The Scorched Earth policy has begun. The FT has a hugely significant story – that the Treasury is “working privately on plans to reform Gordon Brown’s fiscal rules” which would “initially allow for increased borrowing”. In the vernacular, Brown has realised that if the Tories win the next election the he is now spending with Cameron’s Gold Card – every by-election bribe, every union sellout will be funded by borrowing with the bill sent to D. Cameron Esq. Cameron will have to tax us to pay for what Brown is today spending.
The Treasury is claiming that it was always going to “review” its 40% limit after the current economic cycle ends. It will struggle to find a single sentence in any speech that will corroborate that. Danny Finkelstein said on Newsnight that this will undermine the whole New Labour project. My take is that Brown doesn’t care, not any more. Like a retreating army, he doesn’t want the advancing Cameroons to have any advantage at all. Debt is a boring subject, but it means we’ll all pay more taxes for longer. I have blogged here before about Brown’s existing ballooning debt, and here about how Britain over the last decade ramped up debt while properly-run countries vastly reduced it. This is big, serious and a problem: the consequences will be with us for years.
Before too long, I suspect the Treasury will be saying how these fiscal rules are elastic, and how Brown never pledged they were set in stone. So here is a quote of Brown from Newsnight five years ago.
“I can give you a guarantee that is our fiscal rules, that we must uphold. And that is the basis of… and that discipline is the basis on which I think people have seen this Government as competent.”
Quite so, and breaking these rules will strike people as a demonstration of incompetence. Or the most appalling short termism. The Irish government decided a few weeks ago that it would tighten its spending this year, because tax receipts were falling. Is this idea so hard for Gordon Brown to grasp? The entire country is cutting back its spending, why can’t government?
Brown, however, is on a mission to raise state spending – and, right now, it looks likely to be a Tory government that pays tomorrow for the money he borrows today. It is impossible to understand Gordon Brown without understanding his approach to debt. It is his weapon of choice, and if he loses the next election he can right now start turning that weapon on the Tories. So he will have to feast on humble pie, and his own words, as he tears up his rules and lets debt soar above 40%. Yes, he may lose the election. But he has realised one upside to this inevitability: he can start spending David Cameron’s budget now.