I’d normally expect to blog quite heavily here after the budget.
But I did so many blogs for other people (TUC, Forbes, Compass, even the Task Force for Financial Integrity and Economic Development), some of which are already out and some of which have yet to come that I somehow seem to have omitted blogging here.
So what do I think of the budget? Take this, also by me on the Compass blog as an apt summary:
It was extraordinary to hear the demands of the right wing think tanks for cuts in government spending that have been emanating from them since the Conservatives and Liberal Democrats won the general election just six weeks. It was, however, something else to see the Chancellor confirm that most savage round of cuts that anyone has ever attempted to impose on the UK economy.
I can’t have been alone in hoping the injustice this budget will heap upon the UK would not happen, but happen it has. Benefits will be cut by about 10%. Departmental spending, except in health and overseas development will be cut by 25%. At least 750,000 state sector jobs will go on that basis, in my estimation. I think 750,000 more from the private sector could join them on the unemployment register. And this budget, which according to George Osborne promised growth, did no such thing.
It is true that maybe the very poorest might – if they fill in all the right claims – be protected from the very worst of George Osborne’s cuts. But with £11.5 billion of benefit cuts most won’t be. And a 2.5% VAT rise is intensely regressive, whilst new measures, like linking benefit rises to the Consumer Prices Index rather than the Retail Prices Index suggest that a plan for benefits dragging behind real need has now been inbuilt into the system. There is only bad news for the poorest in the UK in this budget.
It is no better for those on middle incomes. The fear of unemployment will be rampant in every household in the country but their chance of saving against that rainy day will be reduced. Their cost of living will rise by much more than the income tax cut they’ve been given. Capital gains tax changes have no impact on them. But whole rafts of benefit cuts will – especially if they have very young children. And the services they need will be much harder to secure.
It’s hard to imagine how effective education can be supplied to children on 25% less spending than now. Or that the emergency services can be effective with 25% less to spend. Or that whole rafts of other services will even be available in the future. It’s when these cuts happen that people will realise that paying tax is a lot cheaper than buying services in the market place, one by one, even if you have cash left to do so.
And what will be the benefit of all this pain? George Osborne thinks that there will be growth from new private sector employment. But that’s just not credible. Domestic economies are going to be depressed because people have less to spend. The government is going to reduce the incentives to business to invest – so it will invest less. And all our major export markets are introducing similar austerity measures. There is in that case no hope of a private sector led recovery in our economy.
George Osborne has gambled that undergraduate right wing text book economics emanating from Chicago works. But it doesn’t. It never has, and it never will.
This gamble will fail. Give it three years and, as I predicted on Radio 2 today, we’ll be seeing unemployment at 4 million, almost no cut in the deficit, the coalition government a memory after its fallen apart in chaos as backbenchers flee its ranks, and a new government will be announcing a budget to tackle the mess that George Osborne has left.
That will be very hard to do.
But that’s the challenge now for all those who believe that there is a future for economic policy on the left. Because this is the scenario any Labour government will inherit when it comes to office.
There’s no time left to begin the process of planning for this demand that office will impose. It should begin now, and with the greatest possible urgency because one day, sometime soon, Labour will be called on to save people from the onslaught on their wellbeing George Osborne unleashed today.