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Don’t trust an Osborne product: read the small print

Osborne no cuts collage by CounterfireOsborne’s spending review is a bewildering mixture of cash changes, inflation-adjusted comparisons and different time-periods in order to suit his political interests. Discounting this trickery is rewarding for getting at the truth. The real facts are that public borrowing is still expected to be at £96bn in 2015-6, which marks the death knell for all his confident predictions of a smooth steady decline in 2010.

Public borrowing had already come down before the 2010 election from its £175bn peak to £135bn, it is now stuck at £122bn and will probably not on current trends reach the £105-110 bn level by 2015. In other words, the growth returned to the economy by Alistair Darling’s stimulus before the 2010 election has been stopped in its tracks and Osborne’s alternative method of reducing the deficit via austerity has proved sticky to the point of almost immobility. His means of eliminating the structural deficit will on present trends take to 2030 or beyond to succeed.

The central problem is that the long-term outlook for the economy is much weaker than was optimistically forecast by Osborne in 2010. As a result bigger cuts have been put in place, but these are turning out to be counter-productive. Real public sector gross investment is now set to fall by 22% between 2010-11 and 2017-18, with a 1.7% drop in real terms in 2015-16 alone. Given at the same time the profound withdrawal of the private sector from new investment (with the big corporates still sitting on an immense cash stockpile of £775bn) plus huge deleveraging by private households, this can only drastically worsen growth prospects further.

Moreover the spending cuts planned for the 2 years after the 2015 election are even larger than for 2015-16, so the pain will not gradually lessen, but rather intensify. By that time any conceivable fat will have been cut away, and those bigger cuts planned by Osborne can only be at the expense of the real meat in public spending. That consitutes the real challenge for Labour.


  1. Robert says:

    We all should know Austerity cuts do not work you only get out of this mess by spending and creation, so then seeing and hearing MIliband who is not a great leader or a great speaker falling in line with Cameron and Osborne over cuts especially to ending the welfare state which now seems to be a Labour and Tory governments idea.

    The question is do not trust Osborne which is fine but whom do we trust obviously not Ball’s and Miliband, not Clegg so I think as both Labour and the Tories already know it may be down to the swing voters.

    I cannot for the life of me see the difference between MIliband lot and Cameron’s lot

  2. Tim says:

    I agree about Osborne, but hopelessly optimistic growth forecasts were also fundamental to the 2009 and 2010 Labour budgets.

    Robert is right to a point, but we can get a stimulus by not taxing people so much and allowing them to spend their own money rather than have Government do it for them.

    Labour can’t be trusted on the economy until it has purged itself of the guilty men who were there supporting Gordon Brown in creating this mess

  3. Rod says:

    Labour has now pledged to continue with the Tory austerity plan.

    And as William Keegan put it: “They call this the need for credibility. Do they not see that in the very act of seeking credibility they are losing it?”*

    Surely, with the Labour Party now flying the white flag the time has now come to think beyond 2015 and start laying the foundations for a party capable of winning a general election.


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