One Year On - 8th May 2011

One  year on since the formation of our first peace time coalition government in seventy years,( and notwithstanding the punishment that the junior coalition partner has just taken at the ballot box), the reason for entering that coalition and sticking to it remains as powerful and persuasive now  as it was  in May last year.

 The single overriding objective of forming the coalition was to give Britain 5 years of stable government in which to address our disastrous public finances. Over the last year we have seen the financial storm raging in Greece, Ireland and Portugal.  Each in turn has had to queue up for a bail out from the European Union and International Monetary Fund on pretty unattractive terms including very high interest rates.

 It is a fact, however, that our own public finances are as bad as those of Greece, and worse than those of Ireland and Portugal. Indeed, had the coalition merely stuck with the deficit reduction plan inherited from Labour, then in 5 years time we would only then have reduced the deficit to the level of Portugal’s now.

How has Britain avoided the financial whirlwind?
Why are we able to borrow at low interest rates enjoyed by countries with very strong finances like Germany, despite our own finances being no better than those of Greece?
The answer is simple: international confidence in –and approval of- the measures that the coalition immediately took to deal with our burgeoning deficit. Of course, these cuts in expenditure are much less popular at home than they are in the international financial markets, but they remain essential to our financial health. It is an illusion to believe that there is some gentler alternative approach that we might have taken.  The consequence of any attempt to solve our problem of debt over a longer timetable with measures less harsh,  would be much higher rates of interest rates that would choke off economic recovery and kill jobs.

It is the achievement of the coalition’s strategy that, despite the need for painful cuts in public expenditure, manufacturing and exports are growing strongly, and there are 400,000 more jobs in the private sector of the economy than there were a year ago.

Despite the fundamental reason for the coalition being financial recovery, and this remaining its main effort, there has nevertheless been a frantic pace of reform across a whole range of our national life. Even to summarise these changes would take up pages, so almost at random I highlight a few: Implementation of immigration control modelled on Australia including an annual cap on numbers; Establishing  a ‘referendum lock’ on any  transfer of power to the EU; Linking increases in the state pension to increases in the level of average wage increases; Cutting business taxes and raising personal tax allowances –taking over a million earners out of income tax altogether; Scrapping the wretched requirement for Home Information Packs.

Work in progress continues on a massive agenda of welfare reform, education reform, and NHS reform.  Some of which enjoys massive popular support, and much of which is highly controversial –in particular the NHS. Of course, it is right that the coalition pauses and listens to concerns and attempts to address them before proceeding. The Government must always be conscious of the fact that the coalition agreement was put together after the general election without endorsement from the voters.

No matter how desirable a particular policy or reform might be, nothing in the Government’s agenda can be allowed to put in jeopardy the coalition itself and its essential objective to repair the public finances over the course of a five year parliament. That is what the coalition is for, and that is the work that it has to complete.