It’s an ill wind that blows nobody any good. Gordon Brown might not think so at the moment, but the collapse of global capitalism could save him from the ignominy of an unscheduled exit from Number 10.
With the demise of Lehman Brothers, the takeover of Merrill Lynch, the rescue of AIG and the merger of HBOS with Lloyds TSB, there is little certainty left in the financial world. Labour activists and backbenchers might be disgruntled ahead of their annual conference, but would they really try to oust the prime minister at this time?
That’s not to say that he is safe until the election (see Recovery position). The events on Wall Street might have bought the PM more time, but there’s still plenty of short selling in Brown shares.
A lot will rest on the atmosphere in Manchester and on Brown’s conference speech. He might be tempted to offer some fiscal carrots to woo voters and appease the party malcontents. This would be understandable, especially with the Tories promising to ‘share the proceeds of growth’ and the Liberal Democrats committed to slashing the basic rate of tax by 4p.
However, it would be a mistake. A tax giveaway might be good politics, but it would be bad economics, particularly when even the most hardened free-marketeers are looking to Big Government for bailouts.
A reduction in the tax take would have to be paid for by cuts in public services or increased borrowing – neither of which would be welcome at this stage of the economic cycle.
The LibDems claim that £20bn could be saved by, among other things, axing Whitehall departments and making non-frontline public sector employees earning more than £100,000 to reapply for their jobs on lower salaries.
It’s not hard to see why one senior LibDem told PF this week that the plan was ‘bonkers’ (see news story). But there are also problems with the Tories’ stance on sharing growth – something that seems fatally flawed when there is no growth to share.
Brown has to avoid this type of empty politicking. He’s been searching for a big idea to differentiate himself from the Opposition parties. Perhaps this could be it.
