By Tim Montgomerie
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It's always called Ken Clarke's golden legacy but, in reality, Norman Lamont laid most of the foundations for the strong economy that Gordon Brown inherited in 1997. And don't just take my word for it. Ruth Lea made the case for Norman Lamont in a CPS paper. Lamont's policies squeezed out inflation, simplified the tax system, moved the public finances to balance and deepened the Thatcher-era supply-side reforms.
I mention Lord Lamont – not just because we've passed the twentieth anniversary of Britain's exit from the ERM (about which he has recently written) – but also because he was the last Chancellor to inherit and tackle a tricky deficit (although nothing like the one inherited by George Osborne).
The former Tory Chancellor has written for today's FT as part of that newspaper's 'Plan for Britain' series. Unlike some of the other contributors to the series he does not think that even more borrowing is the answer. His piece contains some choice quotes which I highlight below…
- Fiscal expansion can only be sensible when the public finances are sound: "When the private sector is deleveraging, of course there are times when it is appropriate to let a public sector deficit expand. But not when public sector debt is nearly 80% of gross domestic product and when you are adding to it at an annual rate of 8 percentage points – the size of the public sector deficit – as we are today."
- Deficit reduction is about international competitiveness: "France, Italy and Spain, even Greece, have lower deficits than the UK and are continuing to reduce them. Britain’s indebtedness could, in a few years, compare unfavourably and could make the country look like the sick man of Europe, as it did in the 1970s."
- A lesson from history: "Shortly before he became president, Roosevelt said that the temper of the times demanded “bold, persistent experimentation”. At the beginning of his third term, Henry Morgenthau, Roosevelt’s Treasury secretary, wrote in his diary: “We have tried spending money … I say after eight years of this Administration we have just as much unemployment as when we started”. He added a prescient warning for today’s advocates of fiscal stimulus – “and an enormous debt to boot”. It is a warning that is still prescient today."
Read the whole article here.
The idea that deficit reduction can be avoided may not have reached the offices of Ed Miliband and Ed Balls but it has certainly dawned on France's Socialist government. Elected on a platform of opposition to austerity the new French president is now promising the most austere budget in twenty years. French spending will be cut in real terms and there'll be 20 billion Euros of higher taxes.