by Peter Watt
This is my final post for 2012 and inevitably I am therefore reflecting on the year just gone. It has been an incredible year for the country from the euphoria of the jubilee to the emotion and pride of the Olympics and Parlaympics. Sat in the Olympic park back in early August you could feel the optimism and the pride of all who were there. You could feel it on the trains and on the buses and in the streets as people enjoyed a sense of something shared that was good.
And it wasn’t just a London thing – I spent super Saturday watching Brazil versus Honduras in a packed St James’ Park and then watching the evening unfold on a giant screen in the heart of Newcastle. The mood was the same, and it felt great.
Once again across the country, families will have struggled to make sure that they had a good Christmas. They will have done all that they can to have a good time, to enjoy their time together, to party and to be optimistic. The queues at the Boxing day sales show that people want to spend if they can and no doubt we will all be hopeful as the clocks countdown to midnight on the 31st.
But sadly, reality will soon kick in. Because sitting behind all of the hope and optimism of the year are the hard economic truths of a flat-lining economy, flaky export markets, huge economic uncertainty in Europe, a weak financial services sector, and austerity in the public sector.
From early January families on modest incomes will lose child benefit, from April many will see their taxes rise as more are dragged into the 40% bracket. Other families will see their levels of tax credits fall relative to prices, or the amount of support that they get to help with their disability fall. Others will lose their jobs or have to reduce their hours. If you are young and unemployed then your chance of finding work will be slim, not much better if you are over 50. Fuel prices will continue to rise, food won’t become cheaper.
Despite the optimism of the year and the hopefulness of us all, what are we offered from our politicians in the face of this huge economic crisis? If we are honest not much. The government can only tweak its clearly struggling (at best) economic approach. It knows that it needs to be more creative and innovative in the face of stuttering growth, falling tax receipts and increased borrowing. But it can only tinker as anything else risks the only thing that the two parts of the coalition cling to as a shared policy – their publicly declared approach to deficit reduction.
So we are stuck with a spiral of cuts to reduce the deficit, no growth and so deeper cuts. And “innovative and creative” absolutely does not mean fiscal irresponsibility. As Hopi Sen pointed out recently:
“What we should be doing is increasing capital spend, scheduling in future tax rises and spending cuts for when growth arrives, and, as far as politically possible, shifting resources from programme and benefits spending (in which I include various tax breaks for the moderately wealthy that boost their lifetime incomes) to investment, capability and structural spending that will support long-term growth.”
But if the government is failing so is the opposition. Labour still seems intent on pretending (if we are being generous) that all of the economic problems we face are caused by the government.
The problem with this approach being that the last Labour government had left us ill-prepared for the recession by allowing the deficit to grow despite falling tax receipts and by overly de-regulating the banks.
The wider collapse in the liquidity of banks around the world cannot be blamed on the government and nor can the parlous state of the euro and the eurozone. On top of that, Labour seem to want everyone to believe that all we need to do is create growth and all will be well; and further, that creating growth is something that a Labour government could do overnight.
Before anyone asks “exactly when did Labour claim that creating growth is easy;” you don’t need to actually use the words to imply it. A five point plan for jobs and growth is a great sound bite but certainly not an economic watershed, however it certainly does imply that the creation of growth isn’t hard. And anyway, whilst growth would clearly help in deficit reduction it definitely will not on its own be enough. In other words a Labour chancellor will have to keep cutting – and cutting hard even when the economy begins to grow.
Neither party is therefore being honest with voters about what is likely to be needed. And neither seems to be able to talk to voters about what the real impact will be of the economic reality that we are facing. It is sad, but it is also dangerous. And after a year when the British public have shown the World that we are at heart optimistic, hopeful and proud it is also unfair.
Quite frankly we deserve better than we are currently being offered. I’d like to say that I am optimistic that this will change in 2013. But I’m not.
Peter Watt was general secretary of the Labour party
Tags: 2012 Olympics, 2013 predictions, deficit, Growth, Peter Watt
Lets see what’s Labour’s plan.
Growth.
In reality, you mean growth in taxes. The immediate problem is governments running deficits. Since you won’t cut spending, which is 30% higher than taxes, you’re growth plan really means growth in taxes.
Now you would like that to mean getting people back to work. However, if you get one unemployed person back to work without spending anything, the state would be better off by 13K. (3K for taxing them, 10K not paying benefits – and that’s an overestimate) 1 million back to work is 13 bn. The deficit is 150 bn.
The difference in Labour’s plan is to tax the rest of us. Take more money form us. Unfortunately we don’t have it.
Then there are the debts. That’s the fraud. The fraud that MPs and yourself won’t talk about. e.g 4,700 bn of pensions debts on top of the other debts, hidden off the books. On taxes of 550 bn, and a 730 bn spending habit its clear, you aren’t going to pay.
Now consider the consequences of that fraud on its victims.
Benefits are part of what’s called the “automatic stabilisers”. They continue when recessions happen and they get spent immediately so cutting them during a recession would be a stupid thing to do. Even George Osborne says that, before contradicting himself with a real-terms reduction.
As for the difficulty of creating growth, Labour had a policy of increasing demand through fiscal stimulus. We had the world behind us, including China and America. It was the Tories that ruined it all.
Your economics are just plain wrong, Peter. We know what the solution is. It was working before the Tories took over. Increase aggregate demand through public spending. Yes, I agree, mostly infrastructure, but not cutting benefits would be a good idea also.
But what you CAN BLAME the government and others for is the initial hyping of “crisis crisis” to gain cutting room (the effect on confidence was palpable); and for their dishonest appraisal of liquidity collapse and eurozone woes. Faults with public sector service delivery and malingering workers is not a cause; and a nation’s economy is not a business entity. Governments knowingly pretending otherwise are not just being unfair, their negligent of a primary duty to protect citizens. Give it up with the deficit woes, its ridicules. Globalisation currently enables ‘elites’/corporations to dislocate ‘their prosperity’ from a nations; to effectively engineer tax short falls and demand greater “flexibility” in return for ‘their services’. The opposition’s mild-mannered “one nation” and rejection of benefit cuts hit the spot metaphorically with a damp cloth. But, it’s facing the right direction, so perhaps there’s hope…
Is anyone ever going to question this need for ‘Growth’? Do we really need it?
Why doesn’t Britain downsize and play within its own league.