On Monday, Philip Hammond, the British finance minister, defended capitalism as the only way to prosperity in an effort to counter the increasingly popular vision of the opposition Labour Party for an economy that is more centrally-controlled.
Hammond, in a speech to the ruling Conservative Party, warned that what he termed Labour leader Jeremy Corbyn’s “Marxist” plans would bring back Britain to the troubled days of the 1970s when it was the weakest major economy in Europe.
PM Theresa May is fighting with a deep split within her party over Brexit, and serious doubts regarding her leadership after her mismanaged bet on a June snap election lost her party its majority in parliament.
Hammond was sidelined by May during the election campaign. He used his keynote speech to warn that Labour would catapult Britain, the fifth largest economy in the world, towards the kind of “socialist fantasy” seen in Venezuela, Zimbabwe, or Cuba.
“We saw Labour in the raw, exposed for what it has sadly become: a party taken hostage by a clique of hard-left extremist infiltrators, people who despise Britain’s values and talk down our country,” Hammond told Conservative Party activists.
Britain can only hope to experience increasing living standards “by harnessing the power of the market economy”, he continued.
Last week, at the own party conference of Labour, Corbyn set out plans for a much more active role for the state in a mixed British economy, including higher government spending, renationalisation of key infrastructure, and more taxation and control of the banking sector.
With opinion polls revealing that Labour is gaining support, Hammond plans to convince voters that Corbyn would make them poorer.
The leaders of Labour stated, “openly proclaim their ambition to demolish our successful modern market economy and replace it with a back-to-the-future socialist fantasy with hundreds of billions of extra debt for the next generation to pay.”
His words mimic those of May, who issued her own defence of capitalism last week – a sign of a growing concern regarding the threat that Labour poses to the pro-business orthodoxy that has underpinned British economic policy since the reforms of Margaret Thatcher in the 1980s.
“Our economy is not broken: It is fundamentally strong,” said Hammond.
However, seven years of the Conservatives’ painful spending cuts the have tested the patience of the citizens of Britain.
May’s government, despite pitching the Labour Party as Cuban-style Marxists, has sought to win over voters with moves to tackle limits on pay for public sector workers and high levels of student debt.
“We must never deny or dismiss the underlying concerns that the election articulated: we must listen to them and we must respond,” said Hammond, adding that the government should extend “pragmatic solutions” to improve the lives of ordinary people.
However, with Brexit on the horizon, a slowing economy and the Bank of England suggesting that interest rates could increase, May’s government has limited room for fiscal manoeuvre.
The British Chambers of Commerce has announced that public splits within the cabinet are weakening business confidence. Divisions over Europe has helped sink the Conservative premierships of John Major, David Cameron, and Thatcher.
“Public disagreements between cabinet ministers in recent weeks have only served to undermine business confidence, not just on Brexit negotiations, but also on the many issues where firms need to see clear action from government closer to home,” stated Adam Marshall, the Chambers’ director general.
Last month, Moody’s, a rating agency, downgraded the credit rating of Britain, saying that plans of the government to reduce its debt load had been knocked off course and that Brexit would have a huge impact on the economy.
In his speech, Hammond pledged 400 million pounds for additional road and rail spending. However, Labour said that the plans did not go far enough.
“Hammond just wants to continue with the seven years of Tory economic failure that has seen the level of investment in our country fall behind many of our international competitors,” said John McDonnell, Labour’s finance policy chief.