Sunday, September 7, 2008

Nearly dumb-struck

I have been all but dumb-struck for a number of days by the actions of my successor in the Exchequer.

Mr Darling's candour is admirable in stating that the economy is the "worst it has been for 60 years". Yet I am struggling with the notion that governments can somehow govern the condition of the economy from year to year or that they can somehow defy the occasional hesitations that may cause temporary misery in the economy. I do not dispute that governments bear responsibility for the overall health of the economy; indeed it is apparent to me that many mistakes have been made in recent years. The foremost amongst these would appear to be to allow the pound to float freely, at the mercy of financial speculation, following the disintegration of the Gold Standard. It is apparent that Britain would be less vulnerable to international currents had the currency been shackled to our European neighbours at a constant rate.

I have read a number of attempts to understand the mind of Mr Darling in recent days. As always Mr Bagehot presents an admirable argument:  that it is part of the natural process of governments with a great deal to hide.It is also argued that Mr Darling seeks to distance himself from his Premier. I can fully understand his sentiments and would wish to support the Chancellor's independence. This, however, is a right honourable gentleman who has shown little independence from the Premier during his brief stay in office.

Indeed there is little sign that the measures proposed over the last week represent a coherent vision of political economy held by the Chancellor. There is a little something for house purchases, a temporary removal of tax at the bottom end of the range of prices. There may be help with capital for purchasers and for those who cannot afford to repay their loans. This may provide relief in this sector although  the question of whence the capital to assist the housing market may be found is outstanding.

From there public attention has turned to the rising cost of energy and those poor people who may face hardship as a consequence. It is an admirable notion that the businesses that provide fuel should provide relief even though the figures may not support the rhetoric. I am indebted to the Local Government Association for informing us that payments to shareholders to these companies increased by some £257 million in the last year.  This economic surplus is a large sum but at the present level of population equates to about £20 for each household. If it were directed to the poorest third of households it would be worth about £60 each. It would be possible therefore to provide considerable relief to the neediest households if such sums are still available; and indeed it is reasonable to assume they are.

I would prefer that this were done by means of voluntary levy. The populist concept of a "windfall" tax is not conducive to good government and is bound to undermine investment confidence and deter business. Nevertheless the present government has rushed to exclude this possibility when it would have been wise to retain some means of influence over the energy sector. But this is a government that seeks to control too many events and has found itself in control of too few of them. It shows every sign of panic at a time when national leadership has most need to present a calm facade.

Aequam memento rebus in arduis servare mentem. 

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