The latest study of the impact of the Budget by the Fabian Society, published yesterday, using a plausible quantitative model of the effects of public service cuts, confirms what we suspected, namely that the poorest tenth in the population will be hit much harder – 6 times harder – than the richest tenth. This is in no way a fair Budget and we’re not all in it together.
But that’s not the only bit of the Budget that’s being ripped up – as well as Nick Clegg’s reputation over the VAT increase. The whole narrative of the Budget is falling apart:
- It was said this was a Budget to deal with Britain’s economic problems once and for all. But the financial crash was caused not by excessive public spending but by excessive private indebtedness – the unsustainable credit and housing bubbles. What is going to prevent this happening again?
- IDS has announced today a reversion to Tebbit’s 1981 solution to slump: “on yer bike“. But who is going to move 200 miles in a tight housing market to take a low-paid and insecure job which wholly disrupts their child-care arrangements?
- The Budget was set to end over-dependence on the State for employment by reducing public sector jobs by a million or more. But cutting the public spending lifeline won’t transform the economic wastelands of the North into shining entrepots of private enterprise. It will simply condemn generations of workless families to futher generations of worklessness. For public spending provides the essential foundation without which the private sector cannot take root and grow.
- The Budget was allegedly aimed to incentivise the work ethic even among capitalists. But who is going to take the risks of creating a high-growth business when far bigger gains in much less time at much less risk remain available from highly-geared private equity or hedge fund investment? And how can incentives work efficiently when two-thirds of the population are sitting on gains from housing far bigger than they could earn from employment while at least another fifth of the population can never get on the ladder however long hours they work?
- But the biggest flaw of all in the Budget is growth. In the false belief that the markets want austerity – they don’t, they want stability and growth – Osborne has instituted the biggest squeeze since the Second World War, without any vision of where future growth will come from. America is worried about a flat European economy, the US where growth is fading cannot lead the world out of recession, and neither yet can China and certainly not Japan. Osborne’s epitaph is Tacitus’ judgement of the Roman conquest of Britain: solitudinem faciunt, pacem appellant (they create a wilderness and call it peace).