Former Tory Chancellor Ken Clarke says Labour should emulate Thatcher by taking ‘tough’ stance on UK economy
3 September 2024, 19:00 | Updated: 3 September 2024, 19:28
Kenneth Clarke says Labour should take a 'tough' stance on the economy
A former Conservative Chancellor has advised Labour to follow the example of Margaret Thatcher by taking a "tough" stance on Britain's economy.
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Lord Kenneth Clarke, who served in Mrs Thatcher's Cabinet before becoming Home Secretary and Chancellor in the 1990s, told LBC's Andrew Marr that the government would be unpopular if they took this course of action - but they should do it nonetheless.
Labour have warned of a £22 billion "black hole" in public finances and Keir Starmer has has asked the country to "accept short-term pain - for long-term good", as the Budget looms next month.
Lord Clarke said: "What they've got to do is get on with the tough, difficult decisions as quickly as possible. Don't read the opinion polls.
"Forget that, it'll be hugely unpopular, and trust that the benefits start showing in time for them to have a chance of being re-elected in five years time.
Kenneth Clarke on Tonight With Andrew Marr
"That's what we did when Margaret [Thatcher] got in, and I think [today is] very similar to the situation when we got in 1979."
Lord Clarke recalled the 1981 Budget of Geoffrey Howe under Mrs Thatcher, which saw a large increase in taxes at a time of serious economic difficulty.
That Budget proved very controversial, but some feel that Mr Howe and Mrs Thatcher were ultimately vindicated by Britain's economic success later that decade.
Lord Clarke said that "if Rachel Reeves does the right thing, she should be" as unpopular as Mr Howe was in 1981.
He added: "Who knows - if you do it properly and toughly just as Margaret demonstrated, in three or four years time we might look around and say ‘we’ve had a sensible government who’ve done the right things and actually things are getting better.’
"I’m actually quite optimistic about that happening."
Lord Clarke said that if we were still Chancellor he would increase VAT, inheritance tax and capital gains tax. But he warned that raising capital gains tax too much could dissuade investment in the country and dampen economic growth.
He also said he would reverse the recent National Insurance cuts made by Jeremy Hunt, adding that he thought that "no doubt" National Insurance would be restored to its previous level "sooner or later".
Lord Clarke was a Conservative MP for almost 50 years, serving in the Cabinets of Mrs Thatcher, John Major and David Cameron, and running unsuccessfully for Tory leader three times.
He lost the Conservative whip after voting against Boris Johnson's government on a Brexit-related issue in 2019, standing down as an MP at the election later that year. He was given a peerage in 2020.
Lord Clarke told Andrew that his party deserved to lose the 2024 election.
He said: "You couldn't have the four years of Boris Johnson and Liz truss and go on to win an election, you were bound to be massacred."
He added: "Boris did one two quite decent things, to be fair, but... to have Boris Johnson and Liz Truss as Prime Minister proved to be quite the biggest political disaster of my lifetime, and if we ever see people like that [become] Prime Minister from any party again, heaven knows how bad the next crisis will be."
