Five points about David Cameron’s speech on the economy

By Peter Hoskin
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David Cameron’s speech on the economy today is a curious beast. Here we have the Prime Minister pronouncing on growth, competition, debt and all that – but it has a thin flavour to it, as though it’s just an appetiser for the Budget in a couple of weeks. There are no new policy announcements, nor anything we haven’t really heard before. Yet perhaps that is the point: Mr Cameron emphasises, à la Lady Thatcher, that “there is no alternative” to the Coalition’s current plan. He speaks of consistency and continuity. It reads like a message telling everyone – from the restless Tory backbenches to Ed Balls and Vince Cable – not to expect a change in course.

All that said, however, this is – by my count – one of the longest speeches that Mr Cameron has delivered on the public finances and on the economy since the early days of his premiership. And that means it’s worth taking a few notes. Here are five points I distilled from it:

i) The sunshine has been dimmed. Remember when, last October, Mr Cameron boasted that “the good news will keep on coming”? There’s little, if any, such confidence in his voice now. The speech begins with a gloomy account of what people are facing – “Some are just a paycheque away from going into the red” – and it continues with plenty of warnings that “there is a long way to go”. The PM does highlight some of the gains that have been made, such as in the employment numbers, but the overall tone is very sombre.

ii) Themes for the next election. Soon after that line about paycheques, and others about bills and children, Mr Cameron stresses that he wants to “back the aspiration of hard working families who want to get on in life”. This is hardly a surprising thing for a politician to say, but it also happens to sum up what – according to the PM himself, in conversation with the 1922 Committee – will be a major theme of the Tories’ election campaign, in competition with Ed Miliband’s own pitch for the votes of “squeezed middle”. Another theme that stands out from the speech is Mr Cameron’s emphasis on global competition, and how Britain can keep up with countries such as India and China.  

iii) The downgrade: an inconvenient convenience. Mr Cameron doesn’t shy away from mentioning last month’s credit-rating downgrade – he uses it to bolster his argument. “Last month’s downgrade was the starkest possible reminder of the debt problem we face,” he says mid-way through the speech. And he highlights Moody’s warning that they could downgrade us further were there to be “reduced political commitment to fiscal consolidation”. It’s representative of the Government’s strangely confident – and Labour’s strangely bumbling – response to the downgrade. Indeed, Mr Cameron even goes so far as to say that, “dealing with the deficit gives us the credibility in world markets to maintain low interest rates.”

iv) Hey, we’re pro-growth, y’know. Strikingly, the speech argues that the Coalition’s fiscal plans are weighted to be pro-growth. “In spite of making difficult cuts,” says Mr Cameron, “we are protecting the science budget and the money flowing to schools.” He mentions infrastructure spending and his reluctance to see “big increases in the taxes people pay on the money they earn”. This, I’m sure, is to counteract any post-Budget claims – from Tory backbenchers, among others – that the Government doesn’t have a plan for growth. But it’s not all about self-defence. Mr Cameron also attacks New Labour for presiding over growth that was “too dependent on unsustainable factors”. One of these factors happens to be the theme of the week: “uncontrolled immigration”.

v) The importance of the Bank. Vince was talking about loosening monetary policy earlier. The FT reports that George Osborne will talk about it, too, in his Budget speech. And now Dave’s at it. “The Bank of England must support the recovery without putting financial stability at risk,” says Mr Cameron in his speech. He talks of “what I call, monetary activism”. It shouldn’t be forgotten that, with QE, the Bank is already presiding over the biggest, most radical economic policy in town. With the arrival of Mark Carney as Governor, the Coalition appears keen to step that up.

And, go on then, here’s a bonus sixth point:

vi) Planting seeds. Surprise, surprise – Mr Cameron attacks Labour for wanting to increase borrowing. But less predictable is his use of the phrase “magic money tree” (as in, “there is no…”) to bolster his attack; not once, but twice. It also crops up, in spirit, in the Prime Minister’s assertion that the Coalition will not implement “a tax cut paid for by borrowed money”. “Getting taxes down to help hard working people can only be done by taking tough decisions on spending,” he adds. Perhaps it’s not just Labour he has in mind, after all.