand on the tiller and Captain Obama scores here although Romney’s First Mate, Paul Ryan has also shown impressive political grip. A deciding factor in favour of Obama would be what he represents for the American people—a triumph over prejudice and the embodiment of the American Dream. It will go down to the wire though."
Andrew Boff AM: "Republican economic policies are impressive in opposition and disappointing in government; maybe because they spend so much time having to pander to the prurient and chauvinistic appetites of their mid-West core vote or their latent protectionism. Obama speaks drivel but boy does he speak it well and is hardly a socialist. I don't want the Democrats to win, I just want the Republicans to lose-big time. Only then will the non-weird Republicans have the impetus to transform our slightly deranged cousins into a modern centre-right party which we can confidently call our ally."
Dominic Schofield: "It's a close one, but on balance hope it's Romney. Economically I suspect Romney 'gets' what needs to be done more readily than Obama. Overwhelmingly US business (large and small) has felt short-changed by the current administration and poverty and unemployment have gone up. Romney's track record at Bain Capital and his record as Massachusets Governor all lend him greater credibility than Obama, and his promises to set about tackling the deficit are believable. The Romney/Ryan ticket stand for genuine fiscal conservatism - and America cannot continue spending and borrowing from the Chinese much further. On the international stage I believe he will combine pragmatism (a la George H W Bush) with the will and guts to stand up for American interests and Western truths. America's enemies (who are our enemies too by the way) will fear him in a way they won't fear a narrowly re-elected (and weakened) Obama administration."
Ryan Bourne: "Romney. Obama's stimulus and recover plan was supposed to generate growth of 4.6 per cent per year by now with 5.4% unemployment. Instead growth is 2% with unemployment at 8%. And many people have simply given up looking for work - real unemployment is much higher. No wonder Obama's economic advisors stopped tracking the stimulus costs when it hit $317,000 per job 'created'. But even if you think a Keynesian stimulus in 2009 was right, Obama's still shown no leadership on the longer term fiscal challenges. $6 trillion will be added to the debt under his watch. He set a Commission to look at fiscal sustainability and tax reform on a bi-partisan level, but was unable to bring forward any of its recommendations despite widespread support for much of it - a lack of leadership which we've seen during the debt ceiling crisis and with the looming fiscal cliff for 2013. Mitt Romney at least seems to understand an economy run with more government will be inefficient and stifle competition and innovation. Plus, he has a good record as a businessman, public official and as a politician working with a Democrat legislature in Massachusetts."
Mohammed Amin: "If I were an American, I would vote for Obama. He inherited a terrible economic mess and has faced enormous Republican hostility in Congress. Even in the first two years, the filibuster rules in the Senate allowed many of proposals to be blocked. Despite all that, he managed to get healthcare reform through Congress, get the stimulus package through despite it not being a big as he would have liked, and repaired America’s image in the world. In a second term he can do much more, especially in the Middle East."
Luke Bozier: "If Obama would commit to seriously reforming the American
corporate tax system for small businesses, and reducing the red tape on
entrepreneurs, I'd say Obama. Because that would be a Clinton-esque
move which would boost growth and let American entrepreneurialism
loose. However, he has been very coy about what exactly he would do.
Romney on the other hand has been more specific; he gets that the tax
and red tape burden on American entrepreneurs - much bigger than it is
in neighbouring Canada or even in Britain (where we have one of the
lowest corporate tax rates in the G20) - hurts everyone, by keeping
growth slow and job creation even slower."
Spencer Pitfield: "On the back of the UK achieving 1% GDP growth for the last quarter I have no doubt that in this global world a Republican Presidency is my hugely preferred outcome. A Romney victory would strengthen American growth and as such help boost growth here in the UK and across the world. Global growth will drive-forward prosperity for nation states and help pull Britain firmly out of the worst recession since the 1930s."
John Bald: "Romney doesn't understand the need to pay for spending with taxes, and doesn't see that some of Obama's actions, particularly on the auto industry, were needed to prevent a slump. However, his gaffes and lack of general knowledge don't seem to be holding him back, and I don't think he's dangerous to us. Obama's healthcare legislation has bucked the US constitution, which may cost him. He is mildly hostile to British interests - he wouldn't start another Falklands war, but wouldn't mind much if someone else did. A lot of Black British people expected much of him, and will hurt if he loses. I never expected anything and, for once, don't much care who wins."
Murdo Fraser MSP: "On very few levels can Romney be viewed as a strong Presidential candidate for the Republicans. Whilst I would still expect Obama to win, the fact that the polls are so close indicates what a poor President he has been. After all the hope and expectation following his election he has been a huge disappointment, failing to tackle the issues that matter to ordinary Americans. Obama may win, but he doesn't deserve to."
> Recent International post: 43% of Tories would vote for Romney and 23% would support Obama.
Earlier this week Peter Hoskin used his column to argue that not every person has remembered the Thatcher years correctly. Three of ConHome's jurors respond by answering a related question - "In what ways - if any - is the Coalition more radical than the Thatcher governments?"
Paul Abbott: "The Coalition is pursuing shock and awe reform, in almost every Whitehall department. Police pay and pensions. the NHS Bill. Reductions in the armed forces. Academy schools. Localism. The universal credit. Utility bills. Quantitative easing. Re-regulating the banks. Top-up fees. A bonfire of the quangos every three years... Conservatives are fighting on all fronts, without an outright majority. By contrast, Margaret Thatcher's government was careful to avoid an all-out confrontation with Britain's vested interests. Her Ministers took not one, but SIX successive Acts of Parliament between 1980 and 1993 to curb militant trade union power, for example. Thatcher was more incremental, and more cautious. As the saying goes, she knew how to eat the elephant. (Many small bites.)"
Spencer Pitfield: "The radicalism of Thatcher Governments is best encapsulated in a political philosophy and economic policies emphasising flexible labour markets, deregulation and privatisation. I have no doubt that this Coalition Government's greatest radicalism, and the one for which it will be most remembered for, relates to education policies and, in particular, the implementation of Free Schools. By creating 'indepedent state schools - free from LEA limitations and local bureacracy - and allowing school leadership teams to lead, Michael Gove has across the board set state schools free to finally achieve their full potential."
John Bald: "Education was a weak spot for Margaret from the time she was bamboozled into appointing her sworn enemies to the Bullock Committee in 1975. They duly did the opposite to what she wanted, and abolished the national reading test. Local authorities took this as their cue and, except in Union matters, ran rings round her and her ministers. David Cameron and Michael Gove have cut the ground from under their opponents by abolishing their quangos, exposing their fiddling of examination and test results, opening more free schools and academies, and being (mostly) much more careful in their use of advice."
Members of the new ConservativeHome Jury offer their thoughts. These thoughts were first submitted a week ago and appeared in the ConservativeHome Party Conference newspaper.
ANGIE BRAY MP: Nick Clegg is probably a better partner for the Conservatives because instinctively he is a Liberal rather than a Social Democrat and doesn’t carry the Labour baggage Vince Cable does from the past – what he needs is a bit of spine-stiffening to remember that sometimes.
MOHAMMED AMIN: At the next General Election we need the Liberal Democrats to take votes from Labour rather than taking them from us. Vince Cable definitely has more left wing appeal than does Nick Clegg, especially after Clegg broke his promise on tuition fees. Indeed Clegg could easily pass as a left wing Tory. Accordingly we would be far better off with Cable leading the Liberal Democrats, as he would have minimal appeal to Conservative leaning voters, but strong appeal for Labour leaning voters.
RYAN BOURNE: “From an ideological perspective, the Tories would find it much easier working with a 'liberal' Liberal Democrat like Nick Clegg. Electorally, the picture is more complex. I suspect the appointment of Cable would give the Lib Dems a poll boost - if this means current disaffected Lib Dems returning to the party in Con-Lab marginals, the Tories win. Where it leads to more Lib Dems votes in Lib-Con marginals, the Tories evidently lose. On balance, Clegg will be better for the Tories if they don't think there's much chance of winning a majority anyway and would rather remain in Coalition post-2015 than occupy the opposition benches.”
ANDREW BOFF: Electorally, clearly Cable would be the best leader for the Lib Dems. There is a huge opportunity for the LibDems to use their base in government to say to anti-Tory voters "We were the ones that stopped the Tories being awful, not Labour". Clegg is a little bit too orange book for that part of the electorate.
MAX WIND-COWIE: In terms of governing Britain with a partner, Nick Clegg is clearly the lesser of two evils. He is a man we can do business with, a man whose liberalism is broadly of the modern centre-right, freedom over ‘fairness’ type and a man who has demonstrated his readiness to make tough compromises. But that’s different to the question of who it would be better for the Conservative Party to be running against in 2015 – strategically, Vince Cable would be a better bet. He is a social democrat, has made it clear that he would happily work with Labour and represents little differentiation from Ed Miliband. Vince vs. Ed vs. Dave would leave broadly centre-right, ‘let’s keep Labour out’ voters with only one real choice: The Conservative Party.
RYAN SHORTHOUSE: Here comes another hung parliament. Who will the Lib Dems go with in 2015? It depends on the maths, of course. But assume there’s a choice. If Vince Cable takes the reins, he’ll go with Labour, no question. Clegg – if we’re a bit nicer to him, and give him a bit more credit –may well stop the bed-hopping. Broadly, he’s an economic and social liberal; a good partner. And he may well see a richer future for the Liberal Democrats in another Coalition with us. If Conservatives want a second term, Nick Clegg could be our best chance.
SPENCER PITFIELD: “I have no doubt that in a perfect world Vince Cable would be the better Lib Dem leader for the Conservatives to go head to head with. His age coupled to his unbridled (or should I say uncontrolled!) social democrat views make him a much easier target. Having contested the Sheffield Hallam seat against Nick Clegg I can honestly say from personal experience that he is most likeable. Indeed, prior to the tuition fees turn-about-face debacle, Clegg has been warmly embraced by the constituents of Sheffield Hallam. Oh, and by the way, Orange Booker that he is, Mr. Clegg is no doubt much closer to we of the blue order than his yellow colleagues. A Lib Dem who we can do business with!”
BRIAN CONNELL: Any change of leader will be a massive distraction from getting the economy fixed: risking the implosion of the coalition and opening up the prospect that our economy gets buffeted as the markets speculate on the UK's ability to meet the coalition's concrete financial commitments. The answer for the country must be that Nick Clegg should remain as leader. The question though isn't 'what's good for the country' but 'what's best for the Conservative Party'. As so often in life, the answers are the same - Nick Clegg. Inconsistency and opportunism have been the hallmarks of LD campaigning: it took Clegg to call their inner bluff and say 'if you're serious about politics, then you must take your opportunity for power'. With a record of delivery, and a critical media there is less space for the ‘ambiguity and apple pie’ that they’ve thrived on. Nick Clegg is a permanently weakened leader and his party will be weakened with him.