Cameron channels Thatcher to remind us what the Conservatives really stand for

“Let us never forget this fundamental truth: the State has no source of money other than money which people earn themselves. If the State wishes to spend more it can do so only by borrowing your savings or by taxing you more. It is no good thinking that someone else will pay – that ‘someone else’ is you. There is no such thing as public money; there is only taxpayers’ money.”

Margaret Thatcher, Speech to Conservative Party Conference, 1983

I was six months old when Thatcher gave this speech. It was nonsense then and it is still nonsense now. That hasn’t stopped David Cameron from channeling the spirit of his hero in a speech given on the campaign trail today saying:

We know that there is no such thing as public money – there is only taxpayers’ money. And we know how we’d rather see it spent: Not on bureaucracy or bloat or the latest crackpot Government scheme but on you, your family – your future.

“Quite simply, it’s your money – you earned it. And we believe it’s people – not politicians – who know best how to spend their own money. And that’s what today is all about.”

The wording is remarkably similar to Thatcher’s phrasing in ’83. I doubt it’s a coincidence. The truth though is 180 degrees from Thatcher and Cameron’s assertions. “taxpayer’s money” is an ideological term used to set the bias towards lower spending and lower taxation. That’s a perfectly defensible argument to make, but the likes of Cameron make it so dishonestly. How far does he want to take this “you know how to spend money best” line? Health care? Schooling? That’s the logical conclusion.

We could just as easily turn the phrase around though and say “there is no such thing as taxpayer’s money – there is only public money”. The UK government is the issuer of pounds. They don’t come from anywhere else, so in order for us to have money to pay our taxes, government must spend the money into the economy first, and it must generally spend more than it taxes back in order for the supply of money to increase sustainably.

Now I don’t think Cameron wants to shrink the size of government to nothing (I don’t think he really believes in anything really), but this section of his speech shows a willingness to gently lie to people in order to push policies which seem to benefit all, but are really squarely aimed at benefiting those at the top. Those at the top can afford the best of everything. They don’t need public services. Everyone else though doesn’t have that luxury though, which is why pooling our resources makes sense in so many areas. Cameron also talked about the “immorality” of government spending, but providing useful public services is not immoral, it’s just common sense!

How far to the left or right of the main parties are you?

When asked what was her greatest achievement, Thatcher famously answered “Tony Blair and New Labour.” The truth of this statement is neatly illustrated by this chart taken from Political Compass:

UK Parties at different times

This is the true impact of Thatcherism. It has been the narrowing of political ideas to such at extent, that on most issues, the main parties are now virtually indistinguishable in outlook. Politics has now been reduced to ‘branding’. David Cameron said this morning “…we are all Thatcherites now”, which didn’t go down well, but in terms of the political class he’s absolutely right. The wider public, not so much.

The knowledge that Labour have drifted to the right is obviously not new, but I think this chart really brings out the transition they have made from a left, slightly libertarian party, to a party almost as wedded to neo-liberalism as the Tories and marginally more authoritarian. For the Tory’s part, for all their efforts to paint Ed Miliband as ‘Red Ed’ and the Labour Party as representing the ‘nanny state’ or the surveillance state, their actual differences in political outlook are superficial at best.

This lack of political choice presents a real problem for voters. Here’s another chart from political compass that shows the political stance of the parties running in the 2010 general election:

UK Political Parties chart

The left-right axis represents economic stance, and all three main parties tended towards neo-liberalism. While Labour and Conservative Parties went into the election with pretty authoritarian manifestos, the Liberal Democrats actually managed to retain some weak libertarian tendencies. The Greens where the only national party in the lower left quadrant.

The media talk of parties seeking to ‘claim the centre ground’, where most voters sit, but if that were true, the ‘centre ground’ is not actually the centre ground at all, but a brand of free market economics twinned with a strong inclination towards authoritarianism.

I find this hard to believe. Voter participation at general elections is falling consistently as the years go by, and those that do vote often vote for the lesser of two (or more) evils. Since voting for the first time in 2001, I’ve voted for Labour, the Lib Dems and the Green Party, but only once have I voted for someone who I actually wanted to win and who had a chance of winning (he lost). Here’s where I score on the Political Compass test:

From this, I should be voting Green, but they don’t have a chance of winning where I live, so what to do? There are those that think we need a new party of the left and others who think the Labour Party must be pressured into returning to its roots, but whatever the answer, there are a huge number of potential voters who’s views lie to the south-west of where Labour sit at the moment. As it stands, they are relying on there being enough people that either hate the Tories or are disgusted with the Lib Dems to get them over the line, but they could be so much more if they had both the courage and the inclination. Right now, they seem to be lacking in both.

P.S. I’d be interested to know the Political Compass scores of anyone reading this, if you feel willing to share in the comments below (mine was: Economic -8.75; Social -6.82) 🙂 .

“Squeezing the poor”

This post by @Ramanan_V prompted me to seek out Nicholas Kaldor’s “The Economic Consequences of Mrs Thatcher”. Kaldor was an eminent Cambridge economist and member of House of Lords at the time when Margaret Thatcher came to power in 1979, and this short book is a collection of speeches made during the first four years of Thatcher’s time as PM.

In ’79 when Thatcher rose to power, the UK economy was in trouble, with rampant inflation and low growth with rising unemployment. In the months preceding the ’79 election, Britain had experienced its “Winter of Discontent”. In his first budget in June 1979 Thatcher’s Chancellor, Geoffrey Howe increased VAT to 15%, reduced the top rate of income tax from 83% to 60% and announced reductions in public spending.

While there were many differences in both economic environment and policy between Thatcher’s early years and today, from Kaldor’s speeches, we can draw some interesting parallels between the justifications made for government budgetary decisions made then, and the justifications for austerity being made today. Here are a few examples from Thatcher’s first year in office.

On the incoming Conservative Government (13.6.79, p12):

“…up to now Conservative Governments in this country were predominantly pragmatist… This time it is different. This time we have a right-wing Government with a strong ideological commitment which is something new in this country…”

The new Thatcher broke with the post-war consensus and steered a different course, one which was continued through the Major, Blair and Brown years and a course which the present Government is now trying to accelerate before it’s too late.

On the tax changes in Howe’s ’79 Budget (19.6.79 p19):

“In this Budget the tax remission to a millionaire or to a man with £50,000 a year, is well over £6,000 a year – enough to allow him to get a second Rolls-Royce. Lord Boyd-Carter says that all this is small beer: a small price to pay for the enormous advantages which efficient entrepreneurship and risk-taking can bring us…

In 1979, the Tories cut the basic rate of tax slightly, while at the same time increasing VAT (on many items from 8% to 15%) and significantly cutting income tax for the highest earners. Sound familiar?

On ‘Squeezing the Poor’ (19.6.79 p21):

“The two main contentions of the Chancellor, that the economy must be ‘squeezed’ in order to get rid of inflation and that top people must be better off in order to induce them to work harder and become richer, in themselves imply that some people must be worse off. These people must be the poor people.

[The poor economic forecasts] will not reflect ‘a shortage in demand’ but a ‘growing series of failures on the supply side of the economy’.

Today we have tax cuts for the rich and bedroom taxes and real terms cuts to benefits and wages for everyone else, while poor growth is blamed on ‘the world economy’ and talk of the need for labour market reforms. The similarities to ’79 are unmistakable.

Here’s, Kaldor on ‘The Momentum of Decline’ (19.6.79 p23):

“These policies (in response to inflation in the 1920s) led to the unprecedented crisis of capitalism in the early 1930s, to Hitler and to the Second World War. We can only hope that on this occasion the outcome will not be so tragic. But the tone of the Chancellor’s speech was strongly reminiscent of what was said by Dr Bruning, by Herbert Hoover and by Philip Snowden in his Budget speech. There is one common theme in all those speeches: we must first suffer agony to be able to make a clean start.”

A bit dramatic perhaps, but the idea that austerity is something we must endure in order to renew our economy prevails.

Finally, here Kaldor on ‘An impotent government’ (7.11.79 p38):

“As far as output, employment and economic growth is concerned, the [Comprehensive Spending Review of its time] adopts a wholly fatalistic attitude. All it says is that ‘the prospects are poor… both in this country and the rest of the world’. This reminds me of a statement attributed to Neville Chamberlain during the Great Depression that the government is no more capable of regulating the general demand for labour than it is of regulating the weather. After a long circle, we now seem to have returned to the same point.”

This is very reminiscent of the current Government’s desire to blame all ills on the Eurozone and to stand idle while unemployment remains high, incomes stagnate and the housing crisis worsens.

The point of quoting the above then is to demonstrate that we’ve been here before (and not so long ago). The likely effects were predicted before the policies were implemented (as with Cameron and Osborne’s austerity). While in Thatcher’s time, the result was three million unemployed and the destruction of British industry, today, unemployment has not gone so high, but only because now we have zero-hour contracts, part time work and working tax credit-supported self-employment instead. The long-term impacts though could be equally as damaging.