Fraser Nelson

I’ve read and re-read Cameron’s speech on the economy, hoping that I had somehow missed the radical message to answer Gordon Brown. I have given up. Britain is facing a tsunami of unemployment, two years of recession if we’re lucky and what do the Tories have to say? They’ll set up a new quango, and try to tinker with council tax. We had new phrases: instead of “irresponsible capitalism” we’re told there will be “responsible free enterprise”. His dreadful “social responsibility” phrase is making a comeback in the form of “economic responsibility” and remains just as vacuous as a concept. Much of the detail appears worryingly wrong-headed.

British households are far less able to deal with the credit crunch because taxes have risen by the equivalent of £6,520 per household compared to 1996/97 levels. This ratcheting up of the tax burden has been a steady feature of the Brown years but it is being felt with particular force now. During the boom years, homeowners felt richer as their house price rose at the fastest rate in the OCED and borrowed massively. So now, when the debt tap is choking, millions of households are right up against it because of this higher tax take. A tax cut is, of course, how to help people facing soaring food and fuel bills. But Brown has spent the money, and the bank bailouts mean even further tax rises.

As Gordon Brown says, Britain is indeed “leading the world” – but into recession, a property market collapse and soaring unemployment. This—not the stock market indices which mesmerise a bewildered House of Commons—is what matters. Take today’s inflation data – it shows a 30 percent rise in electricity prices, 40 percent for fuel prices and 50 percent for gas prices. And that’s before the winter sets in and everyone puts their central heating on. Food inflation is 13 percent and within that meat is up 20 percent. Globalisation continues to push down the costs of imports in relative terms, so overall CPI inflation is 5 percent.

Another breathtaking Brownie at the Prime Minister’s press conference today: “I have to say we face this situation with relatively low national debt because of the steps we have taken since 1997, where we wiped off perhaps more than around £100 billion of debt by reducing the proportion of debt in our national income.” Huh? The ONS is unequivocal: net debt was £351bn in May 1997 and £632bn in August – or £545bn if you exclude Northern Rock. So where is his “wiping out” of £100 billion? Normally with a Brownie you can see how he cooked up the fake figure. But this time, it really does look like he just made it up. Consider this for a moment.

The Euro summit is underway now, and I’ve spoken to a few of my better-informed contacts about it. Here are some thoughts:-   1)      The bailout model they’re meant to agree to in Paris does, indeed, seem to be that of Sweden ‘92. It’s being called that in France and Germany, but you can bet Brown will be calling it the British/Brown Model – he’s on a relentless mission to make political capital out of this. 2)      It is worth someone (like Cameron) pointing out that the UK is probably in the worst position of the EU countries. Not only were our banks the most over-extended but our household debt is the highest any G7 country has already seen.

Not content with saving us poor souls in Britain, our Dear Leader now wants to save the world – and says so in tomorrow’s Times. He is demanding that other dithering countries copy his bold plan. It’s become the major theme of Saving Private Gordon – that the rest of the world will be inspired by the Dear Leader and show their love for him by adopting a similar bank recapitalisation scheme. Brown has mentioned the international element of this so often that I have started to smell a large, whiskered rat and I’d like to run a theory past CoffeeHousers. Gerard Baker tells us that the G7 had been talking about a co-ordinated response to the financial crisis.

Sweden really does rule. What Mervyn King and Gordon Brown have agreed today is, essentially, the Swedish 1992 bank bailout plan, (NYT write-up here). It was authored by the same conservative government which introduced the voucher school model that the Tories are proposing to replicate. While the UK bailout is comparable to the Paulson plan in the US (adjusting for the size of the respective economies) in terms of scale, it is a far better plan. And this is where Gordon Brown does deserve some credit. Instead of buying toxic waste, as Paulson proposes, the UK taxpayer is injecting capital and taking preference shares. This means that if the economy turns around, the UK shareholder will be first in line for the dividends.