A walk down memory lane
As a younger Gordon Brown was bolting the New in front of Labour in the mid-Nineties, he made frequent schoolboyish field trips across the Atlantic to study the slick campaign and policy lessons from Bill Clinton’s victories in the US. This is the stuff of opposition, to learn from those who have blazed a trail you want to follow – and also to lodge in the public consciousness back home the idea that, yes, you are destined to follow them.
So it is that the Tories are obsessing about another North American political success story, that of the Canadian Liberal Party, which swept to power in 1993 and proceeded to implement the biggest reduction in government spending in the country’s history, eliminating a crippling C$42bn (£22bn) budget deficit in just four years. The international acclaim was raucous: The Wall Street Journal had proclaimed Canada “an honorary member of the Third World” in 1993, when its national debt was heading towards a peak of 72 per cent of the size of the economy; in 1998, Paul Martin, the finance minister, was heralded by Business Week magazine for having produced “a maple leaf miracle”. The centrist Liberal Party went on to further electoral success – and Mr Martin inherited the prime minister’s office. No wonder the Conservatives are salivating.
The British Government’s financial position now is far worse than Canada in the Nineties. The national debt will exceed 100 per cent of GDP, as the country works through the legacy of bank bailouts and economic stimulus spending, and the collapse in tax revenues. The deficit – that is, revenues minus spending – will get well into double figures as a percentage of the economy, compared to Canada’s 5.8 per cent at its worst.
But, obviously, the reasons that we are in this position are also significantly different, which is why some experts are cautioning against making too much of the comparisons.
“Canada in the Nineties was in a very different situation to the US or the UK today, and its experience is not a black-and-white case that proves some ideological point, says Joydeep Mukherji, credit analyst at Standard & Poor’s. Canada had not balanced its budget since 1970 and it was demonstrably falling behind its giant neighbour to the south in terms of economic growth.
“There was no trigger, no great bankruptcy – the country did not fall apart. It did not happen overnight. There was a feeling across the board that the public had had enough of deficits and the government had to get its books in order,” Mr Mukherji says.
Most of the major parties, in fact, argued that Mr Martin was not going far enough. That despite his handing out 45,000 pink slips to civil servants, instigating cuts of 40-60 per cent in business and agricultural subsidies, and slashing the money federal government hands out to the provinces.
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