There Is No Money
by Gary North
On May 17, David Laws, the new British government’s Chief Secretary to the Treasury, walked into his office. There on the desk was a note from the previous holder of this high office, Liam Byrne, who had departed along with Gordon Brown’s Labour Party cabinet. The note was brief.
“Dear chief secretary, I’m afraid there is no money. Kind regards – and good luck! Liam.”
Mr. Laws was a bit miffed. He informed the media that it is traditional for an outgoing senior office holder to leave some guidelines for the incoming office holder. This note, Laws said, was not helpful.
On the contrary, it may have been the most helpful note left by an outgoing politician in modern history. It told the truth.
Mr. Byrne later told the media that it was a joke. “I do hope David Laws’s sense of humour wasn’t another casualty of the coalition deal.”
Ha, ha, ha. The joke was on Mr. Laws and the incoming government. There isn’t any money left. The government is running an enormous deficit. The money required to keep the government going will have to be borrowed, either from investors or from the Bank of England.
Mr. Laws was said to be up to the task. This glowing assessment appeared on the site of the Wall Street Journal, a media outlet always ready to believe that deficits don’t really matter, that a government can always dig itself out of a fiscal crisis. All it must do is raise taxes and cut spending. Of course, no government ever does the second. But the folks at the WSJ never are fazed by this invariable law of modern politics. We read of Mr. Laws:
Now he is central to the coalition’s plans and must handle much of the most difficult work. He will have to get used to becoming very unpopular with a significant chunk of the electorate and parts of the commentariat. He will be presented as Mr. Cuts, which the Tory high command clearly thinks is good for its prospects. In theory, Laws will take all the flak for Osborne.
Ah, yes: Mr. Cuts. There will be lots of cuts. There will be a slice-and-dice cost-cutting regime, despite the fact that it is a divided British government in which the Conservative Party could not win a majority.
Laws looks like he realizes all this and is impressively unfazed. He has a job to get on with, as Gordon Brown would say. But it’s a very different task to that undertaken by the former PM. The Lib Dem Laws is on a mission to put the Gladstonian liberal approach – of sound money and low taxation when possible – back into operation.
Said his colleague and friend Malcolm Bruce to Allegra Stratton: “Laws is an unreconstructed 19th-century Liberal…. He believes in free trade and small government. Government should do the job only government can do. There’s no point in having a large public sector if the users of the public services are getting poorer. But he specifically made the point in the house [on Wednesday] that his economic liberalism is tempered by his social liberalism.”
Yes, my friends, there is a New Era coming in Great Britain – a new era of Gladstonian cuts. Yes, it is also true that the Conservatives ran Disraeli against Gladstone, because they could not tolerate his free trade, low-taxes policies. But all this has changed. It’s a New Era.