The old wartime poster ‘Keep Calm and Carry On’ has been reprinted recently and is turning up in the strangest places around Westminster. I have seen it on an MP’s desk and emblazoned on the cufflinks of a Treasury civil servant. It certainly captures the sense that we are undergoing an economic blitz, and acknowledges implicitly the temptation to panic. But at a time when Cabinet members are describing International Monetary Fund bailouts — quite extraordinarily — as ‘a kind of spa’, the case for keeping calm looks increasingly flimsy.
The main question at the heart of the Budget on 22 April is not who will receive what, but how close the nation is to bankruptcy. Alistair Darling will have to lay out in sickening detail the scale of the collapse in tax revenues and the extent of the government’s debt: £150 billion a year, the equivalent to an Afghanistan war every five days. Should this credit supply choke at any point, then it will indeed be time for a little of the same ‘spa’ treatment that Denis Healey gave Britain in 1976.
It is now horribly clear that the so-called ‘stimulus’ announced last October has been an abject and costly failure. The VAT cut has proved a commercial irrelevance, as any junior cashier could have predicted. The overall aim of the package was to curb unemployment, which was then forecast to be 1.1 million by the end of this year. It is now forecast to reach 1.9 million. Mr Darling’s instinct is to draw a line under this — yet in Number 10 the instinct is to play one final card: to borrow even more, and go for double or quits.
Just three months ago, this looked impossible.
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