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“It’s the economy…..”

May 29th, 2008

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    A guest article from Cityunslicker

Even as the rumours of an imminent challenge to our glorious Prime Minister fade, there is still a good chance of an election before May 2010 – no doubt Tory central office is preparing for this and, hidden from view, may even be preparing a manifesto. The mantra ‘It’s the Economy, Stupid’ is going to hold firm for the next year or two as the UK economic situation worsens, recession or no recession.

But the real hard choice for the Conservatives is what to offer the electorate. The party faithful expect tax cuts and indeed with the burden of taxes at a historically high-level and growing public dissatisfaction with the Government spending splurge, they will think they have a point. However, remember 1979 and Margaret Thatcher, taxes had to go up in the first term – they did under the 1992/7 Tory government too. A ruined economy needs sorting by whoever is in power.

    The economic inheritance from Brown and Darling is likely to be a poisoned one. The official government PSBR is not too bad, but this is from a time of plenty. With tax income due to fall as profits disappear from banks and the services sector, this situation will get worse. The benefits claims will surely increase with higher unemployment. Stamp duty revenues will fall along with the slowing housing market. The huge PFI debt will also begin to weigh more heavily, as will over time the cost of gold-plated public sector pensions as more civil servants start to retire.

Overall, if anything taxes may need to rise unless we have massive spending cuts. Can the Tories campaign on this platform – the truth is they have no other choice, but will they say it? Also what can Labour do in the face of the same problem, promise a Tory-lite or ignore economic sense and retreat to a socialist utopia? And even the Lib Dems need to come up with some ideas.

How honest can politicians be, and how much would electoral dishonesty hamstring the next Government to the point at which it became a one-term wonder?

The author runs the Capitalists@work site.

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