George Osborne gave a nervous, cough strewn presentation of his spending cuts. And so he should have done. This was the delivery of the cuts we anticipated – up to 40% in the arts, 33% across Whitehall, 24% in justice, and 1% in education we anticipated.
Across Whitehall the people supposed to deliver them are now being told they’re being fired. And there is the first obstacle to their delivery. The prospect that those who know their days are numbered will deliver the cuts Osborne wants is remote. As the Guardian notes:
It's important to remember that when Sweden, one of the government's favoured models, cut state spending in the 1990s it specifically protected public administration, working on the basis that massive reform is extremely difficult to do if the workforce is itself under intense stress from redundancies.
That’s the same as the prospect of GPs delivering a fully effective alternative NHS management on top of their overpressed day jobs in just 14 months is remote.
And that the prospect that people who face benefit cuts, unemployment, an extended working life and a reduced state safety net are going to go out spending to deliver the record growth in the economy and employment rates on which Osborne is dependent if his assumptions are to work.
And come to that – the remote prospect that corporations who now make up 92% of private savings in the UK are going to rush out and start investing when what is for most of them their biggest customer has just announced its going to severely cut its spending.
This is a spending review built on a myth – the myth that the state has crowded entrepreneurs out of the market, and now that the state is receding those entrepreneurs will rush in to fill the void.
There is not a chance that is right. It’s a myth. It can be made to work on a blackboard with the simplistic assumptions economists make. But in the real world it simply will not happen.
So 19% means nothing – because this was anyway 19% of a made up number – the spend that might have been – but in any event the reality is that first, even with cuts and limits benefits spending will sky rocket as the unemployed increase in number, and second the deficit will rise with that increase in spending which will thirdly be linked to a collapse in the economy.
Sure that makes me a bear. It also puts me in the company of the best economic thinkers in the world. I can live with being alongside Krugman and Stiglitz.
What Labour has to say now is that this is the case. That this is going to blow up in Osborne’s face. That as a result he’s also going to begin sucking more money out of the economy with tax rises way beyond that on VAT he’s announced: increases which will by the just make things worse.
Mervyn King says we face a sober decade. No we don’t. We face a disaster. And I can’t think of the acronym yet!