BBC BLOGS - Nick Robinson's Newslog
« Previous | Main | Next »

Mandelson to back Brown's budget deficit plans

Nick Robinson | 10:39 UK time, Wednesday, 6 January 2010

For the business secretary to declare that he backs government policy would not normally be a news story.

Lord MandelsonHowever, for weeks Lord Mandelson has remained uncharacteristically silent in public whilst privately expressing deep frustration at Gordon Brown's approach to tackling Britain's budget deficit.

He's been concerned that the prime minister's failure to spell out the need to make public spending cuts has reduced the government's credibility.

Today though Lord Mandelson insists that the government's plans are "far more credible than they are given credit for" and stresses that spending reductions, tax increases and economic growth are all vital to reducing the deficit.

All this is designed to reassure nervy markets who can see for themselves the gulf between the words of the business secretary and the chancellor on the one hand and the prime minister on the other.

Last night the shadow chancellor George Osborne seized on the warning by the world's biggest bond investor, Pimco, that Britain faced seeing its credit rating downgraded and that it would be selling off UK government bonds this year (see more on this on my colleague Robert Peston's blog).

The head of Pimco's European investment team is the brother of the cabinet minister who is said to have Gordon Brown's ear now - his former economic adviser Ed Balls - allowing Osborne to claim that even the Balls family don't trust the government's deficit reduction plans.

Mandelson's also had concerns that Labour risked looking like it was turning its back on the New Labour coalition and relying on a core vote strategy.

Thus, he stresses that the government will "always be vigilant" that the tax burden on businesses and highest earners "does not become so great that it damages our long-term competitiveness".

He goes on to tell his party to focus on "the politics of production" - wealth creation - not "the politics of distribution".

UPDATE, 11:55: I have now had the chance to read the full text - as against a few extracts - of Peter Mandelson's speech.

At its heart is an important argument - clearly laid out - but there is also an intriguing political admission and an important omission.

Peter Mandelson's argument is that economic growth stimulated by government activism is the best cure for the deficit. He warns that cutting spending faster - as the Tories advocate - risks "kicking the prop" from the British economy.

Even if quicker deficit reduction produced lower interest rates, he argues that might not be enough to get the economy growing again as the Japanese discovered.

Now for that political admission. Reviewing the growth policies of recent decades the business secretary describes the privatizations of the 1980's made by the Margaret Thatcher government as "timely".

What's more he concedes that industrial relations underwent a valuable sea change.

Perhaps most importantly though, Mandelson does not use the word "cuts" which he dearly would like the prime minister to use. Instead in his speech he talks about "real reductions" and impacts on other services which "cannot be painless".

And that omission is most striking when it comes to what's going on in his own department. Whilst hailing universities as a possible source of future growth he doesn't point out that their budget is taking what he would call "real reductions" and they call painful cuts.

Comments

  • Comment number 1.

    Hmm. Snake Oil salesman pushes the medicinal effects of Snake Oil. News indeed!

  • Comment number 2.

    So to sum up, Lord Mandelson knows that Gordon Brown is in denial about public debt, recognises that the "class war" propaganda which has been pumped out in recent weeks is nonsensical, and knows that any economic recovery will depend on business innovation. The next time he meets George Osborne on holiday he should ask for a job. Caledonian Comment

  • Comment number 3.

    #2
    'The next time he meets George Osborne on holiday he should ask for a job.'
    No doubt he's thinking about it.

  • Comment number 4.

    Does this mean we will finally get some answers to how Labour are going to reduce the deficit? I doubt it. Instead we get a dodgy deficit reduction bill which means nothing and not even one back bencher from the Labour party had the guts to stand up and support it in parliament yesterday.
    New Labour.... New lies more like. They are treating the British peole with distain.

  • Comment number 5.

    Great to have Mandy back on board!

  • Comment number 6.

    CC @ 2

    The next time he meets George Osborne on holiday he should ask for a job"

    Mmm ... preferably his job.

  • Comment number 7.

    ah yes and I mention the pimco story from R4 the other day, yesterday,

    did no tnow Balls brother was head so the politics of thi sget even more interesting,

    This is not just an economic matter its a political one too, given that they can see the gulf between N10,N11 and others and what is actually required to sort the fast aprroaching fiasco out, in the year of a almost certain election

    NR that what you should be talking about not some tax incentive issue for married couples that small fry, we want the bigf beer please

  • Comment number 8.

    ps you are actually wrong about this in your first line it is a major news story and its at the heart of the issue, for you to say otherwise
    is being economical with the facts of what is happening.

    part of which is GB wants to be both PM and chancellor and darling therefore is only a puppet guy

  • Comment number 9.

    "All this is designed to reassure nervy markets who can see for themselves the gulf between the words of the business secretary and the chancellor on the one hand and the prime minister on the other."

    Well, maybe, and maybe not. It's interesting to read what Pesto's written today about nervy markets. He has a theory that any sign of Labour getting its act together and starting to look electable could spook the markets more than anything we've seen yet. If Pesto is right about that, then it seems that the markets have made up their mind that a continued Labour government after the election would spell unmitigated disaster for the country.

    And who are we to argue with the markets?

  • Comment number 10.

    Ah, finally the BBC catches up with events, but will sagamix?

    Sagamix who appears to believe there are two sides to the coin; inceasing tax on one side and cutting spending on the other.

    Sadly he fails to recogmise that newlabour has been playing the same side of every coin for thirteen years; increasing spending and increasing taxation.

    Or does the Hampstead branch of Waitrose exempt sagamix form NI contributions, the ten pence tax break, green taxes on his cars and holidays, his council tax stealth increases and all the other tax rises newlabour have implemented over the past twelve years?

    his probl;em is he can't see that the die is already cast - the money has been spent and taxes raised - this is no longer an option to reduce newlabour's staggering deficit.

    Public sector spending must be cut and cut dramatically.

    Kindly provide the evidence of all countries where keeping public sector spending high and zombie banks alive returned their economies to growth? They don't exist. Countries that pursue this line end up mired in a perpetual negative spiral of low growth and diminishing tax receipts.

    The conceit is to present Japan as the model for why the bank balout was necessary; it is precisley the creation of zombie banks and unfettered government debt that gave Japan its lost decade...now truning inot lost seveteen years.

    Canada and Australia bit their respective bullets and cut government spending and returned to growht faster than any country has ever done with a fiuscal stimulus... yet on and on we go with newlabour apologists bleating that the only way out is to tax more and spend more. It doesn't work; the evidence is all around you and it will get worse without public sector cuts and goverment spending restraint.

    The dividing line is clear - those who want to voter for a policy proven to guarantee sluggish recovery and a lost decade - the newlabour way forward; or those who want the knife to come out to government spending, a proven way to return funds to the private sector for job creation.

    Call an election.

  • Comment number 11.

    Yawn. In the interests of balance Nick don't you have any contacts in Libs, UKIP, Welsh/Irish/Scot nats, Greens etc? That will really bore us to death. Alternatively you could go to posting a story once a fortnight, or are you worried about BBC cuts in 2010 and feel a need to prove your worth?

  • Comment number 12.

    I don't know how anyone can give Mandy house room. He was parachuted in by Brown. Desperate desperate man. Running out of supporters he had to put him into the Lords and make a Lord out of him (or is that Lady) whatever, but the people don't, didn't and never would vote for him.

    NOW Global warming. First it was the ozone layer which miraculously closed itself up. Then Global warming which they hurriedly called Climate change. Global Freezing more like.

    I remember many winters such as this. And many summers when we sweltered. I am still here. England is still here. Europe is still here and the flipping world is still here. Trust Labour? Trust their "scientific advisors" who they sack if they don't deliver what Labour demands (drugs advisors!) - Can't trust Labour. Can't trust Mandy.

    Swine flu - another big hoax and headache for the Labour government after stockpiling millions of pounds worth of a drug which nobody wants to have or need.

    Get them out for God's sake and the world's!

  • Comment number 13.

    Flamethrower..

    and you can add foot and mouth disease which newlabour allowed to run riot in the country to bring down our EU quota for lamb..

    now look who's bleating about not having enough food stocks for the next ten years; newlabour.

    Long term planning? They couldn't plan a fancy dress party never mind an economic strategy... and don't get me on energy..not a single power station built in thirteen years despite soaring energy requirements and a peldge to get everyone in the country on broadband. Powered by what exactly? Fresh air?

    Pathetic incompetence. Newlabour to a tee.

    Call an election

  • Comment number 14.

    Nick, what is government policy that Mandelson is backing? Is it the one that Brown indicated on the Marr show or that suggested by Darling. I think that ZaNuLabour's incontinent economic policy is best summed up by St Augustine:
    "Give me chastity and continence, but not yet".
    No wonder the City is spooked.

  • Comment number 15.

    also knowlingly and with a reason to agnony one group of people they imbarked on an open door imigration policy letting in around 5million more people, without telling anyone and anyone whom even tries to mention it, they play the race card, remember steve moxon trying to blow the whistle.

    where were they going to get there food and energy from ah import it all adding to the Cardon footprint, then we are going to give the world more money that we do not have to sort out there Climate change issues.

    the population of this country cannot expand indefinitly and I would say that 30-40 million is where it should be so that people have a quailty of life. Climate change and population size are linked , if you believe in man made climate change. But population size also effects are finite resources of the plant , food water etc that where the real effort should be

  • Comment number 16.

    "Or does the Hampstead branch of Waitrose exempt sagamix form NI contributions, the ten pence tax break, green taxes on his cars and holidays, his council tax stealth increases and all the other tax rises newlabour have implemented over the past twelve years?

    his probl;em is he can't see that the die is already cast - the money has been spent and taxes raised - this is no longer an option to reduce newlabour's staggering deficit."

    He probably doesnt pay any of those taxes Robin. Maybe the person who owns the house in Hampstead does... therefore it doesnt affect him...

  • Comment number 17.

    Why do I feel that Mandelson is following his own agenda?
    Having been out in the political wilderness for some time perhaps he now feels that his time has come.
    Perhaps he sees his opportunity on the horizon.
    If Brown loses the next election, the Labour Party will be looking for the next leader.
    Mandelson, perhaps?

  • Comment number 18.

    How come we're getting a 404 error when trying to follow the link to PMQs? Trying to hide the fact that the Dear Leader appears to be taking a bit of a pasting?

  • Comment number 19.

    18. At 12:16pm on 06 Jan 2010, Bill_De_Zas

    try this if you are in UK

    http://www.bbc.co.uk/iplayer/playlive/bbc_parliament/

  • Comment number 20.

    Why anyone would want Mandelsons support is beyond me.

  • Comment number 21.

    #18

    The Dear Leader sounds like he's on his last legs; can't even pronounce words on a script anymore.

    The every idea that the government has made 'the right call' getting us into all this debt and providing us with a bloated public sector and six million oin benefits is a rather strange idea in the context of the Dear Leader's addiction to the mantra that the opposition have made the worng calls.

    So if you had your time agian, Dear Leader, you would still land us all in this mess all over again?

    Strange sentiment indeed

    Call an election.

  • Comment number 22.

    Well it's only taken them 12 years to finally realise, so I suppose we should be grateful.

  • Comment number 23.

    Is it me or has GB failed to answer a single question in PMQ's today?

    Nice honesty from the MP for Congleton, finally someone recognising that maybe the facts behind the climate change and the wasted investment in wind farms needs to be questioned.

    Typical derision from Labour to an honest question.

    Apparently alternative viewpoints are not welcome in this country any more.

  • Comment number 24.

    18 Bill_De_Zas

    I've been getting 404 on many items on the Beeb news pages over the last couple of days. The advice given on that page is no help either.

  • Comment number 25.

    19#

    Cheers Kit, unfortunately, I'm not in UK at the moment. Had to go to sky and pick up on their tweeted coverage. Seems to be some disarray on the main Beeb website and on Democracy Live as well...

  • Comment number 26.

    Geoff Hoon + Pat Hewitt = good eggs. Its time Gordon went. He's had one or other of the two top jobs for the whole of Labours 12.5 years in power, a period which has seen the country ruined. Please hand him the ceremonial sword...

  • Comment number 27.

    Seems to be something going round about Hoon and Hewitt fanning the flames of discontent on the back benches.

    Unfortunately, with Geoff "1m GBP property portfolio at public expense" Hoon behind it, the chances of any putsch getting rid of you-know-who is almost certainly destined to fail...

  • Comment number 28.

    Very interesting Daily Politics today. Could it be the beginning of the end for Gordon?
    Get a blog on it ASAP please Nick

  • Comment number 29.

    Bolt down the fax machines and desk tops!

    A challenge to the leader!? - He won't be happy.

  • Comment number 30.

    I'm sure I must be wrong but I believe that the increase in duty on fuel that 'compensated' for the VAT reduction last year has not been removed now that VAT has gone back up.

    I mean, if I'm wrong wouldn't that smack of an increasingly desperate Government resorting to yet another stealth tax to squeeze a bit more money out of us.

    And let's be honest, it's the poorer amongst road users who are more likely to have fuel inefficient cars, so we have a retrograde stealth tax aimed at the working class. Where next for GB & Co?

  • Comment number 31.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 32.

    I wonder what form that text has taken to all the Labour MPs?

    If it's something like "should we get rid of Brown" there will be a lot of dithering.

    If on the other hand it's "has Brown's leadership of the country been:

    a) Awful

    b) Bleedin' awful

    c) so awful as to defy a description that could be used before the 9 p.m. watershed"

    Then a flood of "c"s would surely follow...

  • Comment number 33.

    Mandelson is thinking of the good of the party. One can respect that but how sure can he be that this is what the others are thinking?

    I think we can all agree that there is a risk to broader demand within the economy to effecting heavy spending cuts in the public sector. The big question has to be how those cuts are implemented. One can only agree that the term `real reductions' is a sensible approach to this issue. There need to be cuts but slash and burn across the board will be destructive. However, having said that the budgetary tangle within the public sector might lead to a slash and burn effect anyway.

    The issue of economic growth is a matter all of itself. This can only be achieved now if the issues connected with the economics of production are dealt with first. This will necessitate an embrace of the politics of production by the entire Establishment in the UK. They will find the adjustment very difficult to make: long hours, hard work and to them, small returns.

    I think Mandelson is putting in his bid for the leadership of the Labour Party for after the election. He is head and shoulders above the rest of the rabble.

  • Comment number 34.

    Looks like a 'worst of both worlds' strategy to me.
    Brown and Harman scare off voters in the centre with meaningless gestures and silly jibes about Eton, whilst the unelected (and unelectable) Lord Mandelson reminds the core vote that New Labour has betrayed them to curry favour with the Rich.
    I'm ashamed I was ever a Labour Party member.

  • Comment number 35.

    30. At 12:46pm on 06 Jan 2010, AndyC555 wrote:
    I'm sure I must be wrong but I believe that the increase in duty on fuel that 'compensated' for the VAT reduction last year has not been removed now that VAT has gone back up.

    I mean, if I'm wrong wouldn't that smack of an increasingly desperate Government resorting to yet another stealth tax to squeeze a bit more money out of us.

    ******************************

    No Andy, you're not wrong.

    Also as this is duty rather than VAT it hits companies that would otherwise have claimed the vat back, so actually the government have a double win - and what did Mandelson say about supporting business?

  • Comment number 36.

    32#

    Andy, have a look at Sky, the text of the letter from Hewitt and Hoon is up in full.

    Lots of interesting tweets filling the airwaves; speculation as to whether the Golum will go for March 25th GE appears to be increasing. PLP chairman to make a statement later on. Heard something else in passing about withdrawl of union funding....

  • Comment number 37.

    ...apparently the text just said...'GoBro must be given the Heave-Ho!'

  • Comment number 38.

    What budget defecit plans? Does anyone know?

  • Comment number 39.

    Just remind me who exaclty voted for Mandelson?

  • Comment number 40.

    My sister has a meeting in downing st this afternoon, should i advise her to take a flack jacket? Mobile phones might well be flying everywhere!

    If so does any one know where in london you can buy one as shes already left for the meeting?

  • Comment number 41.

    The same day that Mandelson re-emerges, the plot against Gordon also emerges.

    No connection I suppose?

  • Comment number 42.

    Nick

    Did you know that YOU are the story on the Guido Fawkes website? I am afraid it is not very flattering - at least you are spared the cross hairs of a sniper's sight.

  • Comment number 43.

    #39:

    Mandelson was elected by the time-honoured process of one man one vote.

    In his case, that one man was Gordon Brown.

  • Comment number 44.

    robin @ 10

    Same old tune.

    You really ought to stop presenting an ideological Small State Fetish as if it were grounded, sensible economics. Because it isn't, is it? It's an ideological Small State Fetish.

  • Comment number 45.

    44. At 2:59pm on 06 Jan 2010, sagamix wrote:
    robin @ 10

    Same old tune.

    You really ought to stop presenting an ideological Small State Fetish as if it were grounded, sensible economics. Because it isn't, is it? It's an ideological Small State Fetish.

    ========================================================================

    Saga, on what planet does it make sense to pay two people to do one mans job?

    I guess though in saga world, the unemployed would be rewarded for their efforts with compensation matching the employed so you could argue that whether they are in work or not it wouldn't cost any more, but in the real world most people believe that people who work should earn more than those who don't.

    The state should be as exactly the minimum size required to provide the service required, no larger and no smaller. And we definately don't need any street football co-ordinators or other new labour non-jobs.

    Try the real world for a change where efforts towards efficiency is at least given a passing nod.

  • Comment number 46.

    sweet @ 45

    But I don't equate the private sector with efficiency and the public sector with inefficiency - that's just right wing ideology.

    Both are both.

 

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.