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January 18, 2010

Tory Time

By Spear's

LUV is in the air, according to Martin Sorrell of WPP, the world’s largest global advertising conglomerate, as he sacks 13,000 employees.

LUV IS IN the air, according to Martin Sorrell of WPP, the world’s largest global advertising conglomerate, as he sacks 13,000 employees.

The L, you see, refers to the UK economy, indicating a flat non-recovery, or a decade of marking time; the U refers to the US, indicating a long and slow recovery after the collapse over the Winter of 2008/9; and the V indicates a robust recovery for the Far East, especially China, followed by India, which is already happening. It could all go wrong so easily, with the UK’s L turning into a disastrous W. This is clearly in Gordon Brown’s since the next election is but six short months away.

The UK electoral-economic cycle is an easy read. Labour doesn’t know much about money and their management of the economy always ends in bust, with far too much national debt and too many rip-offs being exposed, with many liabilities unrecorded in the books.

Then the Conservatives come to power, who know about money, who proceed to reduce the national debt and balance the books by reducing public expenditure and then reducing taxes, until a different scandal (as in sex) is uncovered and the old adage of ‘One loose screw and the whole Cabinet falls apart’ is once again proven to be the case.

Amid screams of Tory immorality in bed and sleaze at work, the really useless and sleazy and financially-illiterate Labour Party (Old or New, makes no difference) once again rides the false expectations of over half the electorate and comes improbably to power, inherits a clean set of books from the Conservatives which it promptly proceeds to muddy and ruin with red ink all over again.

Well, it feels like Tory Time again, but this time the financial mess facing them is the worst ever. Although Spear’s has applauded many of his initiatives (e.g. on inheritance tax and non-doms), some in the City are still not convinced that the Shadow Chancellor, George Osborne, is up to it. The main reason is that despite his acute intelligence and occasionally brilliant flashes of strategic thinking, he has never had a real job outside Westminster.

They don’t like his smug ‘I know best’ attitude, but they unfairly expect him to be a financial Teiresias, so when he said, ‘We would only deconstruct the “Too-Big-To-Fail” mega-banks if the Americans moved to do so first’ and two weeks later the EU Competition Commissioner did exactly that, they leap in to criticise.

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The really big challenge facing the Conservatives, however, was spelt out by the CBI: reduce public expenditure by £50.0 billion by 2013 or we’re bust, and then by another £70.0 billion to balance the budget by 2016. And just in case that warning received the smug-off treatment, Fitch has warned that if something like this is not implemented then Britain will lose its AAA credit rating. The next thing we’ll see is a Conservative Government going cap-in-hand to the IMF.

The last time the Conservatives were in this position, in 1980, they had Howe and Ridley who developed the Medium-Term Financial Strategy, but that was in the era when banks were banks and not behaving like a bunch of drunken sailors on a three-day pass. Cameron should take an entirely dispassionate view of whether Osborne is, or isn’t, the right man for No. 11, as post-Brown, there will not be the slightest room for error at HM Treasury.

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