Osborne loves to preen himself that he is clever enough to force Labour into a trap by which he can win the next election. His latest idea is that by announcing (as he did last Monday) that he will eliminate the structural deficit by 2020 and this will require a further £25bn of cuts on top of the £80bn of public expenditure cuts and £25bn of benefit cuts already made in this Parliament, he can force Labour into a corner: either Labour accepts this, in which case what cuts of this magnitude would it make, or if it declines, then Labour is vilified as the welfare party.
It’s pretty cheap and nasty electioneering, but that’s typical of him. It’s also utter nonsense on every count. To start with, before accepting at face value any promise that Osborne makes, it’s worth remembering that in 2010 in his first budget he promised to eliminate the structural deficit by 2015-16. As it turns out, he is more than £60bn adrift! If we are to believe him this time round, he should have delivered what’s on the can – he didn’t, by miles. But even if he could deliver, the arguments against falling for his dirty little trick are overwhelming.
The real point is that it’s certainly not necessary nor desirable to make elimination of the structural deficit (i.e. the deficit that remains after the peaks and the troughs of the economic cycle have been ironed out) the central governing principle of economic policy, as Osborne is doing, at the expense of downgrading all other (more important) objectives for the economy. The last person who pursued balanced budgeting as ruthlessly as Osborne was the ill-remembered governor of the Bank of England in the 1920s, Montague Norman, whose policies produced dismal growth for a decade, triggered a general strike, and led to a stock exchange collapse which ushered in the abject poverty of the 1930s. Why should it be different with Osborne in the 2010s? Of course it is right to aim to reduce the budget deficit which is still far too high, but not to fetishise this target if the economy is crippled as a result.
If Osborne’s austerity dogma were delivering strong results in reducing the deficit, he would at least have a case. But they’re not. He likes to boast he’s reduced the deficit by a third since 2010, but he hasn’t. The reduction by a third below the peak of £175bn by the end of 2010 was entirely the result of the stimulus to the economy by Alastair Darling, the last Labour Chancellor, in his 2009-10 budgets. After Osborne took over, the reduction has been glacial: from £118bn in 2011 to £115bn in 2012 and then to just £111bn in 2013. Moreover even that minuscule reduction has been obtained after horrendous damage inflicted on the British economy and society by Osborne’s slash and burn instincts, when the patently preferable policies of investing in jobs and growth and drastically cutting the dole queues would have secured far, far bigger reductions in the deficit and at only a fraction of the cost.
After setting out all this background, Labour’s line for the election should be: would you buy a used economic policy from this man?