The ability to speak truth to power is a rare skill. But power speaking truth to the people is perhaps rarer still.
In 1976, prime minister James Callaghan addressed the Labour Party Conference in Blackpool amid a financial crisis. Sterling was in free fall, inflation was rampant and soaring borrowing costs had forced Britain, only decades earlier a global superpower and world war victor, to call in the International Monetary Fund for a loan.
The party faithful, accustomed to Labour governments adhering to the Keynesian theories of spending one’s way out of recession, was shocked by what Callaghan said next:
“I tell you in all candour that that option no longer exists. And that in so far as it ever did exist, it only worked on each occasion since the war by injecting a bigger dose of inflation into the economy, followed by a higher level of unemployment as the next step.”
The similarities between then and today are almost too neat, a sort of uncanny valley of fiscal missteps. What was a leading cause of the 1976 crisis? Conservative chancellor Anthony Barber’s famous ‘dash for growth’ budget of 1972, with its large tax cuts that sparked the high inflationary cycle that culminated in the humiliating IMF loan. There was also an energy crisis, in the guise of the 1973 OPEC oil embargo.
I thought it was worth going over that period, not because of some highfalutin view that those who don’t read history are doomed to repeat it but because, to be blunt, sometimes the bad thing happens. When governments get it wrong, particularly on fiscal policy, the consequences can quickly become very serious indeed.
At Prime Minister’s Questions today, Liz Truss appeared to suggest that there will be no cuts to public expenditure as a result of the £43bn unfunded, tax-cutting budget. Given the market turmoil over the last few weeks, with investors concerned that Britain is not serious about repaying its debts, that is some hostage to fortune.
Perhaps there is some clever accounting going on here. Inflation will certainly eat away at departmental spending, while the £60bn energy support package may allow for substantial cuts elsewhere (there was some rowing back by the prime minister’s official spokesperson after PMQs).
But only yesterday, the Institute for Fiscal Studies thought that £60bn worth of savings would need to be found. That is not spare change down the back of the proverbial sofa. Rather, it is the combined total Departmental Expenditure Limits of the Ministry of Defence, Justice and the Department for Work and Pensions.
It is quite simple, really. The policy decisions in last month’s mini-budget cost money. Not only the £43bn in tax cuts, but also the additional cost in borrowing inflicted after the markets took fright. If you want to cut taxes and get debt falling over the medium term, as the chancellor proposes, that requires substantial spending cuts.
Despite Brexit, Scottish independence or whatever politicians of many stripes will tell you, mathematics has not fundamentally altered. Trade-offs still exist. If something sounds too good to be true, it probably is. But on present form, it seems unlikely that today’s occupier of Number 10 has any plans for greater candour.
In the comment pages, Ayesha Hazarika takes you, a normal person, through the Labour/Ilford South/Sam Tarry/Momentum affair, and concludes the end of Labour’s drama detente shows Keir Starmer means business.
While Robbie Smith discovers the surprising truth about how to create a buzz for your latest film: have audience members pass out and throw up.
And finally, a star of screen and stage, amateur detective and singing teapot, Dame Angela Lansbury did it all in a remarkable career spanning eight decades. I dare you to watch this stunning performance of Beauty and the Beastand not discover a little something in your eyes.
