Ryan Robson is a managing partner of the private equity firm Sovereign Capital and chaired recent reports by the Centre for Social Justice on educational failure and children in care.
After Wednesday’s worldwide emergency cut in interest rates, ‘what next?’ is the question on everyone’s lips as they open the newspapers, turn on the radio or log on.
The internet has turbocharged the speed with which bad news travels and there is a lot of it around. Boston bankers are throwing share certificates into the harbour, the Vikings’ long boats are flooded and China’s bonds are junk.
In this world ‘analysis paralysis’ quickly sets in. It is difficult for savers, investors and those that lend to them to make a decision when it could be proved wrong within a few seconds of the next car crash on Wall Street.
But the Government should be made of sterner stuff. Unlike an electorate fearing for their jobs and their families. It has security of tenure until 2010. Yet the last few weeks has shown it to be a follower rather than a leader, doing too little too late and failing to set its individual actions in a strategic context, giving hope to the many who need it now.
So we have seen the shameful spectacle of British savers scrabbling around to read the small print of their accounts because the Government would not act boldly and opening Post Office accounts because they are backed by an Irish bank whose country’s Government has been clearer than our own.
The direction of travel is clear – the economy, the whole economy,
every high street and every home is going to experience a dramatic
downturn in fortunes.
No one, and that includes Gordon Brown and Alistair Darling, knows bad it will be and how long it will last.
But the Government shows every sign of making it worse for us all.
Having blamed the US banks for their profligate lending and ignored
its own borrowing binge, the Government seems more concerned with
taking over the finances of other organisations than getting a grip of
It has embarked upon a ‘harm reduction’ policy; doing a little bit
here or there to solve the problem. But this tinkering ignores the
underlying problem – spending addiction fuelled by debt.
We all know the feeling of having bought something on a credit card
which we can’t quite afford but makes us feel good. Well Labour have
taken the Bank of England Gold Card to every store and their trolley is
full of the things which give them a thrill – complicated quangos,
sharp-suited consultants and shiny new offices.
The Government has put the nation in hock to fund policies which
have not mended our broken society and have left us in an enfeebled
position to help struggling consumers and businesses in a global
Whatever measures it announces over the next few days, ministers
must answer the central question of how are we going to pay for these
rescues. It was the failure to be open and honest which led US voters
to view the Paulson plan as a blank cheque for bankers.
There are only two ways in which bail-outs can be funded – higher
taxes and lower spending. An economic downturn lowers tax receipts and
exerts savage pressures on public spending.The Government needs to send
out the clear message that it is going to cut its cloth to meet its
This will be a severe shock to the body politic of Labour because it
has been on a spending high for a decade. Cold turkey economics could
kill the Labour Party but unless the Government acts now then the
national finances could be jeopardised for a generation.
Both David Cameron and George Osbourne recognised this stark situation in speeches at the Tory Party conference.
It takes political courage to say the unpalatable and Conservatives
are fearful of being labeled as service cutters. Yet the public will
respond positively to this message because it mirrors the tough
decisions they are having to take in their lives.
Every household and every business is looking at ways to reduce
unnecessary spending. The holiday abroad, the new employee were this
year’s quandries. Next year selling your house or laying off staff
could be questions of survival.
Conservatives should lead the way by explaining how Labour’s bloated
bureaucracy has failed to deliver social justice and weakened the
economic security on which all our lives depend.
Moreover, we need to show how we will manage the nation’s finances
in a downturn by doing what every housewife and small business knows
makes sense – plan for the worst and hope to be pleasantly surprised.