Thursday, 13 May 2010

A Message for Melanie

An old friend, Melanie sent me the following message last night. She is a single Mum with two young girls. She lives in Petersfield in Hampshire with her partner Jules:

Rob, I've followed this as much as I can...Cameron and Clegg are working together...can you please explain really quickly how I'll benefit from this new coalition? or a Conservative government? I'll be honest i didn't read the tory manifesto ? tell me? what good will can this man possibly put the country back on track? Ok labour screwed up...? on many occassions? but is it all their fault? and how can DC put it right?

So here is my reply - not sure I can do 'really quickly' as your question is quick to ask but not to answer - but this is my best shot:


Here is my take. Yes largely the problem that needs solving has been caused by Labour. In 1997, at the end of the last Conservative government, the economy was in a good state - no big debts (comparatively) and very competitive compared to other nations and we had comparatively efficient public services. And then in 1999 Labour started spending like crazy. In 1997 government spending was approx £320 Billion per year and if it had risen by the rate of inflation, by 2009 it would have been around £430billion. Instead in 2009 it was £638billion.

Now. This would not have been a problem if the amount of tax coming in had covered it and for a while it did. But one major reason that the amount of tax coming increased for a while was that Gordon Brown allowed the UK banks to start lending vastly increased amounts of money - effectively just printing money (really it's pretty much that simple), then taking a proportion of it as profit - which in turn was then taxed - creating bigger tax receipts in total which made it look okay for government spending to increase..

But this house of cards was always going to collapse and it did in 2008 with the banking crisis.

So where are we now?

Well we have a huge number of people employed in the public sector (i.e. working for the government or in the health service, education etc etc) and the Labour government have left us with a big spending problem. Currently the government is spending approx £500million per DAY more than it gets in tax..

So what needs to happen?

The simple answer is cut spending. But it has to be done sensibly. Just cutting spending by massive amounts instantly would just put lots of people on the dole - costing the government even more money because they would be claiming benefits and not paying tax. But basically the economy needs to be 're-balanced' - we need to decrease the number of people employed in the public sector and increase the number of people in the private (business) sector. To avoid doing this too quickly taxes will have to rise a bit in the short - but not really for the lower income earners.

The Labour party will no doubt start shrieking about reductions in public expenditure as they happen, but the reality is that public services didn't improve when Labour increased spending - schools didn't get better and hospitals weren't even clean! So, there is plenty of inefficiency and waste that can be cut-out.

It's going to take innovation - 'getting more for less' in simple terms in the public sector, but also in the private sector. The government needs to create an environment where British businesses can succeed by providing incentives and make sure investment is available for UK businesses - and of course making the labour (people) available rather than just employing them in the public sector.

Things are not hopeless. Fortunately, in part thanks to the running battle that the Conservatives fought over the last 13 years, we never did join the Euro so as the pound has reduced in value, compared to other currencies, it gets cheaper for people other countries to buy goods and services from the UK - creating profits and taxes.

The 5 year deal that the Conservatives and the Lib Dems have done makes a lot of sense. If they were constantly anticipating another election they would find it very difficult to work together because they would be wanting to criticise each other openly to illustrate differences in approach - so that come election day people would be able to choose which of them to vote for. But now we know they can work together for a good 3-4 years before they start having to think about the next election.

So how quickly will you benefit?

Well the major 'benefit' you will get is the country avoiding financial disaster - and that is an immediate benefit. We have huge debts left behind by Labour and they need paying off at sensible rates - currently the interest on government debt is roughly the same per year as total spending on education (it's big!). The financial markets are confident in the new government and so the amount of interest to be paid will probably not increase much.

But your kids will benefit positively. The changes in education that are planned will drive up the quality of education by introducing competition and driving up standards of teaching. My MP, Michael Gove is the man leading this. He is deeply passionate about it. I can't explain it all here but you can watch thise video below for a flavour of it.

Realistically, my kids are too old to benefit from the changes. By the time the major impact feeds thro' they will be at the end of their education. But yours will and if Michael is successful there will be far less of a difference between 'private' education and 'public' (state) education.

And this is really something worth working for. It is not going to be a Labour government who create equality of opportunity for children (despite weight of expectation and 13 long years to do it - they didn't even get started), its going to be a Conservative one in coalition.

I am positive about it. Look forward with well grounded hope and expectation. That's my advice.

Lots of love to you, the girls and Jules.



Post a Comment