David Cameron sets out the moral, economic and political case for fiscal responsibility

David Cameron has stated in this morning's Daily Telegraph that Bank of England's Governor Mervyn King's warning about the country's inability to afford another fiscal stimulus has "vindicated the argument of the Conservative Party that the priority must be tackling debt".

The Tory leader re-iterates that it was right of the party to oppose last autumn's VAT cut and goes on to outline the moral, economic and political cases for fiscal responsibility.

The moral case: "Fiscal responsibility is morally right because it's wrong to live like there's no tomorrow and burden future generations with our debts."

The economic case: "It is economically right too. The conventional wisdom is that in a recession governments have to step in to stimulate the economy. That might be right for countries that built up surpluses when times were good. But that argument gets turned on its head when the government is already living way beyond its means as in the UK. In these circumstances, a further fiscal stimulus will do the opposite of what Gordon Brown claims. Instead of making things better, it will make things worse – undermining confidence with the certainty of higher taxes and the risk of higher interest rates.

The political case: "Fiscal responsibility is right politically too because it's a vital part of our belief in personal and social responsibility. We're never going to build the kind of country where people save for their future if people see a Government that throws responsibility to the wind. The only way to restore confidence in our economy is to set out a credible strategy for living within our means."

Jonathan Isaby

Comments

[A long time Tory]

Could not agree more with fiscal responsibility. Brown's irresponsible spending spree and phoney "look busy and pretend your are organising the world" world tour just highlights how far from reality the Labour Government are living.

But with a Labour MP "thinking" a spare room is their main home, rather than where their kids and husband live, should we be surprised at Brown's kind of front!

[Jack Iddon]

easily said now. Where was he when it was all happening?

[Phyllis Crash]

Replying to Jack;

Cameron was saying let's match Labour on spending!!

[Jane Gould]

absolutely right...
particulsrly in the context of social responsibility. both individual and corporate.

[Henry Mayhew - ukipper]

I can hardly remember who this bloke is or what he stands for and I'm not sure he's clear on that either.

[david chandler]

fiscal responsibility.
This is very easy to do in the good times, but extremely painful in a period where both consumers and the government have racked up so much debt.
It would have been better to have concentrated efforts on repairing the balance sheets of the public than giving money to the banks. they should have been allowed to fail like other private companies as they are no different.
If politicans were serious, they would consider raising the personal allowances, instigating a flat £110 a week pension and removing the gimmicks of the pension credit. This would give people money in their pockets and help economic growth which in turn could be used to repay government debt. Our income tax rates with a combined national insurance hike puts the country at a distinct disadvantage compared to the emeging economies in the middle east and the far east. Until action is taken we will continue to go down.
Also tax havens. if the income tax rates were lower, the rich and the private clients would not put their money offshore. hence no needs for tax havens.
No politicans have got the guts to tackle this.

[Malcolm Dunn]

I think they have David Chandler, the era of tax havens is passing I think. It does need every country to act together however. Action in isolation is doomed to failure.
I'm glad Cameron has made this speech, I've been pretty terrified about our levels of borrowing for months. But when I listened to people with far greater expertise than I singing the praises of 'quantitive easing'etc I assumed my Thatcherite desire for sound money was wrong.

[John Coles]

Why doesn't he offer the sort of leadership that Daniel Hannan showed yesterday? His speech was short, pithy, wounding and to the point. Instead Mr Cameron's article offers a rambling, pseudo-moralistic, discourse.
Toryism is instinctive, not the precious recherché claptrap of a PR executive that today's party leader now seems to favour.
God, I'm already sick of him and he's not even in power.

[pp]

I disagree about the obsession with 'tax havens'.

It is a demonstration of the government thinking of
"what is the most we can raise"
rather than
"how much do we need to raise"

As long as the government have enough to do what is required of them, the rest is none of their business.

But instead they seek to squeeze every last penny out of the public, with a puritanical belief that it is a sin for the public to have too much of a good thing, and letting us spend out own money will corrupt us.

[Geoff Buckley]

I do wish people writing their comments would make valid points intead of reducing online debate to the level of a shouting match in the back room of a labour party club!
Our revered and lofty leader ( Brown I mean) could perhaps read David Copperfield and take on board Mr Micawbers pithy remarks re fiscal prudence ( prudence used to be Browns Favourite word!) Geoff Sunbear
PS I have nothing but utter contempt for the EEEYUU! Trade Yes control NO NO NO!

[Geoff Buckley]

Socialism has always and ever will be agin people enjoying the fruits of honest labour ! life liberty and the pursuit of happiness does not enter their narrow minds ! Joy and freedom are low on their agenda On the National Banks of greed a minion of Barclays informed me proudly that they would " forego their "bonuses " this year! as I protested a fine for an alleged late payment (cancelled when a I threw a strop !) When I was in work one agreed a salary and hols etc If you had dared to mention bonuses your feet wouldnt have touched ! Geoff Sunbear

[johnC]

'The only way to restore confidence in our economy is to set out a credible strategy for living within our means."

Very true. So where is the Conservative plan for the specific cuts in public spending needed to balance the national books ?

[Denis Cooper]

I'd very much like to see Cameron and Osborne set out "a credible strategy".

But they don't. They jeer from the sidelines, one sound bite or another, mostly about trivial or minor issues, but there's no indication of any strategic thought.

I know some will say "Wait for the manifesto", and "It would be a mistake to reveal our best ideas so that Labour can steal them".

I disagree. We're in the midst of a national economic crisis, and for a patriotic party making any possible contribution to the solution of that crisis, for the sake of the country, would automatically take priority over party interests.

I come back to two central economic issues, on which Cameron and Osborne have remained silent:

1. Instead of removing "toxic assets" from the banks, Darling has left them in place but insured them, for a derisory "premium", at massive risk to the taxpayer.

2. Instead of using "quantitative easing" as part of a process of removing "toxic assets" from the banks, Darling is using it to rig the gilts market so that he can carry on borrowing and spending.

Until the banks have been sorted out, the prospects for economic recovery will remain distant; so the government will desperately seek to avoid cutting public expenditure, because it knows that any significant cuts at this time would necessarily mean consigning millions of people to the dole queue - private sector, as well as public sector, workers; so it will have to borrow as much as it can, to fund as much public spending as possible, in the hope that somehow it can carry on doing this for long enough to ride out the crisis.

As I've asked before -

"If Gordon Brown announced today that we were having a general election, and in a few weeks time Cameron became Prime Minster and Osborne became Chancellor, what would they do to mitigate the economic catastrophe facing the country?"

[Adam]

Cameron's credibility in relation to what he says on the UK economy is damaged because he was totally signed up to Brown's spending plans and crazy accumulation of debt. Despite many commentators and Tory party members not least on this site telling him to ditch his support of Labour's spending plans, he wouldn't budge. Even now, he clings on to most of Labour's spending plans and refuses to come out in simple and plain (and honest) language explaining what needs to be done. How are we going to be fiscally responsible when our spending plans hardly reduce the projected debt under Labour's current plans?

We run the risk that if we are not clear in our message to the electorate, we will suffer at the ballot box. In the south we will have large majorities, in the north we won't and the election might well end up a lot closer than what the polls are saying.

[David Belchamber]

I do so agree with Denis Cooper:

"1. Instead of removing "toxic assets" from the banks, Darling has left them in place but insured them, for a derisory "premium", at massive risk to the taxpayer.

2. Instead of using "quantitative easing" as part of a process of removing "toxic assets" from the banks, Darling is using it to rig the gilts market so that he can carry on borrowing and spending".

I have been plugging the idea of a 'bad bank' buying toxic assets from at least the part-nationalised banks since last October. I added the all-important proviso that the the purchases would be on condition that the receipts were used to pass on to customers by way of loans.

I also agree with Denis that voters deserve to hear 'a credible strategy' from the conservatives.

It could be to restore to the BoE its responsibility for the oversight of the banking sector, the setting up of a bad bank on the Swedish model, the imposition of an index that reflects the real cost of living, the search to create thousands of jobs, albeit some of them temporary, and other similar ideas. But let us hear some positive principles!

Getting the country out of Labour's mess (with a quite a bit of help from our friends) will be very costly; at least let us have something worthwhile to spend a lot of the money on, so that we have something positive to show from the recession.

[Richard]

Our economy is in the worst state it has been since the 1930s; international opinion is that the UK is worst placed to deal with the mess; few world leaders agree with our Prime Minister as to the solutions. At the same our Prime Minister clearly has serious "problems" that prevent him from admitting that he has made mistakes and facing up to the true extent of our problems.

It is clear that our Head of State, the Queen has lost faith in him when she invited the Mervyn King to meet her. She clearly believes that Gordon Brown is not telling her the truth. Most worrying of all the Bank of England and HM Treasury clearly have no faith in the PM either.

At the sametime we have shocking education and health, rising crime and out of control immigration. The Government have clearly lost control.

The Conservative Party should be calling for a vote of no confidence in the PM and his government. The reason they are not, I suspect is that their own economic policy is so weak that they wouldn't know what to do if the Government did fall.

[Jules in London]

Growth built on debt in the last 10 odd years has been a SHAM. UK debt to GDP is 500% in the US 350%. Profligate Gordy has buggered our country into penury. His fiscal stimulus to increase child benefit will not stimulate the economy, notwithstanding anyone who needs this benefit shouldn't breed and it is exploited by foreign claimants to the tune of £6k/week in some cases, as reported on C4. No one objects to pensioners getting an increase, after all Gordy gave them a 10p increase sometime back! Savers have been screwed.
The Tories are not communicating the message of this failed bankrupt govt. Mervyn King was honest, we cannot afford to spend anymore money as we don't have it nor can afford anymore debt. Yesterday's failed gilt auction was a warning. Jeff Randell likened Gordy to Bernard Madoff, albeit on grossly bigger scale, to the detriment of our country.
Come on Dave, go for the jugular, you need a bigger than 100 majority next May to consign the neo-socialists to at least 3 terms in opposition, as it will take at least that long to sort out the financial, economic, social etc problems inflicted on our country since 1st May 1997.

[Ross Warren]

Social responsibility is expensive. You can almost make an equation of it. The less we are willing to spend the more social problems we will create. So its going to be a tightrope walk. We have to recover our debts and we have to make that our moral crusade. This time we have to target the waste like never before. Attacking the debt should be our priority because the cost of servicing our debts is a real drag on our and the worlds economy. Lets also be straight with each other about the amount of pain and who is going to shoulder it. Fiscal prudence dictates a hefty retraction and we really do need some time frame to work to. How many years do we think it will take for the UK to be free of all indebtedness. This is why I do not cheer the likes of Dyson who swan off to make their Hoovers over seas.
This is why I resent every penny that we pay into Europa's Coffers. Debt is a drain on the present, and is a national weakness that we must over come. Rather than hanging on to money we should be paying as much off as we can. Even so we must be sensible in our repayment schedule it must not exceed a pace that would cause discomfort to turn into disaster. That's a real danger that could arise if we failed to support one group fully. So we are back with social responsibility

[resident leftie]

Posted by: Malcolm Dunn | March 26, 2009 at 11:11

I think they have David Chandler, the era of tax havens is passing I think. It does need every country to act together however. Action in isolation is doomed to failure.

Holy crap! I'm in agreement with Malcolm Dunn again.

[ToryBlog.com - Usual health warning about me to please the Editor :-)]

Of course it is not a tax haven if the place changes slightly and actually attracts business and people to move there, which is a distinct possibility in the current environment.

Governments think they can squeeze their captive taxpayers and businesses even further by closing off the tax haven escape route before ramping up taxes to pay off their enormous debt, but the new dimension of the 21st century is mobility.

This will be another case of unintended consequences I think.

[snegchui]

How many businesses are leaving UK to HQ elsewhere in EU to escape Grabber Gordon with cap in hand and assorted thugs behind?

Tax havens and tax free development zones - are both unethical?

[snegchui]

Posted by: Malcolm Dunn | March 26, 2009 at 11:11

"I think they have David Chandler, the era of tax havens is passing I think. "

Have the US states of Delaware, Nevada and Wyoming been informed of this? Apparently they are still incorporating anonymous corporations hand over fist.

Has Gordon done his homework? One hour on the internet and £500-600 in costs to establish a UK anonymous shell company says he hasn't.