George Osborne’s autumn of discontent
The chancellor’s autumn statement exposed a dearth of future-oriented thinking in economic circles.
It’s either a Thatcherite war on the poor or a replica of one of Gordon Brown’s budgets. It’s a sign that ‘Plan A’ is failing or a salutory reminder of the need for even more swingeing cutbacks to appease the markets. The schizophrenic reaction to the chancellor of the exchequer’s autumn statement yesterday actually showed that it wasn’t much of anything.
The Guardian‘s columnists certainly couldn’t agree about what it all meant. Polly Toynbee described it thus: ‘Class war, generation war, war against women, war between the regions: George Osborne’s autumn statement blatantly declares itself for the few against the many. Gloves are off and gauntlets down, and the nasty party bares its teeth. Here is the re-toxified Tory party, the final curtain on David Cameron’s electoral charade. No more crocodile tears for the poor, no more cant about social mobility or “the most family-friendly government” or “we’re all in this together”. Forget “vote blue go green”, with this mockery of husky-hugging. Let the planet fry.’
While the hyperventilating Toynbee was calmly asked to keep breathing through a brown paper bag, Simon Jenkins was writing: ‘Careful of his budget balance, Osborne offered a Blairite sleight-of-hand of initiatives, plans and projects. He “created” jobs, picked winners and kickstarted infrastructure schemes. He intervened in every price and subsidised every project that came to mind. He left Labour’s Ed Balls ranting and floundering in fake opposition.’ For Jenkins, Osborne’s biggest failing has been to try to revive the economy by pumping money into it through the banks. Trouble is, the banks – having been instructed to restore confidence in the financial system by sorting out their dodgy balance sheets – have largely hung on to the cash, it seems.
The truth is that, for all the hyperbole his statement generated, all that Osborne could do yesterday was announce that he was tinkering with his earlier plans. The economy has proven to be in an even more wretched state than expected, according to the government-appointed independent experts at the Office for Budget Responsibility (OBR). Growth for next year, previously forecast to be 2.5 per cent, is now expected to be nearer 0.7 per cent. UK plc has been in such bad health this year that it’s been coming up with excuses for its lack of dynamism like ‘couldn’t make it into work today because of the snow’ or blaming ‘the wrong kind of royal wedding’. Almost any slight aberration has been enough to turn anaemic growth into economic decline.
For Osborne, no growth means no extra taxes means no room for manoeuvre. Instead, what we heard was a depressing promise of government cutbacks going on for longer than originally planned. The UK’s structural deficit won’t stop increasing until 2016-17. That doesn’t mean the state will be paying off debt then. It simply means that the national debt will (hopefully) stop increasing at an alarming rate by then.
Osborne did offer new infrastructure projects, like roads and metro links, but he’s so obsessed with keeping any new spending off the government balance sheet that he’s hoping to get pension funds to pay for most of them instead. The other big news is that the current public-sector pay freeze will be followed by two years of wage rises capped at one per cent. Along with the changes to public-sector pensions, that means that government employees will become a lot worse off over the next few years in real terms.
Yet for all the sound and fury, the reality is that the UK is still, by and large, not so much in a recession as waiting for one to really kick in. Living standards are being squeezed, but those people who have hung on to their jobs are coping with discomfort rather than outright pain so far. Unemployment has not risen as much as many had expected, though youth unemployment is at a record high and many people who would like to work full-time can only get part-time jobs.
There is actually very little the government could do in the short term to turn around the UK economy. Like many other Western economies, the UK has been stagnant for years, something masked by massive public and private borrowing. Now we have to deal with that underlying stagnation and try to get that borrowing under control. That process has hardly begun. Government spending hasn’t declined overall, it’s just that more has to be spent on social security and interest on debts so less is available for departmental spending. This is hardly the kind of austerity experienced in Ireland or Greece.
Nor has Labour got any serious alternative. The mantra of debt reduction is accepted on all sides. Osborne’s plans barely differ overall compared to those of his Labour predecessor, Alistair Darling. Osborne’s current opposite number, Ed Balls, may splutter about the failure of ‘Plan A’, but his alternative is simply ‘Plan A Slowed Down Slightly’.
Sadly, without a more ambitious attempt to shift the economy so that consumption can be paid for by production, the crisis will drag on and on, played out through ever-greater attacks on living standards – aided and abetted by the inability of the trade-union movement to mount any worthwhile opposition. And all this pre-Christmas cheer leaves aside the fallout from the increasingly likely disintegration of the Eurozone, which the chancellor and the OBR admit would put the cat amongst the pigeons to such an extent that there’s simply no point attempting to predict what will happen. No wonder the FT‘s Martin Wolf can gloomily declare a ‘lost decade’ for the UK.
In the short-term, austerity to an uncertain extent is inevitable. A united opposition to cutbacks might be able to sweeten the pill a little, but there’s little chance even of that. What is needed is an end to the short-termism of current policy. What should the UK economy look like in five or 10 years time? How do we get there? The sooner we start that debate, the better.