As I’ve argued previously, the tradition these days is to read the chancellor’s and leader’s speeches as two parts of a piece. The former sets out the economic fiddlys and route to boom-time Britain, and the latter does the feels: the vision, the philosophy, the kind of society government is set on bringing into being. And so it was last week that we had sections of the commentariat embarrassing themselves with cringing enthusiasm as Dave’s warm words erased the suffering of the poor and the vulnerable, as well as the kicking-to-come when cuts to working tax credits arrive. Dave and Osborne said nice centrist things, and were duly praised for uttering nice centrist things. Nearly everyone, myself included, saw it as a land grab for the ever-problematic notion of the centre ground. This was a not-so-subtle gambit aimed at boxing Labour into a hard left corner. Time will tell whether the rhetoric washes. Continue reading
Tagged with Osborne
Despite claims of a recovery, UK productivity is stagnant
The basic reason why UK wage growth has been virtually flat for a decade, at a level still 6% below pre-2008-9 levels, is Osborne’s relentless squeeze on benefits, tax credits, low pay and public expenditure. But there are two other very important contributory causes. One is that the proportion of our national income which we invest each year rather than consume is far too low. Since the onset of the crash in 2007 UK investment as a proportion of GDP (excluding R&D) has fallen from 18.2% to 14.5% now. Not only is this a drop of a fifth, which is a very serious shortfall, it is also barely half the world average which remained at 25.5%. As ONS figures show that depreciation of existing UK assets is running at about 11.5% per year, only 3% of the current total of 14.5% is left, which is not even enough to keep up with our population growth of at least 500,000 a year, let alone sufficient to build up our total assets per head of the population. Continue reading
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Labour should be cautious of adopting Osborne’s fiscal charter
There is now a strange air of unreality about the handling of the deficit. Osborne has made it centrepiece of his political narrative, although his prime motivation is not to reduce the deficit, but to shrink the State and the deficit gives him the pretext to do it. Even if it was his prime objective, he has utterly failed to carry it out since in his first budget in 2010 he promised to cut it to zero by 2015, and it actually turns out this year it is still a mountainous £90bn. He now promises to cut the deficit to zero by 2018-19 and to have a surplus in the last year before the election. Does anybody believe anything that this man ever says?
But given how mischievous his declared intentions and given anyway his total failure to achieve them, it seems odd for Labour to be proclaiming that it will match Osborne. No doubt that’s for reasons of economic credibility, even though Osborne represents such a poor benchmark for that objective. But far more important than all the sparring over matching Osborne’s plans is whether there is the slightest possibility of their being realised by 2018-9, and it’s pretty obvious they won’t be, and by a very large margin. Continue reading
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Fat cats won’t lose a moment’s sleep over Osborne’s banking bill
Arguably the most important bill in a weak and flaccid Queen’s Speech today is the Banking Bill. But it is a fiasco. It has one central objective – to prevent too-big-to fail banks from being bankrupted by the recklessness of their investment bankers and requiring another gargantuan bail-out at ruinous cost to taxpayers and deep and prolonged recession to the economy.
But it will fail because the retail and investment arms of banks are not being split, merely having so-called ‘Chinese walls’ erected between them – a ramshackle device that highly-paid lawyers and accountants in the City of London will take no time circumventing. But that’s not even the half of it. Of all the other reforms now so urgently needed in the banking sector, not a single one is to be found in this Bill.
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Osborne’s deficit reduction is just a pretext
To fill a Budget with populist gimmicks while wholly ignoring the economic fundamentals that are remorselessly driving this country into a semi-permanent stagnation is to degrade the high office of Chancellor. The home loans scheme has more than a whiff of sub-prime about it, luring those without the means to buy a house they cannot afford and thereby fuelling a housing bubble. Continue reading
