Saturday, March 28, 2009

Byers tells it like it is

The North Tyneside MP's comments on Gordon Brown's economic policies this week may have been deeply unhelpful, but his analysis is spot on. Here's today's Journal column.

At the start of the year, I wrote that Gordon Brown’s chances of political survival up to the next general election would ultimately depend on whether his economic rescue package showed any signs of working.

There will be those who claim the fabled “green shoots of recovery” are already appearing – in the London housing market for instance.

But it will take more than a few satisfied estate agents to convince the rest of us that the economic downturn is bottoming out and that the good times are just around the corner again.

After all, there remains considerable doubt even among some of Mr Brown’s natural allies as to whether his remedies for the country’s economic ills are the right ones.

Mr Brown would like to believe there is a broad national and international consensus for the “fiscal stimulus” measures he has been advocating, and which he continues to claim are being copied the world over.

Unfortunately for him, this is very far from being the case as events this week have only served to emphasise.

If it was just the Tories who doubted the efficacy of his proposed solutions, Mr Brown would have less cause to worry – but some of the opposition has been coming from people who might have been expected to show him more support.

Most notably, it has come from the Governor of the Bank of England, Mervyn King, and his former Labour cabinet colleague , North Tyneside MP Stephen Byers.

Mr Byers may normally be a mild-mannered sort of chap, but his comments ahead of the Prime Minister’s world tour this week to drum up support for his measures ahead of next week’s G20 Summit could not have been more wounding.

He claimed the proposed summit agenda was too ambitious and also called for the withdrawal of the 2.5pc pre-Christmas cut in VAT, the centrepiece of Brown's domestic economic stimulus.

“The 2.5pc cut in VAT may appear modest but it comes at significant cost. On its own figures, it will cost the Treasury £8.6bn between April and the end of the year,” he wrote.

He suggested this money would have been better spent on raising personal income tax allowances in the Budget by £1,520, taking around £1.7m low-paid workers out of tax altogether.

More damaging still was Mr Byers’ claim that Mr Brown’s attempts to get international agreement on an economic rescue package at the G20 Summit will fail, with serious political consequences for Labour.

He said the next month would prove "make or break time" for the Prime Minister, with the outcome of both the Summit and the Budget likely to be decisive to his chances of re-election.

Although this will have been regarded in Downing Street as deeply unhelpful, Mr Byers is correct in his analysis of the government’s position.

It shows that the supposedly “settled will” of the Labour Party, that Mr Brown should lead the party into next election come what may, is not necessarily as settled as all that.

It was perhaps unlucky for the Prime Minister that Mr Byers’ intervention came on the same day Bank governor Mr King went public with his doubts about the Brown strategy.

He told the Treasury Select Committee that the government should not unveil any further fiscal stimulus in the Budget because the public finances are already in such dire straits.

The Tories couldn’t believe their luck. Shadow chancellor George Osborne, said: "Not only has a former Labour cabinet minister attacked the ineffective VAT cut, but the governor of the Bank of England has said Britain cannot afford a further fiscal stimulus.”

“It leaves Gordon Brown's political plans for the G20 and the Budget in tatters. It is the Prime Minister who is now isolated at home and abroad."

For all Mr Osborne’s bullishness, the Tories have been having troubles of their own this week, with Shadow Business Secretary Ken Clarke taking a sledgehammer to the party’s flagship policy of raising the inheritance tax threshold to £1m.

His comment that this was an “aspiration rather than a promise” was followed by furious backpedalling on his part, but the damage in the eyes of the voters has probably already been done.

I suspect Mr Clarke was just telling it as it is, as is his wont. It does, after all, stand to reason that an incoming Tory government faced with a huge black hole in the public finances is going to be in the mood to cut taxes straightaway.

But inheritance tax remains a totemic issue for the Tories – not least because Mr Osborne’s autumn 2007 pledge to cut it dealt Mr Brown and Labour a blow from which they have never really recovered.

The debate over inheritance tax is just one more illustration of just how much the world has changed since then.

Mr Osborne’s dramatic move provoked Chancellor Alistair Darling to effectively double the threshold for the tax in his October 2007 pre-Budget report, but the truth is neither party would have made such pledges had they known what was around the corner for the economy.

Sure, any tax cut constitutes a “fiscal stimulus” of sorts, but like the cut in VAT, slashing inheritance tax is not going to make a real and substantial difference to the spending power of large numbers of people.

Meanwhile the wait for the “green shoots” goes on. And slowly but surely, time is running out for Mr Brown.

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Barnacle Bill said...

Personally I feel sad for the "Labour" Party not NuLabor, the experiment has failed massively with it's principal architect off on the speaking circuit, abandoning it to a bunch of second raters to try to pick the pieces up.
Broon is failed, the only trouble is there is no-one who has the interest of the Party at heart, and not their own greed, to administer the coup de grace.
So its all going to end in tears again, nevertheless Paul another pleasant and astute Saturday piece - thank you.

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Will the investiagtion into Jacqui Smith's expenses claim for porno films be called wan@ergate?

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daily pundit said...

Ref: Alan Shearer. He'll be gone by the end of the season.

David said...

The problem with Stephen Byers is that every criticism he makes of someone else, you could make of him also. He falls into that sad little camp of politicians who seem to believe that no-one should be allowed in power if they can't be a key part of it.