The signs that the Osborne budget plan is not working are manifest, yet denied by the blandest absurdities, with a Treasury spokesman with his telescope firmly held to his blind eye like Nelson uttering “We haven’t seen anything yet which makes us question what we are doing”! The excuses are becoming ever more shrill and strident, like Osborne’s repeated claim that if we don’t slash public spending, we’ll end up with a Greek-style meltdown – an outrageous canard (as he must know) when UK indebtedness is decidedly moderate by current international standards, while Greece’s debt is out of control at over 150% of GDP. Only the bankers, who care not a fig about the broader economy so long as the financial markets continue to pour tens of millions into their pay and bonuses, agree athe Osborne line. But how long can this surrealist mirage last?
All the EU Governments are now pursuing deficit reduction by self-defeating public spending cuts which, as Ireland has made clear, then undermine the growth which is necessary for sustained reduction of public sector deficits. Even Martin Wolf, the right-wing economic commentator for the FT, has argued that the only plausible source of increased final demand in the UK is export growth. But that is blocked off because most EU markets are depressed as they all try to export their way out of the crisis. In terms of this crucial issue of aggregate demand the last straw for Osborne and co. to snatch at would be a huge increase in personal and household borrowing – and the OBR has even contemplated the latter rising by a third to more than £2 trillion by 2015! – but with plunging consumer confidence this seems a fantasy beyond reach.
So how can the Osborne strategy succeed? Already with prolonged stagnation in sight, higher inflation and rising unemployment, Government borrowing is set to soar £46bn higher than they planned a year ago. And that’s well before the full weight of the spending and benefit cuts begins to hit the economy and the voters.
So why doesn’t the Government change course – which in the end they will be forced to, only it will be far more painful and humiliating then? What is most ghoulish about this unreal situation is the way that the banks, once suppliants for bail-outs but now the unrepentant aggressors, are now demanding business as usual, stick to the budget-slashing come what may, and holding the nation to ransom if the Government dares to step out of line. The banks are posing themselves as public enemy no.1. Shades of Henry II, who will rid us of these troublesome subjects?
