There used to be a day when the British economy was not run to please bankers or technocrats in international bodies. Alas, they are passed. However, it is worth asking when you read a forecast, in whose interest is it published? The IMF believes that it is important for its members to reduce public indebtedness and makes it a public objective regardless of the beggering of any nation’s citizens until this goal of public policy is realised. Naturally it is supportive of the budget deficit programme of the Coalition. The IMF addressed the issue of a Plan B. You will be pleased to know that if growth remains low the IMF would support monetary easing, keeping interest rates low and putting a brake on cuts (without anyone noticing it). In this way the deficit would not come down quickly in the first two years but would come down faster in subsequent years.
This revelation of the existence of Plan B is hopeful but not reassuring. If growth is slow, the main body of public expenditure cuts is realised , and assuming all other parameters are stable (other than unemployment) the deficit will not come down. The credibilty of the Government in the markets, which Boy George goes on about, will be lost. If then the Government persists it will be confronted with a mountain to climb in years 3 and 4 when credibility is lost and the deficit stubbornly high. If then Georgie presses on growth will remain low throughout the five years, So what then Grannie do we do next?
Well, dear, says Grannie, it might not be as bad as that. That’s what they all say, says I. What is the use of saying that when the flood waters have reached the bedroom sill? Shouldn’t we have been alerted before this time to leave the house? Hindsight, says Grannie, it is an easy art.
There are other dangers. The IMF talks bravely about global growth rates remaining high, surviving high commodity prices and resuming stable growth and low inflation. But then he would, wouldn’t he? But we know that all recessions and recoveries are unique. Perhaps this depression will last for ten years or more. And what shall we do then Granny, says I. Don’t worry dear, says she, I’ve put a little money aside to cope with the odd crisis. Well Granny, that’s the problem. We have been using it. Using it? No one told me that. The problem Grannie is that debts continue to rise. Good gracious, what did you say about the bedroom sill. Take me there. There’s time to jump. A splash is heard, off stage. Granny, you can’t swim! These words came too late. Poor Granny, poor me -oh, and by the way, poor you.
Filed under BBC, Budget 2011, Cabinet, Cameron, Coalition Government, David Smith, Deficit, Economics, Ed Balls, George Osborne, IFS, IMF, Lib Dem blogs, Liberal Voice, New Stateman, OBR, Politics, Rising prices, Treasury
There is now a Lib Dem mantra designed to show how Government has been materially improved becaus of its involvement in the Coalition. What we have, it might be supposed, is really a Lib Dem administration. The party can come up with a long list of its achievements. One by one Lib Dem policy dreams have been put into place. It is necessary side for the purpose of this argument to recognise that there are policies that those of us on the left can support: higher personal tax allowances, improvement of tax credits for the very poor. the triple lock on increases in the state pension, the Pupil Premium to help some disadvantaged poor children. Good on you, say I.
Do these policy changes make people less poor? Yes, they do in a way. However, alas and alack, the imposition of VAT dwarfs these advantages and the poor will get poorer. I will not dwell on the LiB Dem opposition to any VAT increase in the General Election campaign except to comment the they were against it. We all remember the poster. They were against increases in tuition fees too and then suddenly they were not.
But what is the heart of the matter. Remember, the Lib Dems were against cuts in public expenditure on the scale propsed by the Tories. Now they are not. What they tell us now is that these cuts are necessary and like Pilgrims Progress to the promised land they bring us all closer to full employment, rising living standards and sunshine. Trust us, you will see how wise we are it is said.
The Lib Dems no longer command trust. But are they right? Certainly the OBR has consistently produced economic forecasts that suggest they might be. We are days away now from a reckoning. The first quarter GDP figures for the for 2011 is soon to be announced. It may be that over the last six months the British economy may not have grown at all, or if it has it will be at some miserable annualised rate. Unemployment may be rising not falling, inflation will continue to work its way up and not down and real incomes will be squeezed further. I do not know whether the OBR will be asked for a revised forecast but even if they are not asked, it is highly likely that some other respected forecasting institute will make a good fist of doing it. And what will be observed? I anticipate it: a rising budget deficit and no chance of the Coalition’s economic objective of eliminating the deficit by 2015 being achieved.
Is this not the real charge against the Lib Dems? Not the cavilling daily objections to their nonsense BUT one overriding error. On the essential and over-reaching issue of how to keep the economy growing and the public deficit falling THEY ARE PLAIN WRONG. The Lib Dems have sold their soul for a mess of potage to find it uneatable. The electorate will not forget it and a day of reckoning is close.
Filed under BBC, Budget 2011, Cabinet, Coalition Government, Deficit, Economics, Ed Balls, Financial Times, George Osborne, IFS, Labour Blogs, Lib Dem blogs, Lib Dem Conference, Nick Clegg, OBR, Politics, Public Services, Rising prices, Spending Review, Treasury, University fees