Those of us with fond memories of the drubbing Margaret Thatcher gave Michael Foot in the 1983 election cannot but marvel at the remarkable turnaround in political – and economic – fortunes in the UK over the past 18 years. (As a Canadian, friends particularly enjoy reminding me of Canadian prime minister Kim Campbell who led her Conservative government into oblivion, winning just two seats in the 1993 federal election.) Today, Labour accuses the Conservatives of threatening to be reckless with the economy, while a kind of Dutch auction takes place over who’s going to cut taxes most.
New Labour has been accused of failing to deliver on a number of fronts.
We’d like to add a few accusations of our own. Add to the litany of failure the facts that Labour has so far not delivered a recession, any hyperinflation, a currency crisis, a general strike or the kind of punitive taxation that makes rock stars and entrepreneurs beg for a Jersey residency permit.
The success that Labour has delivered – as acknowledged by one-time die-hard Thatcherites such as Alan Sugar in a recent letter to The Times – is their remarkable record on macroeconomic management. It is, of course, Gordon Brown’s success, as it was his decision to hand total responsibility for setting interest rates over to a new Monetary Policy Committee at the Bank of England. We now find ourselves with such a low-inflation economy that interest rates have peaked some three or four percentage points below the level at which they used to bottom-out in the 1980s.
But let’s not forget that one of Labour’s first deeds was to levy a tax worth #5bn a year on a part of the economy that has no votes – and far too much regulation and complexity. The abolition of dividend tax credits has given pension funds a problem that will, literally, compound itself over the coming years. FDs, who have pension funds as major shareholders, and who also have their employees’ retirements to provide for, cannot but be acutely aware of this tax on future wealth.
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