A word about forecasting now that the OBR has had its third attempt to plot the economic progress of the British Economy. Like accountants before them the OBR is useful in recording the past but well-nigh useless in forecasting the future. We live in a time of extreme economic turbulence and uncertainty when at any time wars, earthquakes, worldwide pressure on resources and the stupidities of the human race can turn nice judgements into inanities. Yet still we persist. It will be better in the future: the economy will grow, employment will rise, inflation will come down and real incomes will rise again. The OBR at least has the common sense to admit that all its forecasts are subject to great uncertainty. Well yes, they say, it may not turn out like this but we hope it will.
I commit myself to several judgements, First, the attempt to eliminate the budget deficit in a five year Parliament is doomed to failure. At best the Coalition may complete the Parliament having achieved what Labour continues to promise: the deficit could be halved. We have in the Coalition a group of supply side fanatics who have always maintained that growth must come through a smaller state and greater productivity, who are antagonistic to public administration and welfare and suspicious of the state as pump priming anything. Come back Milton Friedman, all is forgiven. Economists have an adage that you can lead a horse to a trough but you cannot make it drink. The IFS has remarked that the numerous supply side intiatives announced in the Budget do not amount to a row of beans. They will add nothing to aggregate demand. What is needed is the pump priming of capital investment in rail, roads and building construction and a real (rather than imaginary) attempt to raise skill levels. Of course the Government is aware of these needs. It is doing something – but too little.
The central issue of George Osborne’s budget is a judgement of whether this Government at this time is right in believing that it is possible to eliminate the budget deficit in five years. If it is right in its belief it will go on to the glory dreamt of by our Dave and Nick. The objectives of financial probity and economic sucess will be achuieved and electoral success will be the reward. If it is imposible for Britain (and I suspect Greece, Ireland and Portugal) to do anything of the kind when will the game be up? I suggest the Budget of 2012 will be the time of reckoning. The Parliamentary rules now make it difficult to get rid of a Government – but not impossible. And at this time who might be leading the Labour Party. Might events work in favour of Ed Balls? The electorate love a winner. Watch this spot!
Filed under BBC, Budget 2011, Cameron, CBI, Coalition Government, Deficit, Economics, Ed Balls, Ed Milliband, IFS, Labour Blogs, Labour Goverment, Labour leadership, Lib Dem blogs, Liberal Vision, Nick Clegg, OBR, Treasury
The members of the CBI meeting on Monday were somewhat insistent and David Cameron somerwhat compliant: a dynamic and prosperous private sector would save us from economic depression and the Coalition would do all in its power to help firms large and small thoughout the country through lower taxes, fewer regualtions flexible manpower practices and targetted Government incentives. Long live free enterprise! Had I heard this before?
Well, good luck to them is my response but not at the expense of my job, my family, my way of life. After all, is it not true that modern democratic and parliamentary Government is about the representation of interest, of all our interests. Consider the leaders of the top fifty leading British companies who wrote recently to the press in support of the Coalition’s austerity measures. They are international companies who can locate anywhere. They have no intrinsic compulsion to invest in British industry and jobs, Some, perhaps all, will invest elsewhere if it suits their balance sheets. Might it be that these companies actually benefit from unemployment: the availability of more workers, the lower the wages that might be payable to new recruits. No one pays more than they need. Higher dividends mean richer shareholders. Of course, our pension funds benefit too, I accept, but a host of owners of capital rub their hands at the same time. Our families may suffer but surely not the Captains of industry! If the weight of public consideration is given to the owners of capital, our interests, the interests of the motley, take second best. Is that what we can expect? Is that what we shall get?
The Coalition leaders are often portrayed as non-ideological managers of our interests. Let us place our ideologies in the waste paper basket of history and solve our problems one by one. They can do this apparently. However, it is not clear to everyone that this is what they are about. In the 1980’s Mrs Thatche earned her re-elections on the backs of the unemployed. Around 1982 the economic recovery began but with it came rising unemployment for a further four years to 1986. Is this what we are going to experience now? I don’t know. Boy George doesn’t know either. It does seem to me that the world is a dangerous place. Perhaps we shall avoid a double dip depression but I do not think it is likely that we shall avoid a long period of modest growth (lower than it need be). Who can judge the outcome of foreign currency wars, of a slowing in buoyant BRIC economies, or the multitude of wrecked family lives. No one will pay us for the long years of personal suffering. They will be years lost. I do not envy fat cats but I do not feel that they should sleep easy in their beds while some of us kip in doorways. How about you? Long live Parliamentary democracy. Two cheers for our interests!
Filed under BBC, Cabinet, Cameron, CBI, Coalition Government, Conservative Home, Deficit, Housing Benefit, IFS, Labour Blogs, Lib Dem blogs, Liberal Voice, New Stateman, OBR, Parliament, Politics, Spending Review, Thatcher, Treasury, Unemployment, Vince Cable