The Brown Government sees a glimmer of light. The worst of the recession may be over. On that slim hope is built a recovery strategy from now until the general election, which must be held within nine months.
This may seem wishful thinking given all the Government’s troubles and tarnished image. But Gordon Brown is still up for the fight. August was merely an interlude before the battle starts with a few preliminary skirmishes this week ahead of this month’s party conferences. There will also be battles over Europe with the second Irish referendum on the Lisbon Treaty on October 2.
Most of the events of August will soon be forgotten, apart from the growing concern over the British involvement in Afghanistan and the distracting issue of the released Lockerbie bomber. The Tories are in the 41 to 43 per cent range in the polls, and Labour down at 24 to 27 per cent, just as in late July.
Mr Brown’s only hope of shifting these numbers rests on the economy returning to growth around the turn of the year. Mr Brown and Alistair Darling argue that it would have been a lot worse if the Government had not acted to rescue the banks, cut VAT and spent money to support the economy. Now an activist approach is necessary to get credit flowing to sustain recovery and to keep young people in work. And we will get “public spending on a sustainable footing in the medium term”.
That strategy will run through this week’s initiative on jobs for young people to the full G20 summit on September 24-25 in Pittsburgh. Such summits play to the strengths of Mr Brown. And the summit is helpfully just before the Labour conference.
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But — and it is a huge but — any recovery may be slow as the economy and the banks remain fragile, while unemployment will continue to rise. Most important of all, the big, and still worsening, deterioration in public finances confirmed last week will require action over the next parliament and beyond. That means a tight squeeze in public spending and also large tax increases. With fuel duty rising today, and VAT returning to 17.5 per cent on January 1, people will not feel better off and will rightly fear worse to come.
That hardly constitutes a feel-good scenario. However, despite the odds, Mr Brown will play the recovery card until the end.