The Hindu : Opinion / News Analysis : The wrong Tory leader

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Friday, Apr 29, 2005

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Opinion - News Analysis

The wrong Tory leader

William Keegan

Opposition Conservatives are missing out on challenging Tony Blair's Labour Party on the economy ahead of the general election.

IT IS quite astonishing that the British Conservative Party under Michael Howard has made so little of the economy during the present election campaign. Howard seems to have tamely rolled over and accepted the ruling Labour party's claim that it is now `the Party of Economic Competence' without so much as a struggle.

Although `cleaner hospitals' are undoubtedly a goal to be aimed at (no-one seems to be saying that hospitals wards should never have been allowed to reach a state where they figure so prominently in the campaign), it is absurd that they should be listed as one of the five key issues facing the British electorate.

And by focussing so much on the issue of immigration Mr. Howard seems to ignore the views of everybody from the director general of the Confederation of British Industry to the Governor of the Bank of England that recent immigration into the U.K. has been of significant economic benefit, helping to meet shortages of skills and keep inflation under control.

Historically, after a long period of reasonable economic growth and high employment in this country, skills shortages lead to what economists call `overheating' and wage inflation takes off.

It hasn't happened this time, and although global competitive pressures may be one reason, another is almost certainly the supply of new immigrants — a familiar experience in the U.S. Certainly Labour has a good story to tell at the moment.

There has been a period of good economic growth and falling unemployment. By refusing to bow to the siren voices urging him to join the Eurozone, Finance Minister Gordon Brown has managed to avoid the deflationary trap set by the European Central Bank, which is excessively concerned with conquering inflation and not enough with economic growth and employment.

But Mr. Brown has exaggerated the degree to which he is responsible for a relatively good economic performance, to the extent of often including as years of superior economic growth the years of post-Black Wednesday economic recovery under Conservative Finance Minister Kenneth Clarke (1993-1997).

The underlying position of British industry has continued to suffer from an overvalued exchange rate, which has drastically hit the competitiveness of exports. A recent OECD study indicates that, at a time when world trade was booming, U.K. exports performed terribly last year. One British industry survey suggests that what little manufacturing recovery that has been experienced has now expired, i.e. the economy is slowing down and the good times are over.

The Conservatives have made precious little of this and they have made themselves look ridiculous by simultaneously saying the national budget is overstretched but they would nevertheless cut taxes.

What a different type of campaign would be playing itself out today had the Conservatives elected Kenneth Clarke as their party leader.

- Guardian Newspapers Limited 2004

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