As George Osborne gets his excuses in early for the troubles to come, now is the time to expose the failures of ideologically driven austerity, writes Matt Willgress of the Labour Assembly Against Austerity
The British mainstream media is now so clearly biased in favour of the ruling party it can sometimes seem as if politics is entirely divorced from reality. But reality has a habit of intruding on make-believe. This is the position George Osborne now finds himself in.
In the Autumn Statement, the Office for Budget Responsibility (OBR) ‘awarded’ Osborne £27 billion in lower Budget deficits because of projected stronger growth. The March 2016 Budget is likely to tell a very different story, with growth forecasts slashed. Osborne is likely to admit that the Tory Government will again miss its deficit for the current Financial Year and has, in the words of Shadow Chancellor John McDonnell MP, “been getting his excuses in early.”
In June 2010 Osborne and the OBR projected that the £153 billion deficit would now be eliminated. Yet it only narrowed by £64 billion. Even the OBR’s latest forecast shows the deficit at £73.5 billion for the current year, meaning the deficit is still close half its original size.
The reason for this is twofold: growth has been far below official estimates and cuts don’t lead to savings. Austerity slowed the economy to a standstill in 2012 and then Osborne abandoned new measures austerity measures, instead stoking up consumption and house prices to help get re-elected. Government current spending is also £40 billion a year higher than when the Coalition took office, because austerity increases low pay, under-employment and poverty. At the same time, it is Government investment that has actually collapsed.
Ideological cuts
How could Osborne have got it so wrong?
He is often described as an ‘ideological Chancellor.’ He believes in austerity and shrinking the state, subscribing to the notion that the state impedes growth and that removing its role in the productive sectors of the economy will lead to prosperity. This applies across the board – to education and health, banking as well as energy, water, transport, or house building. He believes his medicine works and is repeatedly surprised when it doesn’t. He is then obliged to rationalise or find excuses for its failure.
This is what led him to a U-turn on growth. But any observer of the economic data would know that the economy was already slowing. To take one example the annual growth rate had already slowed to 2.1% in the third quarter of 2015 from 3% in mid-2014.
Rationalisation of the troubles to come
In his ‘cocktail of negative factors’ affecting the economy Osborne cited the turmoil in the Middle East, the slowdown in China and falling commodities’ prices. All of these are international factors of varying significance. But in truth the continued slowdown in the British economy is mainly home-grown.
Middle East turmoil has been a continuous factor since Britain and the US first began bombing it some years ago. But as it is not new it cannot be responsible for a downturn.
In terms of China, Britain does not export much and very little of that low total is destined for China, just 2% of total UK exports. The Chinese economy has slowed from 7.5% growth to 6.5%. The direct effect on Britain’s growth is therefore negligible.
The fall in commodities’ prices is very significant globally, and depresses Britain’s North Sea oil output. But as Britain is a big net importer of commodities, the collapse in commodities’ prices is a net benefit to the British economy.
Reality intrudes
The responsibility for the slowdown in Britain can be laid squarely with Osborne. He inherited a slow recovery in 2010 and promptly stalled it with austerity. Because the economy was stagnating in 2012 and Tory poll ratings fell, Osborne then stoked rising consumption and house prices in order to get re-elected. That short-lived and unsustainable boom-let which is now running out of steam.
This was predicted by numerous leading economists. Now, Osborne will deepen this slowdown by imposing a second round of austerity. It will have the same effect as the first, although in circumstances of slowdown rather than recovery.
But the political situation has changed dramatically. There can be no blaming the effects of this new crisis on Labour. Instead, Labour now has a leadership utterly opposed to austerity and beginning to advance an alternative to it.
In addition, wider layers of society are drawn into opposition to aspects of austerity. This includes highly skilled health workers. It will increasingly include teachers, students, industrial workers, housing association tenants and many more, struggles that can be linked together through initiatives such as those organised by the People’s Assembly Against Austerity.
Not only is the broad anti-austerity movement is growing, but crucially under Jeremy Corbyn there is now a political leadership in Parliament to offer an alternative policy for Government. The fightback is stepping up – we all have a duty to get involved, both in building the People’s Assembly Against Austerity movement, including its Labour wing the Labour Assembly Against Austerity, and in building Labour’s electoral support for this year’s London Mayoral Contest and the election of a Jeremy-Corbyn led Government in 2020.
See labourassemblyagainstausterity.org.uk and www.thepeoplesassemblyagainstausterity.org.uk for more information and to get involved.
EVENT: Better Off With Labour – the Alternative to Osborne’s Cuts – March 9. 6.45pm, House of Commons. Annual LAAA pre-budget event with speakers including John McDonnell MP and Cat Smith MP. RSVP on Facebook at https://www.facebook.com/events/1254712247879119/
why wait till 2020 when all it takes a vote of no confidence in this fraudulent bunch of crooks who sole perpose was to line their own pockets you cant make this up has people get jailed for their fraud it seems parliament is above the law jeff3
Someone needs to stand up and say that in Parliament where they are protected by Parliamentary Privelige.
Good article. Whilst not denying for a moment that Osborne is a complete economic ignoramous , driving the UK economy off a debt and property bubble cliff, we must also always remember that the pursuit of the Austerity Agenda, ie, balanced budgets, shrinking the state, smashing the welfare State, etc, isn’t the outcome of a simply flawed understanding of the need for basic Keynsian counter cyclical government economy boosting measures during a period of economic stagnation.
The 2008 Crash, and its still unravelling global aftermath, has provided the Superrich and their political creatures in all the “democratic” legislatures on the West, with a wonderful ideological cover for a dramatic transfer of wealth from the majority to the 0.1%, at an accelerating rate dwarfing the huge regressive wealth transfers already achieved during the fist 30 years of the neoliberal offensive.
We need to always remember that all the neoliberal economic nonsense still spouted by the Blairite Labour right in defending the entirely bogus Austerity Agenda (who can forget Yvette Cooper’s disgraceful nonsense during the Leadership debates – claiming that neo-Keynsian “People’s Quantitative Easing” measures would lead to Zimbabwe-like runaway inflation), is also not based on a mere faulty understanding of economics. No, the pro-Austerity strategies beloved of the Blairite Right, just as with Osborne, are produced by their being sold body and soul to their Big Business ultimate (post political career) paymasters, not from mere misunderstandings about economics. Which is why the Blairite Right in the PLP can never be “brought round” through comradely discussion to support the expansionary Left Keynsian strategy of Jeremmy and his team.
Absolutely spot on John.
The real dilemma facing Britain is the same the world over, it’s just that ordinary people allow themselves to hoodwinked by ruthless and unscrupulous politicians.
The left need to understand that we need to get the message out to people, that any politician that tells us the country is broke, that we can’t afford our public services is actually lying to us and we need to tell them that to their faces.
James Wolfenson told Stanford University students what kind of world they are inheriting and left them with the conundrum as to what they should do about it.
The answer is really very simple, money is printed out of thin air to produce debt, we can and should spend that money directly into the economy to benefit people not the corrupt private banks, and in case anyone is any doubt, we don’t need the Banks or the City of London. We should nationalise the Banking system, the national Giro before Thatcher privatised it was a world leader in the Banking system, just look it up in Wikipedia.
Good post, well put.
Sorry forgot the link: James Wolfenson
http://www.disclose.tv/action/viewvideo/73770/WORLD_BANKER_MAKES_STUNNING_CONFESSION/
We easily forget that economics is grounded in philosophy – not maths. Any recipe for promoting prosperity has to start with an idea of who is primarily responsible for the creation of wealth. Tory philosophy always believed that prosperity is created by entrepreneurial business owners, investors and captains of industry. When freed from regulations and tax while given access to cheap credit, the recipe suggests that the wealthiest will create jobs, opportunities and profits for all.
The world has now experienced two great depressions after adherence to free-market philosophy and arguably, we are well into the third.
In recent times, Neoliberal academics revisited the causes of the last Depression and put forward a new idea – free market ideology wasn’t to blame at all… it’s that that banks stopped lending, starving the entrepreneurs of cash and spreading fear. With the current GFC, the new theory has been put to the test. Instead of recognising collapse is an unavoidable failure of free market economics, a waterfall of cheap credit has been created in the belief that the wealthy now have everything they need to grow the economy. Nearly a decade of ballooning debt later and the fabled prosperity is as elusive as it has ever been.
The neoliberal economic consensus has been unchallenged for so long that many experts fail to recognise that their predictions are based on a trickle-down philosophy that has never delivered prosperity. Osborne’s economic recipe is the same formula that took us to the point of economic collapse in the first instance. Problematically, accepting the failure of free market economics also requires an acceptance that the increasing empowerment of the wealthy doesn’t result in a healthy economy.
Sadly, a Conservative Chancellor is more likely to accept sun-spots for economic failure than ever point the finger at the privileged elite!
Again very well put, in fact the, “privileged elite,” is a complete misnomer and too often such people are often not really, “entrepreneurs,” at all are in fact anything but.
The salaries commanded by people like Shaun Wright, David Nicholson, Sharon Shoesmith et all and there ilk are socially, obscenities.
I was chatting to one of the checkout staff in Tesco yesterday, about the unscrupulous and almost certainly criminal behavior of their recently departed senior management team and he estimated that for someone who one had worked there for say, 20 years they had probably cost them as much as £25,000 in lost pension credit and the value of their employee investment schemes.
They didn’t need the money and they clearly couldn’t have cared less about the impact of their brand, “entrepreneurship,”on the company on it’s employees or customers; in fact they’d probably regard the notion that they should as completely risible.
Then there are all these seedy charities and seedy businesses, which many of our sticky fingered MPs and their various sycophants are involved with, like A4E, (who nonetheless still kept the contracts,) basically making a profit by feeding the ailing body corporate of the welfare sate like the carrion crows that they are; on any pretext or non, whilst contributing absolutely nothing whatsoever other than hardship, misery and poverty for the weakest and the most vulnerable in our society.
It’s not just bankers, far from it.
Great points, Jeremy P. These “charities” like A4E are exactly like vultures, feeding off the carrion of their neolib paymasters. As you say, its not just bankers, Google or the 1%, but all these disgusting charity sector handmaidens with their snouts in the taxpayer trough.
Laurie Rhodes, John Penney, Mervyn Hyde – clear and concise demolitions of the true neo-liberal agenda too. Great stuff.