by Peter Watt
For three successive quarters our economy has contracted. And this week there is yet another report painting a gloomy picture for the foreseeable future. This time it’s the CBI reporting that they expect the economy to contract by 0.3% this year. The CBI’s director general, John Cridland, said:
“At present I believe the economy is flat rather than falling but, nonetheless, momentum seems to have weakened and the latest official figures put the UK in recession for the second quarter of this year.”
And so it goes on; it’s hard to remember when the economy was doing anything else other than struggling or worse. Behind the headline numbers jobs are under threat, family budgets are squeezed and uncertainty stalks the land. And on top of an economic contraction we have public finances that are in a pretty dire state. No party expects an end to the current public sector budget squeeze until 2017 at the earliest. In fact, after the most recent government borrowing figures even that looks optimistic. In July 2011 the chancellor had a surplus of £2.8 billion and in July 2012 he had to borrow £600 million!
Some experts are saying that he may end up borrowing £30 billion more this year than last when the OBR had been predicting a significant drop in the amount needing to be borrowed. Not quite the progress that George intended.
So now is the time for strong and bold leadership and honesty with the public about what our increasingly dire economic position means. And yet none of the parties seem capable of either.
Firstly the government is increasingly wrapped up in its own navel gazing and appears rudderless. For months now it has seemed bereft of any sense of purpose other than deficit reduction. But now that this seems to be failing the lack of a vision is telling. You would really struggle to say exactly what the government is for and what it wants to do. There are exceptions; you might not agree with Michael Gove or Iain Duncan Smith but you at least know what they intend to do in their departments.
But beyond that, what are the government trying to do? They chop, change and squabble giving the impression of being all over the place. Policy is announced and then reversed and the briefings and counter briefings are now endemic. Who’d be a government whip right now?!
Most importantly there aren’t many government MPs left who really believe that George Osborne is the man to save the country’s economic, and their political, bacon. David Cameron appears bemused but is caught in the contradictions of the coalition. But the one thing that still binds the coalition is the central plank of their coalition, their stated core purpose, deficit reduction.
To challenge their hitherto agreed approach right now maybe sound economics but risks exposing the schisms within and between the parties. It risks further damage to that which keeps them all in government – their shared parliamentary majority.
Yet that doesn’t stop the deputy PM announcing wild and ill thought emergency taxes on the rich. He might have thought that it would make him look in tune with the concerns of those who once voted Lib Dem but everyone else just laughed!
But increasingly that is, and will be, the way – the coalition will be focused on the next election, on political positioning and factional self-interest. How ironic for a project that was initially defined in terms of putting aside self-interest for the national interest. It was probably inevitable at some point, but we’re not even half way through the parliament.
But if the government parties are a shambles, then her majesty’s opposition are hardly commanding. Faced with a government in constant crisis, Ed and Ed have decided that their economic position should be “safety first”. They know that they will need to continue to cut budgets if they win the next election but being honest about this has been ditched in favour of not rocking the boat. The calculation seems to be that government is looking likely to lose the next election all on its own and they shouldn’t take any risks.
They know that saying we need growth in the economy is easier to say than to actually flesh out. So they have decided to repeat “five point plan for growth” on a regular basis in the hope that people will believe that it might just work.
All of this has meant that the Labour Party hasn’t had to face up to the sort of difficult political choices that it will have to face if it has to deal with the deficit. And that is even if healthy growth returns and the tax take increases.
This head in the sand approach means putting off those vital debates about how to actually deliver social justice whilst cutting public spending and dealing with the deficit. Just imagine how quickly the feeling of being lied to and let down will kick in after the next election if we win and haven’t been honest about our true intentions!
So the country is stuck in an economic crisis of unprecedented proportions. No one knows when or how it will end and no one really knows what to do about it. And yet with over two-and-a –half years to go until polling day, all of the three big UK parties have decided that there is something more important to worry about than sorting this out.
That something is the political calculation that sticking with their current economic approach is in their self-interest even if it isn’t in ours.
Peter Watt was general secretary of the Labour party
Tags: David Cameron, Ed Balls, Ed Miliband, Peter Watt, recession
I reject your predicate with regard to cuts, if you want a debate stop trying to prescribe it’s scope.
“how to actually deliver social justice whilst cutting public spending and dealing with the deficit.”
Peter Watt
Your lack of comprehension of economics is self-evident. “if healthy growth returns and the tax take increases” is a solution, to the economic problems, and the objective is ‘Jobs and Growth’. A view endorsed by the CBI/BCC!
“a virtuous cycle of higher growth and reduced borrowing”.
http://www.guardian.co.uk/business/2012/aug/31/business-leaders-plead-stimulus-tuc-economy-shrink
You are making assumptions about Labour Party economic policy, that are not justified. I do not share Ed Balls policy on the the economy, but I also reject your assumptions.
I have my own economic policies that differ greatly from the two Ed’s approach. An economic debate is an internal issue, and possibly a post election issue, as pre-election it will just be a distraction when we can’t implement it. The detail, why offer a hostage to fortune now ?
If the Government are in the process of losing the next election, it is bad manners (and bad politics) to interrupt them, and who is lying ?
My intentions are to deliver ‘Jobs and Growth’, what are yours ?
‘Cuts’ are the Tory agenda so why are you promoting it ?
Whilst its not impossible to eradicate the fiscal deficit without cuts, I do wish just one of the many sloganeerers would admit what in practice this would entail: massive tax rises. Tax rise monomania, like cuts monomania would, in my opinion, lead to the same thing: a strangled non-recovery.
There is a significant part of the deficit that is structural. That means even a return to growth, and growth based on the OBR/BofE’s continually optimistic assessment of capacity too, it remains. If you think deficit spending is sustainable given the size of the national debt, you are living in cloud cuckoo land.
The real problem is that political-economic debate is incapable of nuance. We need short-term demand stimulus that prioritises tax cuts as opposed to capital investment or increased public sector spending, mid-term fiscal restraint leading to decreased entitlement spending (but at a slower rate), and long-term capital investment. It is inevitable, in a recession, that this will entail increased borrowing. Just hopefully for not too long.
Obama is the exemplar. He’s got the balance right. Not that he gets any thanks.
Frasier Nelson supports ‘In the Black Labour’ !
http://www.telegraph.co.uk/news/worldnews/republicans/9509099/Cameron-and-Obama-could-soon-be-drowning-in-debt.html
“Take François Hollande, who was taken to the Elysée on the slogan “austerity isn’t inevitable”. It took just a few weeks for him to start preaching austerity.”
“Cameron faces the same problem. He says he is “dealing with the debt” when he is actually increasing the national debt by as much as Labour proposed: an almighty £600 billion. But he has not yet been rumbled.”
“The younger Labour MPs are beginning to worry. There is a nascent “In-The-Black Labour” movement”
The whole thrust of the article is that Austerity does not work.
“But poll after poll shows that it robs Labour of credibility.”
Everybody implements Austerity because it is credible but doesn’t work ?
Isn’t that the definition of madness ?
“there is nothing “progressive” about saddling the next generation with debt, requiring tax rises that will hurt the poor.” is a piece of conservative sophistry.
And ‘In the Black Labour’ is bookkeeping and Bunkum.
The economy is not subject to double entry book keeping, you can have a positive growth co-efficient. Economics is not a zero sum game.
“In 1999, Time magazine included Keynes in their list of the 100 most important and influential people of the 20th century, commenting that: “His radical idea that governments should spend money they don’t have may have saved capitalism.”[8]”
https://en.wikipedia.org/wiki/Keynes
https://en.wikipedia.org/wiki/Keynesian_economics
Fiscal sanity is an oxymoron at least when used by people who think economics is a branch of accounting !
Labour MP’s are agreeing with the Government to frame the debate at a Kindergarten level of understanding of economics.
Just because you can’t imagine the economic alternative doesn’t mean it doesn’t exist. Or that it can’t be implemented.
p.s.
France is inside the Euro zone.
aragonSAYS – thanks for the comments. My point about growth and increasing tax returns is that this clearly plugs the hole and begins to address the existing deficit. Alone though it will not be sufficient. Sonething that earlier this year Ed B acknowledged.
“all of the three big UK parties have decided that there is something more important to worry about than sorting this out … That something is the political calculation that sticking with their current economic approach is in their self-interest even if it isn’t in ours.”
The electorate sees this clearly. and increasingly judges you all because of it. You put your cheap little games ahead of the national interest every time. You treat democracy as a sport between red & blue, with little pretence at representing the people. You offer nothing but incompetence and deceit. No-one thinks you can govern well, and no one believes in your sincerity. The Labour & Conservative parties wont survive the next few decades as the dominant political forces. Good riddance to you both is what I say. We need something clean.
“‘Cuts’ are the Tory agenda so why are you promoting it ?”
Heh. You reject reality for short term party political reasons. Cuts (actually, the illusion of cuts) are the only practical option option at this time because that’s what the markets want to see. The only reason our economy is stable is because we’re doing/saying what the markets expect. You may not like it, but that doesn’t change the facts. Simply saying ‘Jobs and Growth’ repeatedly does not make Labours vague debt addicted spendaholic “plan” any less of a suicidal gamble with the lives and futures of real people.
I think you will find that the UK is already committed to falling over the fiscal cliff. We are already bankrupt but do not know it – yet. Our Debt GDP ratio will continue to rise remorselessly because the UK is already outside the region of stability. There are no polices that any party is likely to use to bring the UK into the stable region because they would be seen as too severe. Going over the cliff is the only option left. See http://www.bis.org/publ/work300.pdf
The UK would have to have cut expenditure raised interest rates way back in around 2005. Now we are well outside the region of fiscal stability. The engines have gone and the controls no longer work. Choose where you want to crash.
Well Ed Balls is wrong … when in a hole stop digging, when in a recession stop cutting the money supply … increase it but not through QE as currently operated…
Re: what the markets want … Is a matter of indifference to me.
As for Jobs and Growth well ‘Keep It Simple Stupid’ it clearly defines a different agenda from the Tories.
Now if I could just implement my own economic policies, without having to explain them the results should be visible to all (Jobs and Growth).
We would have been better off id the Tories had done nothing when they came to power, their policies have clearly failed and ‘Austerity’ is counter productive, and damages the economy.
I don’t subscribe to the Neo-classical economic model used by the BIS and Ed Balls. It is hardly surprising our views on the future differ.
“Re: what the markets want … Is a matter of indifference to me.”
Of course you don’t, because your principles are more important to you than reality or consequence. And that is why Labour government has left economic catastrophe and human misery behind it every single time.