Nadhim Zahawi is MP for Stratford on Avon and a member of the Foreign Affairs Select Committee.
Like captains of ships, governments can’t take credit for fair weather. They can only be judged on how prepared they are for storms. On this, the Chancellor is a steady helm.
Only three months ago, public feeling was full of optimism. The economy was about to get into its stride and years of solid growth would return us to the good years. Today, forecasters of doom are creeping out of the woodwork and clouds are gathering again. Gravity seems to have caught up with China, years of strife are taking their toll on the world, and western states still struggle under heavy debt burdens and uncertainty over the Euro.
It might well be plain sailing again by Christmas. After all, an emerging market slowdown can be more than counteracted by the increasing growth in the developed world. Just because of the hype around emerging markets, it shouldn’t be forgotten that the developed world still makes up around 58 per cent of world output to the 26 per cent that is taken up by the collective GDPs of the BRICS and the other large developing countries. But responsible governments can’t base plans on that hope.
The trick is to be ready for the worst, because the consequences of failure are far too great. That’s been the idea behind the Conservatives’ long-term economic plan all along.
The impacts of the financial crisis and recession will haunt us for many years to come. No policy can change that. All we can do is carry on with our reforms of the financial sector and its governance, and get Britain living within its means.
When the financial crash struck, we spent more to boost demand and bail out failed banks to stop the economy seizing up, but that luxury would have quickly run out. The Labour Government had left the roof full of holes when the sun was shining. In 2010, we had a budget deficit of over 10 per cent of our economy and as a share of the economy our national debt was soaring. It wasn’t something that could go on indefinitely and that was obvious, at least on the Government benches.
The frustrating argument we keep hearing from Labour is that this government was, and is, reducing spending for the sake of it. Len McCluskey thinks we’re “hell bent on making life worse for ordinary people”. The latter shows how odd the far-left are to think that the Conservatives don’t want the best for Britain. But the former misses that One Nation is the central theme of this government. We’re in a race to fix the public finances before the next recession comes, because it’s the most vulnerable who are hurt by bankrupt state. If the world slides into recession again we would need to be able to shore up our economy.
Had the Coalition not taken the choice to cut spending, our total debt would have risen much faster than it did and we would have sent a clear signal to the world that we could not be trusted. A loss of confidence would have made it ever more difficult to finance our deficit as we’d have had to pay an ever higher rate of interest. This would have eaten further and further into the money needed for public services, making the need for cuts to frontline services necessary for survival.
We know all this because it was the fate of so many of our European neighbours. Their debt levels got so high and confidence in their ability to pay so low, that they could only borrow at exorbitant rates. We could only protect the NHS and education spending because of the tough decisions we took.
The faster we start reducing our debt to GDP ratio and then our national debt, the more secure Britain will be.
We know that if Labour were in government with Gordon Brown or Ed Miliband as Prime Minister that they would have borrowed an awful lot more. The national debt would have been higher and lenders less sure of our ability to pay. If Jeremy Corbyn were elected you can guarantee that investors wouldn’t touch British debt with a barge pole.
If the economy were to tip into recession, the need to borrow would rise as more was spent on welfare and tax receipts fell. That gets much harder when people won’t lend you money.
Despite having Corbyn as their leader, I hope that Labour MPs will help the Government deliver its One Nation agenda. It’s not only vital for the future of Britain, but important to the future of Labour too. Corbyn may want to throw away the credibility of half of British democracy, but his colleagues shouldn’t let him. They should make clear that there is mainstream support for making a strong economy that works for everyone and not just the asset-rich. Myself and my colleagues in the Conservative Party would welcome their support.
Because of this government, Britain is far more robust than other developed countries and that’s because of policies we have pursued. For example, today in Italy, if you don’t include the interest paid on their mammoth debt, they actually run a budget surplus. It’s the cost of the debt that’s so much trouble. It’s come to this because they let the total get too large and people have serious questions about their ability to pay it back. Dodgy leadership in the past didn’t help confidence either. The markets were just as skittish about Ed Miliband taking up the reins of government.
In Italy it took a serious leader, Mario Monti, to steady the ship and a sensible Matteo Renzi to continue his work of reform. The trouble today, is that what the Labour Party offer up isn’t reform or serious leadership. They are offering more debt and more taxes to smother growth and enterprise. Without Conservative Government and George Osborne making it clear that Britain will always pay its debts and take tough decisions to keep our country secure, the next recession could be devastating.