Labour should go for Osborne’s jugular

It’s worrying that Ed Miliband in launching Labour’s local election campaign seemed so defensive and uncertain about his economic case, when it is actually very powerful.   Economic growth by itself, on the Government’s own forecasts, will halve this year’s Budget deficit within 5 years without a single public expenditure cut being made. Higher taxes exclusively concentrated laser-like on the highest-paid 1%, and particularly on the top 0.1% who have made gargantuan gains in the last 15 years (and who were the ones largely implicated in the financial crash), would raise most of the rest – certainly enough to keep spending cuts to a very small minimum.   That’s a very strong case that has still not yet been made by the Leadership. But even that does not include the killer app.

The clincher is the ideological base underpinning on the one side Osborne and on the other Labour. Osborne’s case goes like this: the private sector creates the wealth and the government squanders it, so the more the government can be made to tax and spend less, the more the economy will thrive. Government borrowing, he says, is simply deferred taxation because it all eventually has to be paid for and far-sighted companies and people, knowing their taxes will have to rise in future, spend less in order to save for the expected future taxes. That then causes a recession. So, under this theory, if the Budget deficit is decimated fast, the more quickly will the private sector start to spend and invest again because the need for higher taxes has been removed.

Believe it or not, that’s the rationale behind the Osborne policy. Does it work? It has been tried three times in the last century in the UK. It was tried in 1921 when the Geddes committee of leading businessmen proposed a similar massive cut in public expenditure (the ‘Geddes axe’) and it led to 8 years of anaemic growth and the General Strike in 1926. It was tried again in 1931 by the May committee of leading businessmen and it led to a mutiny in the armed forces and the hunger marches of the 1930s. Then to a lesser degree it was tried a third time by Geoffrey Howe in his deflationary Budget in 1981 and growth gradually took off. But even monetarist economists acknowledge that that had much less to do with Osborne-style ‘expansionary fiscal contraction’ (i.e. contract public spending and the economy expands) than with big cuts in interest rates, loosened restrictions on bank lending and and a revival of the international economy, all of which coincided but none of which is available today.

The theory, which is fancifully counter-intuitive, has never worked because in a deep recession it’s public spending that alone keeps the economy just about buoyant. Remove it, and the collapse will be far worse. The Osbornites have got it the wrong way round: it’s not the deficit that cause private spending to fall, it’s the fall in private spending brought about by the financial crash that cause the deficit to rise.

In view of the large number of Tory trolls lurking around this page, the moderator has neither the time nor inclination to wade through their abuse so comments on this item are now closed. They are welcome to comment elsewhere.

  1. While I agree with much of the article I’m left rather uncomfortable by the illustration.

    Having spent a fair bit of time arguing that the Tea Party movement were irresponsible to use the rhetoric and imagery of violence and gun sights against their democrat opponents I don’t feel I can pass this by without comment.

    I think it’s important we argue politically and don’t, unconsciously, create an atmosphere of violent hyperbole and the dehumanisation of those we don’t agree with.

    Much as I hate Osborne’s policies and have a personal dislike for the man showing pictures of him murdered are not just in bad taste (although they are) they can feed into the kind of political conversation that, if we were on the end of it, we’d find entirely unacceptible.

    If a Tory blog had a picture of Ed Balls or Caroline Lucas hanging from a lamppost we’d be appalled – and I think it’s up to us on the left to lead by example and not make this style of argument acceptable.

  2. without the present cuts,interest rates would rise and we would be unable to borrow to cover the massive deficit at current rates.

    in an ideal world the coffers would have been fulled in the boom years not that senario you could rely on government expansion to cusion the drop in spending.

  3. I’d add that my Mum would be open to the arguments you’re using but would not keep a picture like that on the screen for more than a second – I think the picture limits the audience for a rational and well argued article and adds absolutely nothing.

  4. While I agree with much of the article I’m left rather uncomfortable by the illustration.

    Me too. You get much better photo melding results by using a fuzzy edged brush and dropping the eraser strength down to c50%

    • Jim: I didn’t imagine that the illustration would alone “create an atmosphere of violent hyperbole” or I wouldn’t have used it but I will take account of your views in future and, Scratch, thanks for the useful advice on photoshop techniques – I am a novice but keen to learn.

  5. Illustration in bad taste. Wont do the argument any good – need to take a more mature approach if you are trying to convince any but your own of your arguments.

  6. That really is a very disturbing and sickening image, perhaps made even more worse by the terrible photo shopping.

    No doubt if someone from a right wing party did the same, or if the victim was not a white male then you’d have the police round.

  7. Ridiculous picture. This kind of shallow messaging should have no place in British politics.

    • Jim Jepps’ original comment about “the rhetoric and imagery of violence” was, I am sure, seriously made and is seriously taken. I don’t believe it applies to this piece because “going for the jugular ” is universally understood as idiomatic usage and the picture referenced that in a jocular fashion that was clearly intended as Rocky Horror Show rather than al-Qaeda.

      A number of comments since, however, made by people referred here from Guido Fawkes and Conservative Home, have a different motivation, and I have declined to publish a number of abusive comments. An indication of their flavour is provided by a racist called David whose charming comment is:

      People like you are cowards . You wouldn’t do the same to a a muslim as you know you would be the one with slit throat.

      And Simon Russell who concludes his remarks with:

      I’m off now to piss on Michael Foot’s grave. I may even dig him up and give him a kicking.”

      I have published all those comments that I consider in line with our comments policy. I shall not publish any that do not conform to that policy.