They're up and running on on a good day for Britain
LOVE was in the air in the Downing Street rose garden yesterday. David Cameron and nick Clegg arrived almost handinhand to host their first joint press conference in this unexpected age of coalition politics.
As the sun shone and Britain’s new Prime Minister and Deputy Prime Minister set out their ambitions for five
years of strong and stable government many will have felt swept up in the spirit of optimism.
The significance of what the economist JM Keynes termed “animal spirits” should not be dismissed. In economics optimism can foster growth, employment and consumer confidence.
But optimism alone will not be enough to solve the enormous problems facing Britain. So it is good to report
that the economic policies unveiled by the new Government were received well in the financial markets and attracted the endorsement of Bank of England Governor Mervyn King.
A deficit reduction plan that is far more convincing than anything unveiled by Gordon Brown is being put in place. There is much financial pain ahead. The key test of the Government is how it distributes these sacrifices across the population.
On the one hand the Liberal Democrats will want to ensure that those best able to pay meet the lion’s
share of the burden. On the other, economically literate Conservatives will point out that increasing taxes upon wealthcreators is likely to be a self defeating exercise, while taxing savings and other assets risks punishing those who have worked hard all their lives.
We will not truly know until an emergency Budget takes place next month how these tensions are to be resolved but the early signs are mixed. Raising the taxfree personal allowance substantially is an excellent idea and we are delighted to hear that Labour’s plan to raise employer national insurance contributions will indeed be scrapped.
But an increase in contributions for employees, a massive increase in capital gains tax and the abandonment of the Conservative promise to raise the inheritance tax threshold will be bitter pills for Middle Britain to swallow.
The economy is not the only political issue. On other fronts the new Government’s plans to clean up politics
and reform public services are welcome, while it is alas difficult to see any administration containing Lib Dems getting a grip on immigration.
But sorting out Brown’s deficit is the overwhelming priority and here the CameronClegg regime deserves credit
for starting to cut publicsector waste at once. It had a good first day at the office. Britain must hope that many further good days are to follow.