Tagged with Budget

Pre-budget memo to Osborne: records show austerity won’t cut deficit

Austerity is failingOsborne’s 8 July budget will be forced through in the teeth of all economic experience. The history of the last 70 years demonstrates one conclusion irrefutably: austerity is the wrong way to cut deficits. After the second world war had dramatically drained Britain’s wealth and left the country with colossal debts amounting to 260% of GDP, these huge deficits were easily tamed by fast economic growth in the post-war years.

President Clinton achieved a similar turnaround in the US after he inherited an enormous deficit in 1992 and ended his 8-year presidency with none, largely due to rapid economic growth. Again, the Swedish high budget deficit was successfully brought down during 1994-8 by a policy of fairly fast economic growth. Even in the US in recent years, despite the political deadlock and a largely non-functional Congress, the US has achieved a far bigger and faster recovery from recession than Europe, again as a result of the priority given to growth by Obama. Continue reading →

The magnitude of Osborne’s failure

Blinded by the cascade of populist trivia in the budget, the sheer scale of destructiveness of Osborne’s economic policies over the last 4 years has been hidden. It is immense. The economy is still after 4 years of austerity 1.4% smaller than in 2008, while the US economy is 5% larger than before the crisis.

Put another way, the UK economy is today 14% smaller than it would have been if growth had carried on in the way already achieved in 2010 when Alastair Darling’s policies of economic stimulus produced 2.4% growth in the 12 months to the third quarter of that year. That means, as a result of Osborne’s policy about-turn at that point in favour instead of fiscal consolidation and austerity, the UK has lost output totalling £210bn. That is gone for ever, down the drain, now irrecoverable – a sum equal to one-seventh of Britain’s entire GDP. It means also that households on average are today nearly £2,000 poorer as a result of Osborne’s witless folly. Continue reading →

Today’s Budget and the crisis in Ukraine

ukrainian energy crisisThis year’s Budget takes place at a time of high international tension. The issue of energy security has once again shot to the top of the political agenda. The crisis in Ukraine demonstrates once again the extent to which Britain is exposed to political and economic risks beyond our control.

The fact is Britain’s dependency on external sources of energy means that we are dangerously exposed to this crisis – at a time when North Sea Oil and Gas production has fallen by over 20% since the Coalition government took office. Continue reading →

Osborne’s recovery: fiction triumphant over fact

Osborne Liar LiarOsborne’s central pitch in Wednesday’s budget will be that the recovery is strengthening, the economy is coming along nicely, so don’t hand back the keys to the people who caused the mess in the first place. Each of those statements is questionable or wrong. But Labour have boxed themselves in by supporting the austerity line all along and now find it difficult – even if they were so minded – to advocate an alternative expansionary programme when the economy seems to be reviving anyway from the austerity ashes.

Nevertheless Labour should be attacking hard the unsupported optimism of Osborne’s predictions across the board. There cannot be a genuine and sustainable recovery without a big revival in business investment, yet it is stuck still at 20% below the pre-crash level – in other words, business itself is still deeply sceptical about the ‘recovery’. Continue reading →

Osborne’s last fling

Osborne had a choice. Faced with the unrelentingly grim news on the economy, he could admit that plan A had failed and change course. Or he could brazen it out and focus on choice titbits for the 2015 election whilst giving minor tweaks to the economics where he could. He decisively chose the latter by highlighting a flagrantly populist budget whilst downplaying the economic fundamentals. Continue reading →