So this is it. The die is cast. The battle lines have been drawn. By ripping up his pledge to match Labour’s spending plans, David Cameron has apparently opened up clear political water over tax and spend policies.
The government, he says, is creating ‘a tax bombshell’ with its plans for unsustainable borrowing and unfunded tax cuts. Ahead of Monday’s Pre-Budget Report, the leader of the Opposition has set himself squarely against the Brownite strategy of a short-term fiscal stimulus to dig the country out of recession.
It’s a high-risk manoeuvre, born out of panic at his own party’s waning electoral fortunes. The Tory lead has recently collapsed from over 20 to just three points, largely due to its unconvincing performance on the economy.
Cameron’s attempt to adopt the discarded garb of Prudence might win him brownie points among the party’s backwoodsmen. But it has gone down badly with the CBI and the Institute of Directors, who agree with Brown/Darling that ‘extraordinary times call for extraordinary measures’.
Nor is Cameron’s fiscal conservatism quite the pre-Christmas message that the public wants to hear.
Ironically, given what could be a serious political misjudgement by the Tories, the chasm between the parties is not so great as it appears. The scope for counter-recessionary measures is more limited than the hype suggests.
In practice, less than £5bn worth of capital investments are likely to be fast-tracked. Some modest tax relief for low-income workers, and a few other giveaways, can also be expected.
But even these short-term fixes need to be paid for. The chancellor is seeking to reassure the money markets with a new Whitehall efficiency drive (Gershon Mark 3?). Meanwhile the Conservatives are fending off accusations that their penny-pinching will lead to hospital and school closures with promises of… an efficiency drive.
However, the scope for savings is extremely limited – particularly in a recession. A gulf is certainly opening up in politics, but mainly between rhetoric and reality.
