The mindset of a good Chancellor

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[Gladstone] declared at Edinburgh (29 November, 1874):

“It is the mark of a chicken-hearted Chancellor when he shrinks from upholding economy in detail… He is not worth his salt if he is not ready to save what are meant by candle-ends and cheese-parings in the cause of the country."

Gladstone’s long-term object was to raise the moral standards and the ideals of the people by improving their material conditions. He had no trust in the efficacy of State action to achieve that end. His method was to remove all restrictions upon trade, and to extend its area. All taxation, in his view, operated in restraint of trade, and therefore, in order to reduce prices, and to secure full employment, it was necessary to keep taxation and public expenditure to a minimum.

It seems to me that the extract above, from Philip Magnus’s 1954 biography of William Gladstone, encapsulates precisely the qualities that the next Chancellor of the Exchequer will need to exhibit if he is to sort out Britain’s public finances and get the economy going again. George Osborne could do worse than to buy a copy and take notes.

Of course, reducing public spending is more difficult these days than it was in the Victorian era. In the days before the welfare state, those who profited from the government's largesse were, generally speaking, the upper classes. Public sector employment was a matter of who you knew, and not what you knew. As such, cutting public spending could be a populist measure, with great appeal to the masses. Now, with more than six million people employed by the state, and another six million entirely dependent on state handouts, it’s a trickier matter.

But the fact that it will be difficult to cut spending is no excuse for not doing it. The British state currently borrows more than £20m per hour, twenty-four hours a day, seven days a week. Our budget deficit, at 14 percent of GDP, is the largest of any OECD country. Put simply, this cannot go on. Our next Chancellor must bite the bullet, and implement substantial spending cuts as soon as he takes office.

He should also remember that however unpopular that makes him in certain quarters, there are still plenty of hard-working taxpayers out there who will thank him for it.