GAVI

The pain before the gain

The next two years are going to be the toughest test for David Cameron and his top flight ministers.

These are the times when political commentators get to see whether or not their judgments turn out to be true.

Those, like me, who forecast Cameron had inner steel, are about to be proved right or wrong. But the signs are good.

The first shots have been fired in the fight with the public sector unions over pension reform.

Ministers are making it quite clear rewriting trade union law is very much on the agenda if needs be.

High Street chains are shutting and the big banks are shedding tens of thousands of jobs.

Tory backbenchers are growing restless at their lack of career prospects thanks to the Coalition and Cameron’s need to dish out jobs to LibDems.

And the Greek default crisis could – if badly handled – send a shockwave through the global economy which will have horrendous effects in the UK, whether we’re in the euro or not.

Yet this is the painful period which the PM and his team have long warned us about.

Behind the scenes, they are remarkably calm about it.  It hasn’t caught them by surprise.

And they feel remarkably confident they will come through it relatively unscathed.

This is why.

It is easy to forget just how close to the brink Britain came in 2010.

There was no alternative to bringing back fiscal discipline with a loose monetary position.

The Tories took three bold decisions:

  • To go into Coalition government in the national interest – a decision taken swiftly to shore up the money markets’ faith in the UK. Any sign of weakness would have tipped us over the edge.
  • To bring in an emergency Budget aimed at balancing the current account and live within our means during the course of this Parliament.
  • And to deliver fiscal consolidation. To change, fundamentally, current spending and the public service model.

These acts were vital to shoring us up and, over time, rebalancing the economy so it’s based on private sector growth.

And fixing public services so they are functional, and not bleeding us dry.

There is now a culture of delivery in many Whitehall departments, driven by Cabinet ministers like Michael Gove and Philip Hammond.

In recent years, “thinkers” in Whitehall departments were seen as the A team of officials.

Those who were in charge of delivery were seen as the plodders.

That is now changing.

Ministers are focused on bringing in planning changes to aid industry, to cut corporation tax with an ambition of being the lowest in the EU and to invest in infrastructure.

Hence the HS2 rail being planned – incidentally loved by many Labour supporters and loathed by many Tories – and, I am assured, a new look at the London airport runway shortage.

Smart officials with ambition are learning that being a deliverer of change and efficiency is the way to get noticed.

This will inevitably mean a shakeout in the senior civil service. Some would argue that’s no bad thing.

Key departments like the Treasury are shelving thousands of staff.

In the Treasury’s case, 25% leave each year and are not being replaced.

Many  good brains are being lured away from HMT into investment banks like Dan Rosenfield, the Chancellor’s principal private secretary. He is replaced by Beth Russell, who used to work for Gordon Brown.

Cameron and George Osborne were helped by an accident of timing.

Change has fitted neatly into the political cycle, with goals on course to be met in time for the next General Election in May 2015.

President Barack Obama hasn’t been so lucky – getting caught slap-bang in the middle of that cycle and unable to deliver change in time for his second attempt at the White House.

There is a feeling the Bank of England may not raise base rates for the time being, or even this year.

Ministers are very conscious of the rising cost of living relative to real wages which are effectively falling in value.

Life “costs” more and we feel it every day.

A rise in Bank of England base rates will make that pain brutal for many – but ministers have calculated that people will bear it for a short period.

This is the crucial electoral gamble.

There are problems brewing. There always are.

New intake Tory MPs are growing frustrated about Cameron’s failure to renegotiate Britain’s EU membership.

A dining club has formed. It last met on Tuesday in a wealth MP’s home in Westminster.

Defence spending threatens to leave the UK “like Holland with nukes”, as one eminent backbencher told me recently.

But I’m clear these things will not bring the Premier down.

Cameron is aided by a junior Coalition partner in the LibDems who are taking much of the blame for the cuts.

This also means there is no contest on the Finance Bill which, in government, means vital energy is not being sapped in Commons pitched battles.

And he is buoyed by Labour leader Ed Miliband’s struggle to make much of an impact. Some in Labour have already written off his chances of a 2015 election victory.

I am told there is a steady stream of Labour figures beating a path to Tony Blair’s door pleading for his help.

And they’re not all Blairites.

Written By

George Pascoe-Watson