George Osborne’s Economic Miracle

by George_East on December 23, 2014

225px-George_Osborne_0437That is what we are living through if you believe much of the Westminster Village as it gets into its pre-election groove.   The Tories we are told are going to run on a vote Conservative to Finish the Job message – a terrifying thought to many.   Osborne has indicated where he wants to go in his Autumn Statement – a scythe to public spending and unfunded tax cuts to the wealthy, the latter something that Labour would have been eviscerated for promising by the same press who lap up it up when it comes from the Chancellor. There are, in fact, some tentative signs in the polls that the Autumn Statement may have backfired on the Tories’ plans but that is a judgment for another day as pre-Xmas polls are notoriously frothy.

Yet what is hardly mentioned by the same press that laud Osborne’s achievements is that his whole economic strategy was supposed to be predicated on eradicating the structural deficit. That, we were told back at the time of the emergency budget in June 2010, was the reason why austerity was needed. If you remember back to those days of oh my god we are about to become Greece scaremongering, this mission to eradicate the deficit was described as the ‘glue that held the coalition together’.   Alistair Darling’s alternative plan to halve the structural deficit in the lifetime of the parliament was said to be recklessly insufficient to stave off bankruptcy.

This plan, that was supposed to be the raison d’etre of the government has been a total and utter failure. In its Autumn statement the government has said that they have halved the deficit.   This in itself should have been viewed as such a disastrous failure that the government ought to have been run out of office, as it is precisely what Alistair Darling was proposing in 2010. In fact this claim to have ‘halved the deficit’ is, like so much else with this government, not true. Osborne moved the goal posts by moving from an absolute measure to a relative to GDP measure in order to make such a claim. All the government has managed to do, despite inflicting potentially irreparable damage to public services, is to reduce the deficit by a third.

Of course what is also now forgotten is that this government inherited an economy with a relatively strong growth rate (coming out of recession with the benefit of the Brown/Darling stimulus of 2009).   Both the measures that they implemented and the ridiculous rhetoric about the country being on the brink of bankruptcy resulted in that growth rate coming to a screeching halt. The economy did not better than flat line for the best part of the first 3 years of this government – an almost unmatched record of economic disaster.   Former Monetary Policy Committee member David Blanchflower has pointed out that it is probably been the slowest recovery from an economic recession since the South Sea Bubble of the mid 18th century; indeed it may be the slowest since the Black Death, which is some achievement.

Wages are still 10% below where they were at the beginning of the recession, with very little sign of recovery. The recent real increase of 0.1% being largely achieved by inflation heading towards deflationary territory rather than wage rises of any scale. For most people the recovery that has been trumpted from the highest towers has not been felt at all. The jobs that have been created have been overwhelmingly casual zero hour or part time work. The huge rise in the number of self-employed isn’t some sign of a Torywank entrepreneurial upsurge as the forced casualisation of much low waged work (such as cleaning).

And what about that recovery? Osborne took to the airwaves at the time of the Autumn statement to brag that the UK economy was the fastest growing in the G8. Surprise surprise, today the ONS released figures showing that not to be the case. The 3% annualised growth that Osborne crowed about turns out to be 2.5% growth; compared to US growth (revised up on the same day) of 5%.  Of course the economy is still doing better than the Eurozone, but that has nothing to do with George Osborne but because of the structural absurdities of that currency union (if any one is to be praised it is Gordon Brown for ensuring that the UK did not enter the Euro when Tony Blair was desperate for us to do so).

Finally, in another piece of economic news today, the current account deficit (the balance of payments in old language) was 6% of GDP in the last quarter. That is the worst figure ever.

So yes let’s, as the festive season is upon us, all give thanks for the genius of our chancellor. Thanks a bunch Gideon.

 

{ 1 comment… read it below or add one }

Mike Killingworth December 24, 2014 at 8:14 am

A Merry Xmas & a Happy New Year to all four (or is it five?) of you.

I still expect the Tories to win an overall majority next May. In the meantime I can chortle over the absurdities in the UKIP manifesto – but I’ll leave that for another day. Enjoy your plum pudding…

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