David Cameron is scheduled to get to his feet at this time and deliver a major speech entitled The Conservative Plan for a Responsible Economy. The speech begins with a strong declaration that the Conservative Party’s support for bank recapitalisation was genuine but will not extend to other aspects of economic policy. The speech lists existing Tory promises including a two-year council tax freeze, investment in high speed rail, tax simplification and investment in green technologies – but offers no new policies yet. Instead Mr Cameron promises that "over the coming weeks and months we will set out many more ways to help families through the downturn." What the speech lacks – and what we had hoped for – are ideas to help prevent "the downturn" being as serious as now seems likely. As a long-term framework it is promising but there is not the sense of urgency that we have seen from, for example, Boris Johnson (calling for substantial infrastructure spending) and John Redwood (calling for large interest rate cuts).
So we give it two cheers: One for the analysis of Brown’s mismanagement and one for the long-term vision of economic responsibility. It disappoints on ideas to beat the looming recession.
The Tory leader will begin by repeating his Party Conference declaration that his Conservatism is about more than freedom: "Over the past decade, we have seen a total breakdown of economic responsibility. From the government, as it has spent and borrowed without restraint. And from our financial sector, which has taken decisions which have harmed the rest of our economy. So it is not more freedom that our economy needs; it is more responsibility. Just as this Party under my leadership has stood for social responsibility, now it must stand also for economic responsibility. We’ve had irresponsible capitalism presided over by irresponsible government. Instead, what we need is responsible free enterprise, regulated and supported by responsible government."
And exactly as ConservativeHome predicted Mr Cameron is ready to style the Conservatives as the party of the real economy: "Because though Gordon Brown is trying to rescue the banks, we now need a plan to rescue the economy."
Mr Cameron will say that Labour excess has made Britain particularly vulnerable to the global crisis: "The Chancellor who prided himself on prudence came to believe that he uniquely in the history of economics had ended the trade cycle and abolished boom and bust. So he thought the good days would never end, and borrowed and borrowed and borrowed, and racked up the biggest government deficit in the developed world. And he stood aside as our households racked up over a trillion pounds of personal debt. So when the boom did turn to bust and the value of assets fell our financial system was hit harder than most. The Government couldn’t complain about financial institutions lending too much money because the Government itself was borrowing too much from them."
Gordon Brown ignored the debt and excesses of the City for too long: "Four years ago he was telling the city: “I want us to do even more to encourage the risk takers”. Two years ago, he was dismissing calls for what he called a “regulatory crackdown” on the City. And only last year, he was celebrating what he called a “golden age for the City of London"… Now he’s describing that very same time an “Age of Irresponsibility”. “A Golden Age” to an “Age of Irresponsibility” – in less than a year."
Brown’s policy mistakes have (1) left us in a deeper economic hole than competitor economies and (2) left us too indebted to easily reboot the economy: "Gordon Brown’s policies – his entire economic strategy – has fundamentally failed. The first result of this failure in domestic policy in the UK was a debt-induced asset bubble in the private sector that has now burst, generating both downturn and serious threats to the stability of our financial system. The second result of this failure in UK policy is that our Government – having spent all the money in the good years – is less able to help people in this country get through this downturn than the government of almost any other developed country."
Tory economic policy will have three pillars: "Fiscal responsibility – the Government must live within its means. Financial responsibility – you cannot build an economy on debt. And a balanced economy – as you cannot rely on unsustainable growth in a few areas to increase prosperity for everyone."
An extra levy on City firms to fund a higher quality of regulation: "For too long, City firms have been able to poach the best regulators. So we will ensure that we get more good staff at the FSA, paid for by an increased levy on the City, and introduce a system similar to the Shareholder Executive so that banks send their best people to the FSA on secondment."
70% of Britain’s economic growth has come from just three sectors: "Over the past decade, seventy percent of our economic growth has come from just three things. From housing – which is now declining. From the financial sector – now in turmoil. And from government spending – now slowing. And in addition, much of the growth has been driven by immigration – an unsustainable basis when you consider the impact on public services and our national infrastructure."
The Conservatives are developing a radical plan to rebalance the economy: "We have to broaden our economic base to include more science, more hi-tech services, more green technologies, more engineering and more high-value manufacturing, drawing upon a much wider range of industries, markets, people, towns and cities."
David Cameron’s concluding remarks:
"We will only build an economy that is strong and there to last if we… apply the same philosophy as I have been advocating in the social sphere for the last three years… the philosophy of responsibility. To repair the broken society, in the long-term, we need social responsibility. And to repair the broken economy, in the long-term, we need economic responsibility. That means… a responsible fiscal policy, bolstered by independent oversight… a responsible financial policy, bolstered by a renewed role for the Bank of England… and a responsible attitude to economic development, that fosters more balanced economic growth. And today, it’s only the Conservative Party that is offering that change."