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Ask the Chancellors: The verdict

UK chancellor debate

This year’s General Election in the UK will be the first to feature the live debates that the U.S. and other countries have enjoyed for 50 years.

Come on, we gave the world the Magna Carta, what more do you expect?

Tonight we got our first taste of how these debates will play out with Channel 4’s Ask the Chancellors, which pitted Labour’s incumbent UK chancellor Alistair Darling against the Liberal Democrats’ Vince Cable and the Conservative party’s George Osborne.

Kennedy versus Nixon this was not – it was more like watching three Council officials quibbling over how much money to spend repairing the duck pond.

Despite repeated mentions of Britain’s ‘serious’ problems, a viewer from Mars or Minneapolis would never guess we’re currently borrowing £167 billion every year – nearly 12 per cent of our GDP – or that we’ve just come through the deepest recession since World War II.

Instead, it sounded as if the three would-be UK chancellors had been hauled in front of the headmaster to find out who’d taken 50p from the tuck box tin. And naturally, nobody was confessing.

Dishonest guvs

What the electorate claims to want is honesty, though just like the politicians I doubt it really does.

No matter – on tonight’s showing, it will go wanting.

The nearest we came to across-the-board candor was when the host, Krishnan Guru-Murthy, got each candidate to concede that the cuts required are on the same scale as those implemented by Margaret Thatcher in the 1980s.

Really? I lived through those times and I can remember the scraps, the pain, and the huge social changes. Yet there was no portent of that in this debate – instead we were offered the prospect of a few knobs being dialed back here, and a few zeroes being lopped off there.

Only Cable admitted that ring-fencing anything – such as the NHS – would mean even bigger cuts elsewhere. A brave move, given that every question from the audience pleaded a special case to avoid the axe themselves.

When the cutbacks come, the country isn’t going to be ready for them, that’s for sure. This is downright reckless, and I’m starting to wonder whether there will be 1980s-style civil unrest as a result.

All pain, no gain?

Perhaps the electorate is as stupid as everyone keeps claiming it isn’t, if it really thinks we can reduce the vast public debt without some fundamental changes as to how our economy functions.

What’s truly lamentable on this score is that as I bemoaned on Saturday, none of Darling, Cable or Osborne have any big ideas to rival the Thatcherist agenda of the ’80s (or even the Blairite one of the ’90s for that matter) and so they offer no hope of gain for all this pain.

Osborne in particular just sounds bleak and defeatist.

The UK was one of the leanest economies in the world in the mid-1990s, thanks largely to the years of austerity under the Conservatives, and the nasty recession of the early 1990s that forced through yet more change. Osborne should be shouting that from the rooftops, and condemning Labour for not putting aside money in the good years that followed, or at least giving more money back to the public through lower taxation so we could raise taxes from a smaller base now.

Instead, he sounds like a new Labour imitation of a Conservative.

Unlike dyed in the wool Tories, I do believe the first Labour administration had some decent policies, and that it redressed some deficiencies where things had gone too far, particularly in health and with the minimum wage.

But after 13 years, the public sector has become so bloated – even before the downturn – and the reliance and reflexive lauding of public sector spending so institutionalized, that the idea of the private sector generating wealth has become almost the dirty word it was in a pit village in the 1980s.

I supported Government spending during the recession but the recession is over.

Britain is growing again, and emergency measures shouldn’t be taken as an excuse to maintain public spending for years to come, nor to avoid reform.

What about the private sector workers?

It was a full 52 minutes into the one-hour debate before George Osborne had the guts to say we needed a strong private sector recovery to best tackle our debts, and that we couldn’t rely on the public sector to generate prosperity.

52 minutes!

Oh far a Margaret Thatcher standing in Osborne’s place and tearing shreds off Darling and Cable, while inspiring us with the obvious truth that capitalist economies work best when private enterprise is put front and centre.

Yet there was far more time given to bankers bonuses and the pseudo-problem of banks not lending than any discussion about helping businesses grow.

Cable got in a good quip about ‘pin-striped Scargills’. He didn’t sound like he could tell an entrepreneur from a main course at a French restaurant.

Darling admitted that banks were in actuality lending, but just not as fast as healthy private businesses were repaying their debts. Yet he then went on to bash the banks for not lending more money anyway, only to say in barely the next breath that HBOS and Northern Rock went down because of reckless lending!

This is Alice in Wonderland stuff that most people aren’t clued-up enough on to follow.

Obviously Darling knows the same, the man’s no idiot, yet both he and especially Osborne often sound like they’re talking to school children. You might expect nanny-ing from a socialist, but Osborne really should be doing better.

Cable as ever is in the luxurious position of being able to tell the truth because there’s no chance of him ever being elected into power, and he did so again tonight. Tomorrow morning, as always, most viewers will tell their workmates that they wished Cable was a member of the Labour party, yet if he was standing in Darling’s shoes I’m sure the honesty would be taken out of his delivery, too.

The key is that Osborne and Darling don’t sound dumb – there’s clearly plenty going on behind their earnest masks. Rather, they sound like they think we’re dumb, and it rankles.

The final verdict

On the subject of rankles – the final scores.

Winner: Vince Cable

Score: 8/10

Not a vintage performance but a predictable champion, Cable got the first and the most laughs, yet far from playing to the crowd he also warned several times that deep cuts would be required, and that no Chancellor could please everyone – and he did so without the obligatory ‘but’ tacked on the end. Cable remains the nation’s answer to Gandalf the Wizard; it will be fascinating to see if he can pull anything out of a hat come a hung Parliament.

Second place: Alistair Darling

Score: 7/10

Darling sounded more human than he previously has, and I stand by my previous begrudging support for the man – perhaps if he’d been Chancellor instead of Brown alongside Blair, less radical spending cuts would be required now. He called the recession right and did a fair enough job in herding the banks through the worst of the crisis (albeit it near-crippling Lloyds in the process). Darling has also increased the right taxes, if we must increase taxes, but he’s showed no sign of how he’ll do the harder bit – the cuts.

Last Place: George Osborne

Score: 4/10

Poor George. No knockout blows, no killer marshalling of the facts (Cable sounded far more with it on the details) and worst of all he seems to be fighting with one hand behind his back. Desperate not to sound like an old-school Thatcherite – let alone on Eton-educated one – Osborne comes over like Tony Blair by talking about equality and bigging up today’s National Insurance announcement like it’s some great rolling back of the State.

The irony is that I agree with many of Osborne’s core points (remember that spending cuts now would still take months to get going anyway) yet his delivery is hopeless. I can’t believe he’s as out of his depth as he seems, which makes him the biggest unknown quantity of the three should he ever get into power. And like the markets, voters hate uncertainties.

Readers: Did you watch the debate? Who did you think won the day?

{ 13 comments… add one }
  • 1 LeanLifeCoach March 30, 2010, 3:07 am

    So your politicians are in just as much denial about the need to get fiscally responsible? What do you think its going to take to get government to take their budgets seriously?

    Maybe it’s time for a new form of government where personal finance blogger’s control the budgets!
    .-= LeanLifeCoach on: Combat the Closing Techniques – The Make It Affordable Close =-.

  • 2 UK Value Investor March 30, 2010, 8:47 am

    I’d have to agree with your ranking. I think the key factor is believability; Cable is the most honest (or at least comes across that way), followed a great distance behind by Darling and a cringe worthy Osborne. Personally I’d much rather see Cable go up against Mandelson and Clarke, at least they’re funny.
    .-= UK Value Investor on: Goodbye EDP, hello Luminar =-.

  • 3 Monevator March 30, 2010, 9:24 am

    Agreed. Osborne is a man out of his time. Plop him in the 1980s, and he’d be roaring along with a bottle of Tattinger champage in one hand and a Thatcherite manifesto in the other. He’d be elected for it, too.

    UK Value Investor I agree with you on the joke front, though Alistair managed to land a corker on Osborne about stealing the stamp duty idea.

    Five days left to bring in Ken Clarke. Not going to happen, more’s the pity.

  • 4 The Investor March 30, 2010, 9:27 am

    @LLC – I guess, cynically, that one thing honesty requires is for there not to be an election imminent. In the US you have those mid-terms, which puts politicians on an almost permanent war footing. In the UK at least this only happens once every five years.

  • 5 Lemondy March 30, 2010, 9:40 am

    Osborne exceeded my low expectations. Darling was too pompous. Vince, oh, Vince, we love you so.

    “When the cutbacks come, the country isn’t going to be ready for them, that’s for sure. This is downright reckless, and I’m starting to wonder whether there will be 1980s-style civil unrest as a result.”

    Amen to that. The student asked who would guarantee her a job and a house, Christ. It scares the crap out of me.

  • 6 The Investor March 30, 2010, 10:28 am

    @Lemondy – Indeed. As an act of mercy to long-suffering readers, I chopped out a chunk of this post that ranted on about all the students doing themselves and us no favors studying esoteric subjects that will never land them a better job.

    Has anyone else noticed how the jobless students pulled up by the news reporters during the recession always studied something along the lines of 18th Century art history, Norwegian runes, or black and white photography?

    I’m not a philistine, I agree those subjects have a place, but only in the minds and hands of the very best. If we must target 50% going to University, then let’s make sure the rest learn something useful and productive, that has a chance of repaying their debts and the country’s.

    I thought it was shocking how everyone engaged with her question so intimately (not least the cameraman) but not one of the would-be chancellors was really prepared to stand up for the woman who asked about wealth creation. A sign of the times, no doubt about it.

  • 7 OldPro March 30, 2010, 12:08 pm

    Certainly George makes one long for the good old days when right-wingers were cutting back the state from the moral high ground.

    Everyone feels entitled today. We’re turning into Scandanavia but without the blondes or saunas.

  • 8 Niklas Smith March 30, 2010, 12:37 pm

    Firstly, anyone who missed the debate can watch it here: http://www.channel4.com/programmes/ask-the-chancellors/4od#3052871

    Secondly, I disagree with some of your points. While most questioners wanted some kind of special favour, the one I remember most was a middle-aged woman (I think) who said bluntly that public sector pensions were unaffordable and asked which of the politicians would cut them.

    The standard of the debate was surprisingly high, although it sometimes drifted away from the specific question being asked. We certainly got more policy substance and less mudslinging than is usual in Prime Minister’s Questions.

    More generally, the impression I got was that all three of them were rather gloomy and open about the need for cuts, though Vince Cable was the most honest in terms of setting out what he would cut and by not promising to ringfence anything.

    The spectacle of George Osborne responding by defending New Labour’s NHS spending shortly after having announced that he’d discovered £12 billion of “efficiency savings” was one of the best laughs of the show, though it is worrying that he might well become Chancellor. (Please, Mr Cameron, give us Ken Clarke or Philip Hammond instead!) How any responsible politician can promise real-terms spending increases on the second-largest part of the budget every year over the next Parliament is a question I cannot answer.

    As for the private sector driving the recovery, one reason they didn’t mention it until the end was that most of the questions were more narrowly about public finances. Another reason is there is little the government can do (at least fiscally – regulatory reform is another matter) to encourage more private investment and consumption because there is no money available, as Darling pointed out repeatedly. Only Osborne had a concrete plan to stimulate job creation by cutting National Insurance contributions, but he spoiled it by claiming he could pay for it by cutting waste.

    What do you think the government can do (positively or negatively) to strengthen the private sector, given the dire public finances?

  • 9 The Investor March 30, 2010, 12:59 pm

    @Niklas – Thanks for the comments and the link to the show. Well worth watching.

    Yes, I did agree the standard of debate was higher than we usually see. The issue for me is that it wasn’t at the level it should be, given the huge debts and over-expenditure to be tackled. So ‘better than usual’ yes, but ‘good enough’ – not for me.

    I disagree that there’s little a Government can do to encourage the private sector; there’s a reason why China has boomed for the past 30 years, in the most extreme case, after increasingly opening up its markets to capitalist activity.

    Yes, a fair bit of this is regulatory, but there are other fiscal measures, too.

    There is no money available because they’re not cutting spending – if we cut spending, money is freed up. In other words, I don’t accept Darling’s starting position.

    I’d cut spending and reduce corporation tax and NI contributions, especially for smaller businesses. I’d look to float whole Government departments and spin-off chunks of the NHS. I’d discriminate where University funding went — instead of it being driven by student demand, I’d take more account of the requirements of industry and the economy, to produce a more productive workforce. I’d throw out the inane 50% target for higher education, but redirect some of that money saved into vocational training and grants for poorer but high-flying students. I would draw a line under increasing maternity rights and other interventionist regulation, and leave companies to get on with hiring the best as they see fit, with rights instead protected by the courts.

    I’d also take an axe to the entitlement culture that rewards fecklessness behaviour by young women who get pregnant, and young and old men and women alike who presume they can subsist off the state. Not a pretty thing to say these days, but with £203 billion going on ‘social protection’ it’s vital (Source: http://contexts.org/graphicsociology/2009/12/15/uk-public-spending-distribution/). Ditto public sector pensions.

    The above is going to happen one way or another anyway, but I’d try and do it from a position of progress – and I’d massively simplify the tax system, while I’m at it.

    I’m far from a right-wing nutter. I have no problem with inheritance tax, for instance, and right now I can see the logic for a 50% tax rate for higher earners. But 13 years of a socialist Government buying votes by weakening self-reliance has to come to an end to keep the country competitive.

    Admittedly some of this would in the short-term just represent shifting numbers from one column to the other, but in the medium to long-term I think history has proven most activities are more efficient and productive when in the hands of the private sector, so I’d expect net gains over time.

  • 10 OldPro March 30, 2010, 1:13 pm

    Give that man a vote! Of course Government spending affects private activity and consumption. Google “crowding out” to get going.

  • 11 Faustus March 30, 2010, 5:18 pm

    I agree with you about the first Labour term in 1997-2001 – Brown was sensible then in sticking to Tory spending plans, running a current account surplus, and using it to pay off the national debt. It horrified the old-time socialists, but it was the right policy.

    Around this time, something went horribly wrong in Brown’s head, and since 2001 he has been on a profligate spending binge, while interest rates were kept too low, resulting in the crazy housing bubble, looming personal debt mountain, and worsening government deficit.

    Now Osborne wants to stick as closely as he can to Brown’s spending commitments. It is a daft policy – particularly the ringfencing idea – which means protecting those areas, such as NHS and primary education that have been the chief beneficiaries of Brown’s spending spree and need to be slashed most of all.

    It is worth pointing out that very few benefits seem to have resulted from this spending – our hospitals are as bad as they were before, and educational attainment is no better – because most of the money ended up inflating GP’s and teacher’s salaries due to poor negotiation by the government.

  • 12 Lemondy March 30, 2010, 5:28 pm

    The small bits of the welfare state I personally encounter are completely insane. Child Benefit without means testing – insane. The means testing on Child Tax Credit is insanely generous. The Child Trust Fund scheme is redundant. The huge (and incompetent) bureaucracies necessary to administer these schemes – in addition to the rest of HMRC – also insane.

    I’ve had people working for me say that they can’t work more hours because they would lose out on benefits. The system is insane. This accumulation of vote-winning welfare scheme after vote-winning taxation tweak needs to be reset.

  • 13 Neil Wilson March 31, 2010, 5:42 pm

    Your point on cutting corporation tax for small businesses is perverse. That encourages the rape of small companies by capital, inappropriate incorporation, and most importantly it means that companies tend to stop growing when they reach the marginal tax rate.

    Much better would be to abolish corporation tax for companies with profits less than, say, £500K and make the profit attributable to the members at their marginal rate. And in return for that I’d allow all expenditure by the company against tax – capital or revenue – and preferably slash employers NI as well.

    The general theory would be that small companies wouldn’t ever make any profit, as they would be too busy investing and creating jobs in their quest to get enough profit together to pay corporation tax at 28% rather than income tax at 40/50%

    And we really, really need to scrap NI and put it on income tax. Let’s stop pretending pensioners are all destitute. I can tell you many are not.
    .-= Neil Wilson on: Where your taxes goes (and a bit more besides) =-.

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