Thursday, September 20, 2007

Labour Trusted on the Economy

A Populus poll done for the Times, showed that 56% trust Labour on the economy compared to just 18% for the Tories.

The significant thing about this poll was that it was carried out Monday afternoon and evening, after the Chancellor's announcement that he would guarantee existing Northern Rock deposits and after the scenes on Friday and Saturday of people queueing to get their money out of Northern Rock Bank.

Tories reacted with shock to the poll. They had fondly hoped that this was Labour's "Black Wednesday" (which happened exactly 15 years ago) and had hoped it would boost their prospects. So why hasn't it?

The defining moment of the Labour government was actually the period 2001-2003. The conjunction of 9/11 and the crash created a perfect global storm. Stock markets everywhere crashed. The FTSE100 went from 6900 in Jan 2000 to about 3100 in March 2003. The USA, France, Germany, Japan and scores of other developed countries such as Italy and the Netherlands went into recession, with attending rises in unemployment. People in Britain held their breath. In the previous 50 years, everytime the USA sneezed, we caught a cold, and in the last two recessions (1981 and 1992) we suffered worse than everyone else.

Only in 2001-2003, we sailed on undisturbed by world events. The economy continued to grow and unemployment stayed low. It was a non-event as far as the economy was concerned and the public took note. You only know how good a government is by how they perform during the bad times.

The current crisis is a minor thing compared to the crash. When people ask themselves whether the Labour government can cope with crises, they think back to 2001-2003, when the govt faced a world economic crisis and passed the test. However, when they ask whether a potential Tory government would cope, they think back to the last time the Tories faced such a test, 1992, and shudder. Especially as all those old photos show David Cameron standing close behind Norman Lamont.

If the current crisis is minor compared to 2001-2003, it is even more minor compared to 1992. Britain was in recession that year. 55,000 businesses went to the wall, unemployment was rising and the budget deficit that year was a horrifying 7% of GDP. Black Wednesday came on top of all that and was the final straw.

The world economy faces potentially significant obstacles ahead, but the public believes that the Labour government will strive mightily to protect them. After a hesitant start, the Chancellor Alistair Darling has come out enhanced by the Northern Rock crisis. He showed leadership, decisiveness, pragmatism and sheer guts, when everyone else was losing their heads. It's nice to know we have a heavyweight in the Treasury.

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