Elections are decided on the personalities of the leaders of the parties, on the policies that they put forward but, above all, on the record of the government that has been in power up to the election. So let us have a look at what the Conservative led coalition has achieved and how the electorate should react to it.
The vital issue is the economy and the Conservative Party identified the Labour government?s budget deficit as the problem that they had to resolve.
Historically Conservative governments have always been strong in balancing public expenditure with the government?s revenue receipts. Under the Thatcher government, the 1990 budget was in surplus by £6 billion and the national debt stood at 27.7 per cent of GDP.
Gordon Brown, as Chancellor and as Prime Minister, decided to impose a ?Golden Rule?. This required the government to generate a budget surplus across the lifetime of an economic cycle. Unfortunately Labour?s inherent commitment to government spending was too strong, and they got round this commitment by defining the economic cycle to suit their own ends. So when the Coalition Government came to power in May 2010 it had inherited a budget deficit of £153.5 billion, 10.2% of GDP. Total expenditure was £673 billion, so the government was borrowing 23% of what they spent. In his June 2010 emergency Budget speech George Osborne said « As this is the last Budget in which the Golden Rule will appear, I would like to be the last Chancellor to report on it. We are set to miss the Golden Rule in this cycle by £485 billion. »
Conservatives believe that government deficits must be controlled not just out of blind adherence to political dogma but for sound practical reasons. Firstly higher government borrowing pushes interest rates up to a higher level than they would otherwise be, and that reduces private sector economic activity. Secondly, high borrowing results in pressures to increase taxation and taxation, however necessary, also reduces growth in the private sector economy. Finally increased public borrowing increases the National Debt, which requires greater government expenditure to service it. Those of us who live in France, of course, know all of that full well. So the government?s achievement on reducing the deficit to what is expected to be £90 billion in 2014/15, is strongly to be welcomed.
This has contributed to the trend for employment to rise and unemployment to fall that we have seen since late 2011/early 2012. There are currently 30.9 million people in work, 2 million more than when the government came to power. The official employment rate, i.e. the proportion of people aged from 16 to 64 in work, is 73.3%
The proportion of the economically active population who are unemployed (the unemployment rate) is 5.7%, compared to 7.8% when the government took office.
So the theory set out above works, and the reduction in the public deficit has yielded significant benefits to the UK economy. The painful austerity programme is not just adherence to political dogmatism that deserves public rejection, as our opponents would have the electorate believe, it is beneficial to the country as a whole, and particularly to those two million extra people who now have jobs.
Robin Baker
BCiP Member