Thursday, April 30, 2009

Nearly Men On The Job


When you think Labour Chancellors, you naturally think uncontrolled spending, wild borrowing, and crippling debts. Gordo and his poodle fit the bill precisely.

But there have been one or two Labour Chancellors who attempted to break the mould, and deliver at least approximate fiscal sanity. Two that spring to mind are my Lord Jenkins of Hillhead and Baron Healey of Riddlesden.

So during a brief stay in hospital this week ("routine investigation" - make your eyes water - don't ask), Tyler read Giles Radice's Friends and Rivals, his account of long-time Labour "nearly men", Jenkins, Healey and Crosland (the "golden generation" who "so nearly" scrabbled to the top of the greasy pole - see here for hilariously bitter book review by Gerald Kaufman).

In today's circs, the experiences of Jenkins and Healey are very interesting. Both had to confront public spending that had grown too fast, and was far higher than the economy could bear. Both were driven by fear of a collapse in market confidence, and a catastrophic run on the pound. And both had to face down passionate opposition from their own "colleagues".

In Jenkins' case, he became Chancellor in 1967, after Wislon had finally been forced to devalue. His task was to tighten fiscal policy and get a grip on rampant public spending, which had increased by a bonkers 25% in real terms over the three years since Labour had taken power.

Jenkins grabbed headlines with Iron Chancellor style spending cuts (along with some other deflationary measures). But when you examine the figures, you find all he actually achieved was a public spending standstill - spending in real terms remained unchanged between 1967-8 and 1970-71. Not what Tyler would call a real Iron Chancellor.

Healey did better. He became Chancellor in 1974, again after a period of mad public spending growth - this time under Big Government Heath. Real terms spending had increased by 27% in just four years.

And although he faffed about for his first two years (mainly spent playing to the gallery with promises to squeeze the rich until their gilded balls squeaked), after sterling nearly died in 1976, Healey subjected public spending to a SERIOUS haircut. In one year, he cut spending by 4% in real terms - the biggest decline we have ever seen (ex post-war defence rundowns).

But it wasn't easy. Not only did he have to face down Wedgie Benn and the Labour Conference, not only did he have to threaten Prime Minister Callaghan with resignation, he also had to call in the IMF to prove to the cabinet that there really was no alternative.




We must cut spending, I tell you

So what are the lessons for today?

First, real terms spending increased by an astonishing 40% in the first eight years of this decade - even more than in the eight years prior to the crisis of 1976. And on top of that, we've got the bank bailouts - our current problems make the 60s and 70s look like a breeze.

Second, A Darling is no Healey - he's not even a Jenkins.

Third, when George takes the controls he'll have to be tuff tuff TUFF. Yes, it's a Tory government, not Labour. And yes, he can count on Cam's support (can't he?). But his spending "colleagues" will all have their own corners to fight, and they'll shaft him without a second thought.

And while Healey's 4% real cut is the all-time record, George is going to have to find something closer to 10%.

It's a huge task.

So let's hope that when the book is written in thirty years time, George will come out as the strongman who saved Britain.

What we do not need is yet another nearly man.

PS So will Brown go down as the worst PM since WW2? Wislon won four elections and... er... kept us out of Nam. Eden called and won an election. Douglas-Home very nearly turned things around during his very brief tenure. And Major now looks like a genius. Unelected, unloved Brown is simply leaving a trail of disaster. And we've still got another year to go...

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