Tory eyes turn to next election as hopes about economy remain high

Press, 3 February 1987, Page 16

Tory eyes turn to next election as hopes about economy remain high

More British General Elections during the last 42 years have been decided on economic issues and the next one, which must be held within 17 months, looks like no exception. ROBERT TAYLOR, of the “Observer,” comments on the prospects.

In an interview to mark the start of 1987, the British Chancellor of the Exchequer, Mr Nigel Lawson, has taken a bullish view of the country’s economic prospects in the “Financial Times,” and he made it clear that he wants to cut income tax to 25 pence in the pound as a way of stimulating enterprise. Official statistics just published suggest that living standards in Britain are rising more rapidly than at any time since the end of 1979. The consumer boom at the moment indicates that most people are much better off as long as they have a job. In this atmosphere of wider prosperity it is not surprising that the Conservative Government believes it can win the next General Election and Mrs Margaret Thatcher achieve a third term.

The present electoral omens, as such, do not look promising for the main Labour Party Opposition and the Liberal/Social Democratic Alliance. But the Government’s critics question how long the present economic upsurge can be maintained before it. provokes a grave crisis. This year’s balance of payments deficit (the difference between what Britain exports and imports) looks like being one of the biggest in the country’s history because the higher level of consumer spending is simply sucking finished products into

Britain on a huge scale and doing nothing to re-equip and stimulate the country’s own decayed manufacturing base. Moreover, the North Sea oil revenues, which has done so much to cushion Britain’s steep industrial decline since 1980, are falling now, partly because of the drop in oil prices, but also as reserves start to peak. Many observers believe that Britain wasted its most precious asset in North Sea oil and did not use the revenues raised to restructure the country’s economy. In many new, high-technology industries there is already a big trade deficit between Britain and the rest of the world. There are some signs that the high level of unemployment is now falling steadily, partly because of an improvement in job opportunities — especially for part-time workers — but also as a result of the Government’s own jobs and training programme. Mrs Thatcher and her Cabinet colleagues will argue that only more of the same can reduce the level of unemployment still fur-

This looks like involving a larger amount being spent on the State health service, on education, and on construction. In recent years, the Conservatives showed an active dislike for big Government spending plans. That old disdain appears to have waned, at least for now. Surprisingly, Chancellor Lawson gives the impression that Britain can enjoy both tax cuts and more State spending on worthy projects. Whether the voters believe him will determine the outcome of the General Election.

Certainly the Labour Party believes that more must be spent by the Government through taxation and borrowing if unemployment is to be cut by one million in two years — Labour’s primary objective. Recently Labour leaders have been discussing their job creation plans as they prepare for the coming political struggle. And the Liberal/Social Democratic Alliance hopes to improve its present modest public opinion showing (not more

than 20 per cent) at the relaunch conference it held in London last week with a strong emphasis on an alternative economic policy. General economic trends appear to be helping rather than hurting Mrs Thatcher at the moment. Pointing continually to the phenomenon of unemployment throughout the Western industrialised world, she argues that her Government cannot be held responsible for what has happened in the labour market Although Britain has not generated job opportunities, as in the United States during the last 10 years, its unemployment crisis is not as severe as that in Belgium, the Netherlands, and Denmark. In addition, its serious, underlying troubles involving poor training, lack of investment in manufacturing, and high rates of interest to industrial borrowers have so far not provoked a run on the pound or panic on the Stock Exchange.

The money markets would have acted quite differently if a Labour Government had been in office at this moment, but for the moment they retain confidence in Mrs Thatcher.

Yet opinion polls suggest many people are not as optimistic over future prospects as the Conservatives would like. Although the Labour Party’s employment strategy has not yet achieved

public credibility, its leaders believe it can do so by the next General Election.

For her part, Mrs Thatcher is behaving with supreme self-con-fidence and insists that the economy is enjoying a strong and permanent recovery. It may be not until the General Election is over though that the British people will recognise their present material prosperity is based on feeble foundations. Copyright — London Observer Service.