As this is my last column before taking leave to write a book about the Great Depression that never happened, let me try to forecast some of the main events that will probably happen in the months ahead.
Between now and Christmas, the recession in Britain will almost certainly end. That, at least, will be the official story, with government statisticians declaring an expansion in GDP. Unemployment will rise for another six months or so, but is unlikely to reach the shock-horror levels above 3 million thought inevitable a few months ago. House prices will probably stabilise after the recent sharp rebound and in stockmarkets, too, normal conditions will gradually return. So it seems this recession will be considerably less painful than the Tory ones of the 1980s and 1990s, when unemployment peaked at much higher levels and more people lost their homes.
But just because a greater disaster has been avoided, it will not send grateful voters flocking to Gordon Brown. On the contrary, the Government’s political troubles will probably intensify.
With no improvement likely in Mr Brown’s dismal poll figures, Labour loyalists will have to start taking seriously my argument, now gaining attention among the chattering classes, that the 2010 election may not merely mark another rhythmic swing from left to right in Britain’s political pendulum.
Instead it may set off a once-in-a-century upheaval in the structure of British politics, with the Liberal Democrats displacing Labour as the dominant part of the Left in a neat reversal of the process that began almost 100 years ago with the defeat of David Lloyd George.
Let me give two reasons why Mr Brown should draw no comfort from the improved economic prospects. First, the end of a recession as defined by statisticians is not a return to economic prosperity as understood by voters. Statistically, a recession is a period of falling output, incomes and employment. Once the decline is over, economists consider normal conditions to have resumed. For ordinary consumers, workers and voters, however, what matters is not the rate of change in economic activity but its absolute level and how this compares with the last period of prosperity.
Even if the economy grows strongly after a recession, as it did in 1981-83 and 1993-95, voters feel that the country is still in hardship as long as the availability of jobs, the price of houses and the standard of living remain below the maximum levels reached in the previous boom. But for the economy to clamber out of the hole created by a deep recession and return to its previous peak can take several years, which is why government popularity rarely improves immediately one is over.
The second reason not to expect any political dividends for Labour from the end of recession is more specific to this cycle: the magnitude of the hole in Britain’s public finances. The gap of almost £200 billion or 14 per cent of national income between what the Government spends and the revenues it receives means that big cutbacks in public spending and increases in taxation are inevitable, whichever party is in power.
For Labour, the universal acknowledgement of this reality is trebly disastrous: first because Mr Brown spent months trying to deceive the public about the outlook for public spending; second because Labour is justifiably blamed for having let spending grow so much faster than the sustainable level of Treasury revenues; and third because the Liberal Democrats and the Tories seem to have better ideas on how the inevitable reductions can be achieved without causing too much damage to services valued by voters.
That last point brings me back to the possible realignment of the Left. The issue bound to dominate British politics in the next Parliament and beyond is how to achieve large spending cuts after a decade in which the public sector has grown much faster than the private economy.
The obvious answer is to reduce dramatically the role of the State by abolishing all sorts of “public” services that ought to be left to individual responsibility and the private sector. This is a perfectly plausible answer that appeals to that 30 or 40 per cent of the electorate who are ideological conservatives.
There is, however, another plausible answer, which a modern party of the Left needs to develop: to maintain and improve public services while simultaneously reducing their cost. Labour activists generally believe this combination to be logically impossible — in their world view any reductions in spending are equivalent ipso facto to cuts in the services that the Government provides. This idea that the standard of public services is equivalent to the level of public spending might just have been defensible in the pre-computer economy when service industries were believed to be incapable of productivity growth. But in the modern economy, equating the quality of government with its cost is manifestly absurd.
According to the Institute for Fiscal Studies, the “eye-watering” squeeze needed to bring Britain’s public finances back into reasonable balance translates into a reduction of 8.6 per cent in departmental budgets spread over three years. If the directors of any private company sent their line managers an instruction to reduce costs by that amount over three years, with no loss of customer service or output, this would not be considered an insuperable challenge, still less a managerial nightmare.
To judge by this week’s conference, the Liberal Democrats have started thinking along these lines. Reducing or freezing the pay and pensions of public employees is a constructive alternative to cutting the number of employees and the services that they provide. Limiting universal payments such as child benefits, student grants and housing subsidies is a constructive alternative to slashing welfare for those in greatest need. Raising energy and property taxes is a constructive alternative to income tax rates so high that they become economically counter-productive.
The great political challenge of the coming decades will be to find ways to deliver the high standards of public service demanded by voters at a cost that taxpayers are willing to accept and that the private economy can support. Any party that takes it as axiomatic that cuts in public spending can be achieved only by slashing public services will find itself marginalised in this debate.
Will this be the fate of Gordon Brown’s Labour Party? The answer will become clearer as the election approaches.
Order By:
Would you like to post a comment? Please register or log in
function blogURL(bUrls) { window.location=bUrls; } fieldset { float:left; width:165px; border:0px; margin:0px; padding:0px; } OUR COLUMNISTS
Columnists
Select David Aaronovitch Anjana Ahuja Chris Ayres Joan Bakewell Simon Barnes Cherie Blair Camilla Cavendish Jeremy Clarkson Robert Crampton Daniel Finkelstein Michael Gove Simon Jenkins Anatole Kaletsky India Knight Dominic Lawson Leo Lewis Rod Liddle Magnus Linklater Ben MacIntyre Bronwen Maddox Minette Marrin Carol Midgley Alice Miles Caitlin Moran Richard Morrison Matthew Parris Michael Portillo Libby Purves William Rees-Mogg Melanie Reid Peter Riddell Hugo Rifkind Sathnam Sanghera Frank Skinner Graham Stewart Andrew Sullivan Rachel Sylvester Janice Turner Guest contributors
Blogs
Select Alpha Mummy Archive Blog David Aaronovitch Asia Exile Baby Barista Blockbuster Buzz Gerard Baker Charles Bremner Big Brother Mary Beard Comment Central Consumer Central Cricket Blog Eco Worrier Faith Central Fashion Formula One Ruth Gledhill Inside Iraq Ariel Leve India Knight Money Rafael Nadal News Blog William Rees-Mogg Rugby Sinofile Mick Smith Sports Commentary Irwin Stelzer Peter Stothard Surf Nation Technology Travel Urban dirt Video Wimbledon
Anatole Kaletsky
Anatole Kaletsky writes for The Times Comment pages on Thursdays. One of the country's leading commentators on economics, he was formerly Economics Editor and is now Editor-at-large of The Times. He has won many awards for his financial and political journalism. Before joining The Times, he worked for 12 years on the Financial Times
Read more from Anatole Kaletsky Camilla Cavendish wins award for family justice campaign
Columns urging greater openness in family courts win Paul Foot Award
Cartoon More cartoons Peter Stothard
The Editor of the TLS writes on books, people and politics
A Don's Life
Mary Beard of Cambridge and the TLS on culture ancient and modern
Nominate a celebrity for the Harry Redknapp Award
Are they nice enough to win?
Comment Central MOST READ MOST COMMENTED MOST CURIOUS Most Read Skip Most Read Today India’s lunar mission finds evidence... Metal detector enthusiast unearths huge... Dinner lady case 'bully' is school... Concerns grow for Manchester United and... MOST COMMENTED Skip Editor's Pick Today if(isArticle == "true" && articleHeadlines.length!=0){ for(var j=0; j=45){ headline = articleHeadlines[j].substring(0,44)+"..."; } document.write(""+headline +""); } }else{ fSubmitMostCommented('http://community.timesonline.co.uk/ver1.0/Direct/Process'); } MOST CURIOUS Skip Most Curious Today Lack of runners leaves Ascot facing flat... £30,000 Hyde Park fountain aims to... ‘Egg whisk’ pioneered by doctor... Images to cure your nature-blindness Focus Zone Northern Lights:
Win a luxury weekend to Newcastle and its neighbour Gateshead, find out more here
Need to Know:
Industry sectors news at a glance. Interactive heatmap, video and podcast
Business Travel:
Everything the Business Traveller needs to know to make a better trip
Corsica Travel:
Corsica is an island of beauty and contrast, an ideal holiday destination
More reports:
Enjoy further reading from Travel to Fashion, Business to Sport, discover more
Northern Lights Need to Know Business Travel Corsica Travel More reports Births, deaths, marriages
Place your announcement
Fantasy Football
Sign up for free and get your mates involved today
Crossword Club
Sign up today or try one of our free demo crosswords
Free CV Review
Sell yourself! Have your CV reviewed by experts
Announcements
Search The Times Births, Marriages & Deaths
Online Sudoku with daily prizes Find a Lawyer
Cut your legal costs
Popular Searches on Times Online books | chess | crosswords | fantasy football | fashion | formula 1 | horoscopes | Michael Jackson | need to know | obituaries | recipes | redundancy calculator | science | sudoku | swine flu | travel deals | twitter | university guide | wine | wintersun
Shortcuts to help you find sections and articles
Classifieds Cars Jobs Property Travel Cars Skip Cars of the Week Car leasing
New Audi A5 - 2.0 TDI Sportback 36-month car lease on contract hire for £359.99 plus VAT pm
Gocompare.com
Compare 100+ insurers with Gocompare.com
Prestige Car Finance
The UK's leading alternative to showroom finance. Finance packages tailored to your needs. Minimum loan of £25,000
Car Finance from Car Loan 4U
No Deposit Required. Use Any UK Dealer. Apply Online Now at CarLoan4U
Search for more cars and bikes Jobs Skip Jobs of the Week Queen’s Bench Master
£102,92 The Judicial Appointments Commission (JAC) London
Development Executive
up to £40,000 St Benet's Hall Oxford
Corporate Finance Associate & Analyst Required – City
Competitive + Outstanding Pkg. Regency Recruitment City
Advocates
£46,506 - £63,883 CPS GREATER MANCHESTER
Search more Jobs Properties Beautiful apartments and townhouses
SW6
Stately home in Regent's Park.
Gothic architecture, modern interior - for sale with Winkworth.
It’s in your hands!
-30% off key ready properties in Cyprus with guaranteed fast and easy finance
COTSWOLDS. Less than 2 hours from London but a million miles away
Stunning 2nd homes in the Cotswolds from £395k - £1.5m
Search for more properties Holidays Skip Travel of the Week SAVE up to £200pc on China now!
Book Wendy Wu Tours by 22 Sept 09. www.wendywutours.co.uk
Exclusive South Africa v England Test Match Cricket,
Cape Town January 2010 trip hosted by cricketing legend Allan Lamb
Great Travel Insurance
Get covered on your travels with a superb range of policies at great prices. Visit InsureandGo.com
Antigua On Sale.
£120 OFF selected holidays. 7nts All Inclusive with flights fr £759pp. Book with key2holidays by 15 Oct 09.
Search for more holidays Place your advert now
Search Ad Reference:
Where am I?
Home Comment Columnists Anatole Kaletsky Contact us Back to top NewsCommentBusinessMoneySportLife & StyleTravelDrivingArts & EntsArchive Times Online Times Archive Google TLS Archive
Contact our advertising team for advertising and sponsorship in Times Online, The Times and The Sunday Times, or place your advertisement.
Times Online Services: Dating | Jobs | Property Search | Used Cars | Holidays | Births, Marriages, Deaths | Subscriptions | E-paper
News International associated websites: Globrix Property Search | Milkround
Copyright 2009 Times Newspapers Ltd.
This service is provided on Times Newspapers' standard Terms and Conditions. Please read our Privacy Policy.To inquire about a licence to reproduce material from Times Online, The Times or The Sunday Times, click here.This website is published by a member of the News International Group. News International Limited, 1 Virginia St, London E98 1XY, is the holding company for the News International group and is registered in England No 81701. VAT number GB 243 8054 69.
Blogs
Anatole Kaletsky writes for The Times Comment pages on Thursdays. One of the country's leading commentators on economics, he was formerly Economics Editor and is now Editor-at-large of The Times. He has won many awards for his financial and political journalism. Before joining The Times, he worked for 12 years on the Financial Times
Columns urging greater openness in family courts win Paul Foot Award
The Editor of the TLS writes on books, people and politics
Mary Beard of Cambridge and the TLS on culture ancient and modern
Are they nice enough to win?
Win a luxury weekend to Newcastle and its neighbour Gateshead, find out more here
Read Full Article »