David Cameron set out earlier this afternoon a bold and ambitious vision for an economic cultural shift for Britain.
Cameron called for a wealthier, happier country that has a balanced, greener economy, is less materialistic and one in which government and its citizens live within their means, saving for a rainy day. He said he wanted Britain to become a contributor, rather than consumer, economy where standards of living and well-being increased hand in hand in a free market economy.
He offered a vision of the future in which the country would embark on a huge, ambitious, cultural shift by moving the economy from one built on debt to one built on savings. Cameron said he wanted to change the UK's economic culture from "spend, spend spend" to "save, save save."
To put meat on the bones of his new economic vision, the Tory Leader outlined two tax cuts worth £4.2 billion for savers. The first tax cut is a pledge to abolish the basic rate of tax on savings (costing £2.6 billion) and the second is to raise pensioners' personal allowance by £2,000 (costing £1.5 billion). Cameron said that the tax cuts would be paid for by restricting public spending increases in 2009-2010 to 1 percent in real terms which represents a £5 billion cut in public spending from what Labour has budgeted for.
Cameron is clearly returning to his favoured theme of “responsibility” and using the tax system to reward people for behaving responsibly. This builds on comments George Osborne made in an interview with the Sunday Times on the 28 December when the Shadow Chancellor said that he wanted to help people "who did the right thing in the age of irresponsibility."
In an interview yesterday with Andrew Marr, the Prime Minister seemed to be aware of his own vulnerability on the issue of dramatically reduced returns for savers as he said that ministers are looking at doing "more to help savers" in the run-up to the Budget. Savers really are the "innocent victims of Labour's recession." Interest rates have been slashed to help banks lend money and stimulate the economy but this has had the downside of penalising the very people who have behaved responsibly during the Brown boom and are not responsible for the financial crisis and recession. Savers are now having to pay for other people's profligacy, none more so than Brown's spendthrift ways over the past decade.
Cameron’s speech, the first of 2009, shows a clear political dividing line between Brown/Labour and Cameron/Conservatives. Labour is committed to state intervention to stimulate the economy while the Conservatives are calling for a smaller state and tax cuts. The new tax cuts announced today for savers is a substantial policy which helps counteract Brown’s charge that the Tories are the do nothing party. What is more, his tax cut will help those hurt by “Brown’s recession.”
Labour will no doubt attack the Conservatives claiming that the spending cuts would hurt front line public services [YAWN]. It is the standard response that Labour deploys every time the Conservatives pledge spending cuts and/or tax cuts. However, this time Labour will find it harder to win the argument. In 2005, the Tories pledged £35 billion of spending cuts to fund tax cuts. Labour denounced the policy. Fast forward to the 2008 PBR and Labour pledge to cut public spending by – you guessed it - £35 billion. Of course, when Labour reduce public spending it is cutting out waste but when the Tories do it, it is the loss of nurses, doctors and police. Come off it! Labour can no longer credibly argue that this is the case any more. This will not stop them trying, however, with their scaremongering aided and abetted by the “pro-big state” BBC.
But this time Cameron is helped by a factor that was not in play when his successors attempted this before – we are now in recession. This means that Cameron’s “responsibility” theme, living within one’s means, ought to resonate with voters. If voters have to tighten their belts, it is right and fair that a “culture of thrift” ought too to be at the “heart of government.”
This is supported by the polling evidence. Anthony Wells over at UK Polling Report has shown that borrowing continues to be a weakness of the government’s approach. In the most recent YouGov poll (14 December) 27 percent agreed with the statement that “it is right for the government to increase borrowing sharply at a time like this, in order to support the economy and stop the recession becoming too deep,” but 48 percent agreed instead with the statement “it is wrong for the government to increase borrowing so sharply: any short-term benefits will be less than the longer term costs to the economy and to taxpayers.”
My only concern is that Cameron could be setting himself up for a fall. The British have embraced materialism and have grown used to the credit culture where we buy now, pay later, constantly living beyond our means. There is nothing wrong with aspiring better things for a better quality of life for ourselves and our families but for too long now, encouraged by cheap, easily available credit, with have grown unaccustomed to earning the money to pay for it. Will the British want to undergo such a cultural shift? Cameron seemed to realise that his vision for the future was hugely ambitious when he said that it was not going to happen overnight and repeated his phrase from his Conference speech that he was “a man with a plan, not a miracle worker.”
But Cameron is right to claim that now is the time to be prudent and he is also right to call for a cultural shift in how the government and its citizens behave with money. Britain has the highest household debt in the history of the G7 and this surely has to change. No longer should we have unsustainable and irresponsible booms in which we all pay for the consequences in the subsequent bust. Even if the British are unwilling to change, the recession could once again work in Cameron’s favour. If ever there is a time to make such a shift it is in a downturn. During a boom, voters will be unwilling to do anything that threatens the good times, however worthy. However, during a recession, voters are faced with the consequences of a bust and therefore are more likely to be willing to adopt a much more pragmatic, responsible approach.
Even so, advocating a move from a consumer to contributor economy with “save, save, save” as its motto is very courageous and somewhat of a risk. Brown could promise the electorate that they can have the boom times back if they stick with him, especially if he can continue to convince voters (how, I don’t know!) that the recession is global in origin and nothing to do with him. Consequently, the future with Brown offers the bright attractive neon lights of “spend, spend, spend” rather than the boring fuddy duddy future Cameron is offering of “save, save, save.”
Cameron called for a wealthier, happier country that has a balanced, greener economy, is less materialistic and one in which government and its citizens live within their means, saving for a rainy day. He said he wanted Britain to become a contributor, rather than consumer, economy where standards of living and well-being increased hand in hand in a free market economy.
He offered a vision of the future in which the country would embark on a huge, ambitious, cultural shift by moving the economy from one built on debt to one built on savings. Cameron said he wanted to change the UK's economic culture from "spend, spend spend" to "save, save save."
To put meat on the bones of his new economic vision, the Tory Leader outlined two tax cuts worth £4.2 billion for savers. The first tax cut is a pledge to abolish the basic rate of tax on savings (costing £2.6 billion) and the second is to raise pensioners' personal allowance by £2,000 (costing £1.5 billion). Cameron said that the tax cuts would be paid for by restricting public spending increases in 2009-2010 to 1 percent in real terms which represents a £5 billion cut in public spending from what Labour has budgeted for.
Cameron is clearly returning to his favoured theme of “responsibility” and using the tax system to reward people for behaving responsibly. This builds on comments George Osborne made in an interview with the Sunday Times on the 28 December when the Shadow Chancellor said that he wanted to help people "who did the right thing in the age of irresponsibility."
In an interview yesterday with Andrew Marr, the Prime Minister seemed to be aware of his own vulnerability on the issue of dramatically reduced returns for savers as he said that ministers are looking at doing "more to help savers" in the run-up to the Budget. Savers really are the "innocent victims of Labour's recession." Interest rates have been slashed to help banks lend money and stimulate the economy but this has had the downside of penalising the very people who have behaved responsibly during the Brown boom and are not responsible for the financial crisis and recession. Savers are now having to pay for other people's profligacy, none more so than Brown's spendthrift ways over the past decade.
Cameron’s speech, the first of 2009, shows a clear political dividing line between Brown/Labour and Cameron/Conservatives. Labour is committed to state intervention to stimulate the economy while the Conservatives are calling for a smaller state and tax cuts. The new tax cuts announced today for savers is a substantial policy which helps counteract Brown’s charge that the Tories are the do nothing party. What is more, his tax cut will help those hurt by “Brown’s recession.”
Labour will no doubt attack the Conservatives claiming that the spending cuts would hurt front line public services [YAWN]. It is the standard response that Labour deploys every time the Conservatives pledge spending cuts and/or tax cuts. However, this time Labour will find it harder to win the argument. In 2005, the Tories pledged £35 billion of spending cuts to fund tax cuts. Labour denounced the policy. Fast forward to the 2008 PBR and Labour pledge to cut public spending by – you guessed it - £35 billion. Of course, when Labour reduce public spending it is cutting out waste but when the Tories do it, it is the loss of nurses, doctors and police. Come off it! Labour can no longer credibly argue that this is the case any more. This will not stop them trying, however, with their scaremongering aided and abetted by the “pro-big state” BBC.
But this time Cameron is helped by a factor that was not in play when his successors attempted this before – we are now in recession. This means that Cameron’s “responsibility” theme, living within one’s means, ought to resonate with voters. If voters have to tighten their belts, it is right and fair that a “culture of thrift” ought too to be at the “heart of government.”
This is supported by the polling evidence. Anthony Wells over at UK Polling Report has shown that borrowing continues to be a weakness of the government’s approach. In the most recent YouGov poll (14 December) 27 percent agreed with the statement that “it is right for the government to increase borrowing sharply at a time like this, in order to support the economy and stop the recession becoming too deep,” but 48 percent agreed instead with the statement “it is wrong for the government to increase borrowing so sharply: any short-term benefits will be less than the longer term costs to the economy and to taxpayers.”
My only concern is that Cameron could be setting himself up for a fall. The British have embraced materialism and have grown used to the credit culture where we buy now, pay later, constantly living beyond our means. There is nothing wrong with aspiring better things for a better quality of life for ourselves and our families but for too long now, encouraged by cheap, easily available credit, with have grown unaccustomed to earning the money to pay for it. Will the British want to undergo such a cultural shift? Cameron seemed to realise that his vision for the future was hugely ambitious when he said that it was not going to happen overnight and repeated his phrase from his Conference speech that he was “a man with a plan, not a miracle worker.”
But Cameron is right to claim that now is the time to be prudent and he is also right to call for a cultural shift in how the government and its citizens behave with money. Britain has the highest household debt in the history of the G7 and this surely has to change. No longer should we have unsustainable and irresponsible booms in which we all pay for the consequences in the subsequent bust. Even if the British are unwilling to change, the recession could once again work in Cameron’s favour. If ever there is a time to make such a shift it is in a downturn. During a boom, voters will be unwilling to do anything that threatens the good times, however worthy. However, during a recession, voters are faced with the consequences of a bust and therefore are more likely to be willing to adopt a much more pragmatic, responsible approach.
Even so, advocating a move from a consumer to contributor economy with “save, save, save” as its motto is very courageous and somewhat of a risk. Brown could promise the electorate that they can have the boom times back if they stick with him, especially if he can continue to convince voters (how, I don’t know!) that the recession is global in origin and nothing to do with him. Consequently, the future with Brown offers the bright attractive neon lights of “spend, spend, spend” rather than the boring fuddy duddy future Cameron is offering of “save, save, save.”
Cameron needs to convince people that spending more than you earn is not as good as it sounds. The problem he faces is that people like bright neon lights. People continue to flock to the casinos of Las Vegas despite the fact that gambling with a policy of “spend, spend, spend” – whether as an individual, family or as a government – is the road to ruin. Just ask the gambler... or the poor sods who lose their jobs as a result of Brown's "boom and bust" and the rest of us who have to pay for all the debt accumulated by Gambler Brown!!!
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