Yahoo Sports The Tories can no longer avoid hard choices
The Chancellor might be feeling a distinct sense of déjà vu. A Government that entered office to calm the financial waters and fix the damage supposedly wreaked by its predecessor is instead presiding over a spike in government bond yields and sharply rising mortgage rates. Jeremy Hunt even felt the need to reassure markets that he is comfortable with Britain entering recession, should that be necessary to control inflation. That may well be the economically rational position to take. But he will know that it is hardly likely to help the Conservatives’ prospects if they reach the next election with the country still in the doldrums.
Admittedly, the present bout of instability is almost entirely the fault of the Bank of England. Disappointing inflation figures implied that the Monetary Policy Committee would have to go further than previously thought on rate increases. Under its governor, Andrew Bailey, the Bank’s credibility has been shot, having failed to anticipate the post-lockdown inflationary surge. It is unable to explain properly how it got things so wrong. That would mean owning up to its role during the pandemic, when it flooded the economy with vast quantities of money, in a move that looked suspiciously like monetising government debt.
As many ministers will acknowledge, however, Britain has been left particularly vulnerable to economic turbulence because of years of political failure. Indeed, across a swathe of areas, hard choices have been avoided altogether. Despite raising taxes to unprecedented levels, borrowing has surged, in part thanks to timidity on welfare reform and getting the jobless back into work. That, in turn, has necessitated an ultra-liberal approach to immigration, which is putting huge pressure on the country’s infrastructure. The original sin of lockdown is almost entirely absent from the political debate. Back in 2020, it was judged easier to follow the crowd and impose massively damaging restrictions on the population than stick with the sort of approach that has left Sweden in a considerably better state. It remains taboo for politicians to criticise the Bank of England.
The Government might say that there is no time to fix any of these things, and that it has had to do the best with the hand it has been dealt. It has behaved almost like a government of national emergency, seeking short-term fixes for problems and shutting down controversies. But it is beginning to pay a price for its managerialist fixation on appearing competent, while lacking any obvious guiding philosophy of government. If inflation and the economy continue to turn against it, the Government’s “competence” will instead look more and more like drift.
