Economy

The recession has been intellectually thrilling, and I write that without a note of sarcasm. First, politicians argued as to whose understanding of Keynes was greatest; and now they’re in Keynes versus Hayek territory, over the timing and depth of cuts. The Chancellor and his Shadow have marshalled the various authorities who support their respective cases. The science of economics, if it is science, is in its adolescence. Should necessarily equivalent government policy be detirmined by pure intellectual opinions and reputations, especially as those are being forged for posterity by current events? Economics is as much history as science - like Coleridge’s lantern on the stern of the ship; it illuminates the waters through which we have sailed.

I must be one of the very few people who would genuinely like to see David Cameron give another speech on chocolate oranges. There was much mockery of it but it contained a very important point: there are some things that a business can do that have negative externalities to which the appropriate response is not taxation or regulation but social disapprobation. So, it was good to see Cameron promising both to use the power of his office to call out companies that sell age inappropriate products and to make it easier for people to protest against such behaviour. There are other areas where I expect social pressure could be effective. It would be fantastic if Cameron would say that only people who are domiciled and resident in this country for tax purposes are eligible for honours.

I know there's a danger of expending too many words on poster campaigns, so just a quick post to flag up the designs the Tories launched this morning.  There's one of them above, and two more based on the same theme - "I've never voted Tory before, but..." - which you can see here. To my eyes, at least, they're a massive improvement over the last, graveyard poster: refreshingly positive, while also attacking The Way Things Are Now.   Now, I know there are CoffeeHousers who liked the Death Tax poster precisely because it got down 'n' dirty, taking the fight to Labour.  But, despite their sunnier front, these latest posters will also hit Labour where it hurts.  After all, one of the ideas that Brown & Co.

If there was a story in the Sunday papers of a split between David Cameron and the two most senior figures in the shadow Cabinet over economic strategy it would be the talk of the town. But because it is about Brown and Balls versus Darling and Mandelson it is on the inside pages; it is as if the split over economic policy between these four men is priced into Labour’s standing. Patrick Hennessy reports that Brown and Balls would like to use the Budget as a pre-election springboard, announcing larger than scheduled increases in public spending and challenging the Tories to match them.

Aspiration is Gordon’s middle name. The Observer has an extensive interview with Brown and though the classification has changed class remains his obsession: Brown wants to fight the election on the middle classes. He spoke of little else. Education and family policy will be defined by Sure Start, child tax credits and the school leaving age; the NHS will offer yet more choice and unaffordable luxuries, such as one to one care. It may seem peculiar for a man who is synonymous with stealth taxes, and whose time in government will be remembered for the polarisation of society, to frame his arguments in such terms; but his reason is clear: Brown doesn’t want to debate the economy.

Here’s a question: to be a good angel or a bad angel? We know what Fraser thinks; Matthew Parris differs. Writing in the Times today, he asserts that he would give David Cameron the same advice he offered Margaret Thatcher in 1979: agree a gloriously unspecific manifesto. The details of hard-edged manifestos are ambushed well before polling day; discretion is the better part of valour. In the immediate circumstances of the Tory wobble both arguments are commendable. The Tories have unwound when trying to supply detail to flesh out their broadly radical ideas. Recognising marriage in the tax system has been their foremost blunder.

The longest recession suffered by any major country in this cycle seems thankfully to be drawing to an end, even if only by the narrowest of margins.  Such has been the severity of the downturn though, that, as the above chart shows, GDP has fallen back to the levels of mid-2005. The economy is basically the same size as at the time of the last election. This means for probably the first time in modern British history, living standards have failed to rise for almost the entire duration of a Parliament.   Sadly, the cost of the economy going nowhere has not been as lacking as the growth or living standard increases. The national debt has virtually doubled since the last general election, rising from £440 billion to £870 billion now.

Well hello there, Rompuy. We haven’t heard much from the new EU president so far – he was upstaged by Barroso at the Copenhagen conference, showing that the EU stage only has room for one super-ego*. But with the Lisbon Treaty ratified, in defiance of public opinion in Britain (and Labour’s manifesto pledge), he now has powers to advance the EU project further. His idea today: the possible development of a "humanitarian rapid reaction force" for the EU. This rung a bell with me. When I did my tour of duty in the Scottish Parliament, this was a goal of the SNP. They want to creep on to the world stage, without asking permission. One step is to send “observers” to various committees. But aid is the softest target.

Andrew Turnbull, who was permanent secretary at the Treasury from 1998 to 2002 and Cabinet Secretary from 2003 to 2005, has previous when it comes to criticising Gordon Brown. But his recent piece in the FT — ‘Six steps to salvage the Treasury’ — is one long barely coded attack on the PM. Take this line: “First and perhaps foremost, it [the Treasury] needs a strong ministerial team – a chancellor who wants to be chancellor for the full term rather than coveting the prime minister’s job.” Interestingly, Turnbull comes out in favour of the Tories’ plans to create an Office of Budgetary Responsibility. I know this is derided by some as yet another quango, but I actually think it will be an important reform.