joke doing the rounds in the Manchester conference hall yesterday was this: is David Cameron following Plan C or Plan D? The wags weren’t referring to the government’s deficit reduction strategy, but rather the fact that the Prime Minister was forced to rewrite his speech after early extracts, released to the press on Tuesday night, caused a furore. In one passage, the Prime Minister appeared to call on all Britons to pay off their credit card debts as soon as possible. “The only way out of this crisis is to deal with your debts. That means households – all of us – paying off the credit card and store card bills,” read the offending extract.
By the time the Prime Minister took to the stage, that line – along with several others – had been altered, so that it became a mere observation: “households are paying down their credit card and store card bills.” Cameron’s aides put the clanger down to “sloppy drafting” but the damage was already done. Here was an incredibly well-off Prime Minister, whose government borrowed almost £16bn in August – the highest on record – lecturing the electorate on debt.
There is nothing wrong with prudence. The UK has been getting drunk on cheap money for far too long and a great de-leveraging must take place. The idea of calling on everyone to do it at once – in the run-up to Christmas – is crazy, however, and plays into the hands of those critics who claim Cameron just doesn’t get it. Meanwhile, the Bank of England’s whole strategy – keeping interest rates artificially low and ignoring inflation – is designed to help those who want to borrow to spend, while penalising prudent savers.
Worse still, the government’s own fiscal watchdog, the Office for Budget Responsibility, bases its growth assumptions on even higher consumer debt in the years ahead. Its March forecast showed household debt rising from £1.6 trillion in 2011 to £2.1 trillion in 2015 – an increase of £566bn. That would take it from 160 per cent of disposable income to 175 per cent. Cameron is often criticised for ignoring the details, but he – and his aides – should really know this stuff.
The credit card row overshadowed the entire speech. The Prime Minister used an auto-cue rather than reciting it from memory – his best mode of delivery – apparently because the text had to be changed so many times it wasn’t ready in time for him to learn it. The passage on consumer debt was so badly written, it verged on the incoherent.
The whole debacle underlines the problem that the Cameroons have had all along. Too concerned with happy-clappy issues such as the big society and foreign aid, they ignore the bigger picture: falling living standards and feeble economic growth. The Prime Minister only really found his groove when he was criticising the opposition. In fact, the whole conference can be summed up with one message: “we’re not as bad as the last lot”. Unless the Tories get a grip, the electorate could soon disagree.
David Crow is City A.M.’s managing editor.