Tuesday, June 30, 2009

Bleak Britain

Britain’s economic challenge is almost as severe as the challenge of its leadership. Economic decline in Britain is now the worst in fifty years, with GDP shrinking by 2.4% in the first quarter of 2009. Figures released today by the UK Treasury paint a bleak picture of the economy, with all sectors showing a decline and no evidence of the “green shoots” of growth, which Prime Minister Gordon Brown continually refers to. The decline is steep and creates a real set of challenges for the government. It’s the worst economic performance since 1958.

The OECD annual economic analysis of the country, also published this week, suggests that government spending needs to be curtailed so as to bring it back into the zone of reason. It said that Britain's deficit would climb to 90% of economic output – significantly higher than the 80% level the Treasury projected in its April Budget. In order to keep the UK economy in good health, it added, the Government should target "more ambitious" budget cut-backs once the recession is over.

Gordon Brown’s response to the OECD and others demanding austerity planning for the post-recession economy is a firm “no” followed by “maybe”. On Monday he announced a set of proposals for the remaining year of his term before he has to hold a general election. It shows he is committed to recycling – almost everything he announced has been announced before, in most cases just three months ago. The plan involves new commitments to social housing, new commitments to personal tutors for school students falling behind, preventive health checks, docking benefits, Lords reform. Nothing new. But cuts are already being made to the speed of growth of many government budgets and, after the election, the Labour Party indicates that it will make annual reductions in spending. Brown’s mantra is that “you cannot cut your way out a recession”. So he spends more than the country can afford.

David Cameron, the Conservative Party leader, makes clear that there is both a need to rethink government and to reduce spending. Interestingly, polls released this week show that the British people are confident that Cameron would be a better manager of the economy and would deliver on his promise to reduce spending. No one appears to be listening any more to Gordon Brown. The challenge Cameron has is that the more explicit he is about what he would cut and how he intends to reinvent government, the more Brown and the Labour Party are able to promote the politics of fear.

Britain is in the pre-election season and the two party leaders are laying down the lines of attack. Brown will promote his record and fear, Cameron will document Brown’s record and counter the fear with an agenda of “real change”. The timing of the election, which has to be before early June 2010, will be just as the recession shows signs of ending, but before the end of the recession occurs. Unless something remarkable happens, the Labour Party will likely lose as the electorate is tired after twelve years of the same promises.

Some progress has been made in key social issues over the last twelve years, especially in terms of primary education and some aspects of health care, but Britain is in trouble. From transport to housing, from secondary schools to elder care, from policing to social services, problems abound. What the electorate appear to be looking for, according to in depth polling, is inspiration coupled with a sense of capability.

Brown no longer inspires and there are strong questions about his capabilities, especially following several botched attempts to respond to the MP expense scandal and the total failure to meet targets he himself set with respect to the climate change agenda. He is seen to dither, wobble and pander.

Cameron is a much more effective communicator, but is not inspirational. Many see him as a Blair like figure – effective with words, but duplicitous. He is untested with respect to competence and capability, though he has secured the benefit of the doubt from a portion of the electorate. He will find, when the election is called, that he has challenges convincing people that his deeds will match his words.

Cameron also has another problem. His front bench team have a habit of offering comments that run contrary to those made by the leader. Discipline is lacking, yet will be crucial. Every slip will be punced on and used as part of the “you can’t trust the Tories” fear tactic Labour will pursue.

It will be a nasty election – bitter arguments, partial truths masquerading as evidence and reality, new lows of debate. The victim will be the economy and the sense of the integrity of politics – already shaken to the core by expense scandals and the new concerns over the second jobs many MP’s have. It is a bleak time. It is likely to get worse before it gets better.

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