by Anthony Painter
There’s no hiding place. The autumn financial statement outlined in full the dire economic situation that this country will face for much of this decade. Squeezed living standards, high borrowing, cuts in public services and the shrinking of the welfare state, ongoing uncertainty, and high unemployment will define the 2010s: the austerity decade. What’s worse is that all of the risks are on the downside.
George Osborne has made the situation worse – unnecessarily so. Cutting short term programmes and investments such as the future jobs fund and building schools for the future which don’t add to the structural deficit was myopic. Once his model of economic recovery – driven by exports and private sector investment – was faltering early this year he should have intervened. He didn’t and that has made things worse. We are all paying a price as a consequence.
The choreographed dance so far this parliament has been for the Tory-Lib Dem government to blame the last Labour government for all our economic ills. And for Labour to blame the government austerity. The reality is far more complex. The government bears some, but by no means all, of the blame: a strong stance on fiscal consolidation has reduced the risk of government debt in the eyes of investors; world oil prices and food prices that have increased by 30% in a year have also been a drag on growth; eurozone crisis is starting to be a drag on confidence and demand; but an early and inflexible fiscal consolidation, especially the VAT increase, has made matters worse.