The Financial Times

[Steve]

Theoretically a business focused paper, but honestly just a bit weirdly obsessed with Europe.

[Steve]

Recession official, but this is just the beginning

It’s official: Britain’s troubled economy is back in recession. For most people this doesn’t mean a thing - the real numbers are their pay packets or their unemployment cheque. But economists watch quarterly GDP figures because they are a very good signal of what is to come. Two quarters of negative growth are very rarely the end of the bad news.

The prospects of a quick recovery are scarce. Inflation is still over 10% and still rising. Even if it begins to fall, that it is so high to begin with points to a long and painful adjustment for the economy. Unemployment will rise and wages will stagnate. The only question is how long that will go on.

What can the Government do? The Lawson and Thatcher view would probably be that this is a necessary adjustment and that the government needs to simply get out of the way and let it happen. Inflation will only come down if the exchange rate remains stable in the ERM, if interest rates remain high to restrain lending, and if government spending remains restrained; and inflation coming down is a precondition to prosperity. Further deregulation, privatisation, and tax reform funded by spending cuts would put the economy in a good position to recover.

Their view prevailed in 1981. They are widely considered to have been vindicated at the time, but the price was mass unemployment that persisted far longer than expected. Tory moderates will probably push a different approach now, arguing for a “soft landing”. There is no avoiding recession and higher unemployment, but they are likely to argue that inflation has peaked and that a more gradual fall in inflation is a price worth paying for a shallower recession and lower unemployment. Their policy prescription would mean lower interest rates, tax cuts or spending funded by small deficits, and a reconsideration of Britain’s current ERM exchange rate. Those policies would normally be anathema to Thatcherites, but increasingly many are worried about the political imperative of acting.

Even this approach would be relatively timid by historical standards. Labour is likely to argue for a more radical approach - prioritising employment with much more substantial public works programmes and a return to some degree of economic planning to direct investment where it would have most value. That may give the greatest short term benefits, but the long-term impacts are much more difficult to estimate - though are likely to be negative unless the government has got substantially better at picking winners than in the 1970s.

The final piece of the puzzle is Britain's place in Europe. Joining the ERM has not automatically led to economic stability, but it has put Britain's currency, and economy, towards a more stable path. There is no avoiding this adjustment in some form - the writing was on the wall long before the ERM, and has its roots in Lawson's pre-election giveaway in 1987. What comes after is what is most important. The single most pro-business and pro-recovery move the government could make would be to make the most of Britain's membership of the ERM and confirm that it is the path to future membership of a European Single Currency. That would allow business to start planning with confidence of a Britain at the heart of the single European market, and give long term direction right now to an economy that sorely needs it.

[Redgrave]

It's time for experience, it's time for Dylan Macmillan
In a race for Leader rapidly descending into chaos, the Foreign Secretary cuts a principled and experienced figure for Downing Street



Dylan Macmillan is right when he says that this leadership contest will define the Conservative Party for a decade. However, the next decade will not just define the Conservative Party but it will define a new millennium, define the way in which Britain enters the 21st Century. 

The fate of Hong Kong, Britain's role in Europe, the end of the Cold War, a resurgent Russia and a withdrawing America, the challenges for Britain are great and it requires a calm, competent and experienced leader at the helm. That man is Dylan Macmillan.

Whilst the Financial Times will not formally take a position on which party to back until closer to the election, our readers can be assured that we have no qualms about expressing our preference for the next Prime Minister now. 

Macmillan proposes a detailed, comprehensive plan for deepening our ties with Europe, accepting that our place lies within the continent and not as a distant outsider. He knows of the need to stand up to Russia over their trickery and mind games and he knows of the need to bring Marcus Drummond-Macbeath back from South Africa, and in both of these instances, he can rely on his experience as Foreign Secretary to deliver results.

He also proposes a range of economic reforms that we believe are welcome steps, including double locking the personal allowance so that it rises by at least earnings or inflation, ensuring better worker participation and share ownership, regional investment funds, startup banks and reforming Right to Buy.  

Little time remains before the next election and Britain needs a Prime Minister who can calm the immediate chaos after Maastricht and deliver on the critical matters of foreign policy. It is for this reason that we believe it is time for experience and therefore time for Dylan Macmillan. 

[Max]

Britain needs a Liberal-Conservative Government for the 1990s

Earlier this week, markets took a jolt in anticipation of a Labour Government with the likelihood of Tommy Dawson in No. 11 Downing Street, set to drag us back to the command economics of the post-war consensus. The prospect of that should terrify everyone who believes in private enterprise and the free movement of capital and goods. 

The Conservative Party, although mired in scandal since Mrs Thatcher's downfall in 1990, has managed to pull itself back together and reform ranks just in the nick of time. At the Financial Times, we see a lot to like in Bibi Lauria - she's young, energetic and unlike Mrs T - a Europhile who can see that Britain's future lies at the heart of the European Project, even if she doesn't shout about it too much for fear of upsetting the backbenchers and party faithful. We have significant reservations about her foreign policy adventures, which have been very popular with the public, but have placed yet more strain on the public exchequer - at a time when we need to tighten the purse strings. 

The most important thing in this election as far as we are concerned is to stop a Socialist Government, you'd have been forgiven for thinking that Labour should have learned its lesson after 1983 and 1987 - but we are where we are and they haven't. Sir James McCrimmon is a mild mannered man, and personally likeable albeit uninspiring; however we can't ignore the men around him and his high tax, high spend manifesto.

For the sake of our economic future, we want to see the next Government with the Liberal Democrats at the very heart of it. Alex Cardigan embodies the pragmatic moderate politics that have made the Lib Dems a voice of sanity amongst extremism on left and right. We know he won't be Prime Minister, but should he hold the balance of power in the next Parliament -a distinct possibility- then he has a unique opportunity to anchor it in pro-European, pro-Business centrism. Whilst we do like Bibi, we don't like the Tory backbenchers; their xenophobic view of Europe and Referendum-lite morality. 

Our message to the voters is this: a Liberal-Conservative Government will be good for business, and take us in to the next century, a European century. So if Mr Cardigan does hold the key to Downing Street in his back pocket come Thursday, we call on him to learn from the missed opportunity of his predecessor Mr Thorpe and do the right thing to stop socialism and safeguard Britain's economic certainty.