08 June 2017
Following The Oracle
Has Mrs May misjudged her position?
By John Watson
Data is all very well but for it to be useful you have to know what it means. A failure to interpret forecasts correctly ruined Croesus in 347 BC. Now it threatens Mrs May. Of course the two cases are not identical. For one thing, Croesus was not relying on opinion polls. Why should he? As King of Lydia he possessed legendary wealth and power. Still, he thought he had better check up a bit before attacking the Persians so he asked the Delphic Oracle what he should do. The reply was reassuring. If he went to war a great empire would be destroyed. Naturally he assumed that it would be that of the Persians but oops! he had interpreted the forecast wrong; it all went belly up and the empire which was destroyed was his own.
Looking at the polls before she called the election, Mrs May must have thought that she could obtain a mandate which would give her a free hand on Brexit and allow her to put through the reforms to help lower paid workers on which she has so clearly set her heart. “Go on,” her advisers said, “it’s a slam dunk. What is more you will split Labour and destroy their prospect of office for a generation.” Should she fail to obtain a satisfactory majority today, the party which will be split and destroyed will be her own.
Where has her support gone? Was her manifesto overconfident? Historically parties have achieved office by offering a series of promises designed to bribe vital sectors of the electorate. A triple lock on pensions? Yes, that should hold the grey vote, even if it tilts the balance further against the younger generation. No rise to taxes or national insurance? That may limit the government’s flexibility to deal with changing circumstances but so what if it will win a few votes. Costs of social care? We certainly would not want to spook people who hope to leave money by suggesting that the state should be reimbursed out of their estates, however much the health service could do with the cash. Those approaching death still have votes. Was it arrogance which prompted Mrs May to try to use her popularity to escape from this semi-corrupt mess?
In reality she had little choice. The real problems facing the government are not self-made but go back to the need to rebuild the economy following the disasters of 2008. The truth is that we are over indebted and to prevent it getting worse we need to do two things. The first is to hold back on spending. The second is to grow GDP so that the debt becomes less significant in the context of our national income.
The efforts of the Coalition, and now this government, to pull back on expenditure remind you of a man trying to cover a leaky roof with a tarpaulin. If it isn’t quite big enough there is exposure to the weather somewhere. Move the tarpaulin and you just change the gaps. No one really likes the way the young are burdened with University fees, but pull the tarpaulin over that and there is less to cover the health service. Keep the triple lock on pensions? Now the farming industry cannot be covered. On and on it goes and meanwhile the government’s opponents talk about how much they propose to spend as though the tarpaulin was infinite. No wonder Amber Rudd asked Labour about their money tree.
However unpleasant it is to have to cut back on spending, it becomes harder if GDP declines. A drop in the nation’s income reduces the tax available for spending but also makes the debt bigger in comparison with the economy. Whatever the government’s priority with the tarpaulin, therefore, GDP has to be protected and although taxes will no doubt increase they must not increase to a level which damages the national income. That is why it is folly to try to put all the burden onto companies and highly paid taxpayers. Profitable business is highly mobile these days and if you hike taxes too far you will drive business across the channel in precisely the same way that France drove business to London through its restrictive labour laws. That isn’t to say that there is anything wrong with the view that, when needs must, those with the broadest shoulders should bear the heaviest burden. That is surely right but care still needs to be taken to ensure that burdens are seen to be fair and that needs do not get out of hand. In these days of limited means and instability that means taking a cautious approach and not committing oneself with unnecessary promises.
It is the need to maximise flexibility to meet changing circumstances which has driven the government to keep away from specific promises in its manifesto and to avoid anything which could create an unnecessary burden on the public funds. Politically it is risky. It allows the opposition to upstage the government with promises and hard figures. Mrs May’s bet was that her political position was sufficiently strong for her to be able to ignore this in order to keep her options open. Today we will discover whether she read the polls aright.
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