As before, we conclude by looking at this episode in terms of the three sets of issues about the politics of fiscal squeeze that we raised in Chapter One.
Tax and Spending, Depth and Duration, Blame and Control
Our analysis of financial outcome data in Chapter Two showed the fiscal squeeze episode of the 1990s—in the later years of John Major's Conservative Government and the first two years of Tony Blair's 'New Labour' Government— was distinctive in at least two ways. It is the longest continuous squeeze episode over the century as a whole, comprising altogether seven years of 'soft squeeze' on both the revenue and spending side. That is substantially longer than the second Thatcher squeeze of the 1980s, discussed in Chapter Eight, and contains individual years of 'hard' squeeze sandwiched (in a manner modulated to fit the electoral cycle) within a longer period of soft squeeze. While the period as a whole has features of the 'boiling frogs' approach we discussed in Chapter One, when we look more closely we can see that the frog was taken somewhat off the boil at some points and the heat turned up sharply at others.
Second and relatedly, it is the first squeeze episode at least since World War II in which overall plans for spending restraint adopted by one party in government were implemented by a successor government from a different political party. As far as blame management is concerned, neither of the governments involved chose to 'outsource' the identification of spending cuts along the lines of the Geddes and May Committees of the 1920s and 1930s, but both moved to distance themselves from direct control of other potentially blame-attracting aspects of policy. Given the blame associated with unreliable (usually over-optimistic) Treasury economic forecasting that underlay spending and taxing plans, Chancellor Norman Lamont made use of some independent political forecasters—a move destined to be taken much further in the 2010s. And in contrast to the actions of the 1945 Labour Government, whose first nationalization had been that of the Bank of England, immediately after the 1997 election Chancellor Gordon Brown outsourced the process of setting Bank of England interest rates to an expert committee (the Monetary Policy Committee) tasked with achieving specified inflation targets.