Carswell defection highlights UK’s fiscal weakness

I’d like to congratulate Douglas Carswell on forcing a by-election in his Clacton constituency. Furthermore, I hope he wins. I write this not because I’m a UKIP supporter, because I’d take a particular pleasure in seeing the Conservative party suffer in this high-profile Essex constituency or because Carswell is a personal friend. None of these things is true.

What is true is that on the various occasions I’ve met him since he entered Parliament in 2005, and in much of his prodigious written output, I’ve found Carswell to be not only perceptive and intelligent but also, genuinely principled. He’s a debater and thinker who identifies tough issues, immerses himself in research, then comes to clear, intelligible conclusions. That’s rare among MPs.

Rarer still is Carswell’s determination to say what he believes, and what needs to be said, even if the message is likely to upset others – be it the House of Commons authorities or the leadership of the Conservatives, a party of which he was a member, before his defection to UKIP last Thursday, for almost 25 years.

Clearly possessing the ability to hold high office, Carswell takes the view, when he sees stupid things happening, that someone needs to shout stop. And so he does. In his early 40s and a strong media-performer, had he played his cards differently, he’d now be well up the ministerial ladder. Yet Carswell chose, instead, a different path of saying what he believes. That, no question, took courage. It also took courage to defect from a party that clearly means a lot to him and then state, as he announced his decision, that the Tory leadership “isn’t serious about the changes that Britain desperately needs”.

For that reason alone, I applaud Carswell’s decision. But I also want him to hold the Clacton constituency he’s served for 9 years in the upcoming by-election, albeit for UKIP, as in my experience he’s one of very few at Westminster who’s truly grasped, and then been prepared to articulate, the reality of the UK’s current economic predicament.

Britain is growing, yes. Our GDP expanded at an annualized rate of 3.2pc in the second quarter, compared to 2.4pc in America, 1.3pc in Germany and 0.1pc in France. A typical government backbencher would wave their order paper, cheer to the rafters and leave it at that. But Carswell has, for several years now, been prepared to point to underlying economic truths that he knows, while deeply unpalatable to the Conservative high command and to the political classes as a whole, absolutely mustn’t be buried.

The UK’s fiscal situation remains dire and is getting worse. For all the “austerity” rhetoric, and the cross-party dogfight over “tight spending”, public sector borrowing remains sky-high, our national debt continuing to spiral ever upward. Attempts to reform the UK’s still extremely bloated banking sector, meanwhile, for all the squealing of the ubiquitous financial services lobby, have been deeply inadequate and will do little to prevent a repeat of re-run of the disastrous meltdown of 2008.

Such statements, easy enough for a financially literate commentator to formulate and put forward, not least because they’re obvious, are career suicide for any Tory MP. Yet these are precisely the views that Carswell, to his credit, has continued to advance.

“After Osbrown”, a pamphlet published earlier this year by the think-tank Politeia, was the Member for Clacton’s most recent attempt to drum some basic economic history into the addled brains of his Parliamentary colleagues. The UK recovery, he argued, is built on an unsustainable and potentially explosive combination of cheap credit, printed money and ultimately unaffordable on-going government largesse. Amen to that.

Each of the four periods of sustained economic contraction experienced by the UK since the early 1970s has been preceded by an unsustainable credit-induced boom that then went wrong. “We’re now making the same mistake all over again”, Carswell wrote, pointing out that Conservative fiscal policy, while spun differently, has actually been a continuation of what came before, with Osborne on course to borrow more in the five years from 2010 than Gordon Brown did in the 13 years from 1997. “We insist on testing to destruction the idea that cheap credit can make us rich,” Carswell concluded. “Sooner or later, Osbrown economics will not only fail but will be recognized as having failed”.

Parliament needs people with the intellectual self-confidence and honesty to make such important, but politically awkward interventions, and who will keep making them, however great the pressure to shut up. That’s why Carswell should remain in the House of Commons.

Anyone who doubts the need for plain-speaking, or who wants dismiss Carswell’s analysis, should take a close look at the UK’s national accounts. Figures published last week showed that during the first four months of the fiscal year to the end of July, government borrowing was higher than the same period over each of the previous three years. You read that correctly – we’re currently borrowing at a faster rate than in 2010, 2012 or 2013, despite our “world class” economic growth and the fact that growth, via lower spending on benefits and higher tax revenues, is supposed to improve our public finances.

The UK grew almost three times faster than Germany during the year to the end of July. One of the four months when corporation tax is due, July is also supposed to be a strong fiscal month. Yet still, the government spent more than it took in revenue in July 2014, racking up another £200m of borrowing – an amount which rises to almost £800m, as the fine-print shows, if you net out over £500m which the Treasury dubiously counts as “receipts” from its QE bond-buying program.

The Tory narrative is that growth is roaring ahead – and that’s certainly what the headline figures show. Yet it’s surely alarming that the Treasury has borrowed an additional £37bn since April, a worse outcome than in each of the previous three years, despite higher growth. Why? For the most part because of the government’s failure to control spending – which has increased every year since 2010, just as it did under Labour.

Of course, some state programs have been cut and some deserving recipients have unduly suffered. That’s unfortunate, but is always going to case when you’re spending over £600bn a year and an unwieldy state accounts for more over two-fifths of the entire economy. Individual cases of hardship, though, cannot disguise the truth that, in terms of the overall fiscal picture, UK austerity is a myth.

Spending and borrowing are soaring, with the UK’s national debt – which we must service and then repay – now standing at £1,410bn, almost £40,000 for each UK taxpayer and twice what is was when the Tories took office in 2010. Osborne’s emergency budget of that year said that, by 2014/15, annual borrowing would be £60bn. On last week’s figures we’re instead looking at adding £100bn+ to the national debt in the current fiscal year, just as we have under each year of Conservative government.

Such realities seriously bother people like Carswell who believe in fiscal responsibility and a well-run state sector. They also seriously bother me. The growth we’re now seeing in the UK is being driven less by private investment, borne of greater confidence, than by ever-accumulating debt – in both the private and particularly the public sector.

The fact that Parliament has someone as credible as Douglas Carswell highlighting problems that the vast majority of our political classes want to forget is, for me, more important than which party he represents.

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