Labour's Luck is Running Out

Written by Vincent Cable MP and published in Informer on Tue 3rd Dec 2002

Last week in Parliament we heard the Chancellor's sobering statement on the economy. This government's luck is running out.

After a period of economic sunshine, with low inflation, low unemployment and rising living standards for most people the economic storm clouds are gathering ominously.

Even in an economically successful area like our borough there are signs that the crash in IT companies and the troubles of firms in the City are affecting jobs. The local housing boom is not sustainable and prices will fall sharply when enough people realise that their mortgage commitments are getting out of control.

Britain is bound to be affected by the serious slowdown in Western Europe and the economic uncertainties in the US. A messy war in Iraq could push up oil prices, temporarily, and weaken confidence.

If the economy slows, the government gets less tax revenue. The budget has already started to leak red ink. Gordon Brown admitted to growing budget deficits.

Yet the following day I was head to head with the industry minister, Patricia Hewitt, when she announced that the government is planning to find several billion pounds to bail out the failed, privatised, nuclear power company, British Energy.

There are other potential 'black holes' in the government accounts: the costs of financing a war; the costs of pay rises for public sector workers in short supply (nurses, doctors, NHS scientists, teachers) and whatever has to be found for the firemen.

Since the government has been generally prudent and has paid off a lot of debt it now has some room for manoeuvre and can borrow to cover budget deficits for a while. But the day of reckoning may be approaching when painful tax rises are imposed upon us.

We have been warned.