The Economy

If the argument for the fiscal stimulus is not economic, but social, let the Government make that case. We are repeatedly told that the fiscal stimulus is needed as part of the package of measures to rescue us from our share of global deflation—a completely separate argument. The third respect in which the Government aggravated the crisis was in the language that they used to describe their economic policy to businesses, the markets and the public in the past decade. When the Prime Minister, as Chancellor of the Exchequer, said, I am told, 120 times in the House of Commons alone that he had put an end to boom and bust, he may have thought that he was making a clever reference to Conservative policy, but he was also sending a strong message to those taking decisions about their mortgage and business lending. One of the reasons why Britain's personal indebtedness is so high is that by saying he had abolished boom and bust, the then Chancellor was reassuring the public that it was safe to go and borrow to the hilt, and that is what happened. The combined effect of a large fiscal deficit and a massive rise in personal borrowing is now highly toxic for the British economy. Millions of borrowers will need to rebuild their savings, slowing the pace of any recovery. The Government will have to close the gap between spending and taxation, and that is going to be extremely difficult to achieve. It will be painful for many years to come if Britain's creditworthiness in international markets is to be sustained. I sometimes wonder whether the Prime Minister was foolish enough to believe his own rhetoric about boom and bust. Why did he embark on such a spending spree after 1999? Did he, too, believe that he had put an end to boom and bust? At that time, many people in the City and the House warned him that that would be an illusion. Here, if I may beg the tolerance of the House for a moment, is one of my efforts to warn him:""Labour talks as if it has abolished the business cycle when it refers to the end of boom and bust"—" I was saying this in the House nearly a decade ago—""but the business cycle has always been with us. There will be a recession. I do not know when, but I guarantee that there will be one. It may be sooner or later, but, when it comes, the relatively incautious fiscal position that I have described will be found to be extremely vulnerable."—[Official Report, 20 April 1999; Vol. 329, c. 784.]" The Government, led by the Prime Minister, still persist in arguing that this crisis was largely an American one. We heard more of that today, but the severity of the crisis and the difficulty of a recovery, is very much part of the Government's responsibility. The Prime Minister's plain denial of all that is getting in the way of sorting it out, clouding the Government's judgment and corroding their credibility with the public. Let us compare this situation with the poll tax. That was a mistake—not such a big one, but still a mistake. The Conservatives, albeit with a new leader, owned up to that mistake. That honesty undoubtedly contributed to the election victory of 1992. So far, I see no evidence at all from this Prime Minister, who is also a new leader, that he understands that simple point. I do not worry whether his denial is damaging Labour's prospects, but I worry very much that if it persists, it will damage the country's ability to deal with the crisis. That, above all, is why this Government have to go and why it will fall to a Conservative Government to clean up the mess.