Thursday, 3 March 2011

Deficit hyper-uppers

In an article in the Observer last month William Keegan wrote:

"There is something barbaric about the way this coalition is setting about a deficit problem whose seriousness it has cynically magnified for its own political purposes."

Alas Liberal Democrats are in this deception up to the neck. In an "all member" issue of Liberal Democrat News which I have just received Nick Clegg begins his front-page article: "Tackling the legacy of Labour's debt is one of the most urgent tasks facing the government," continues "Labour left us well and truly in the red" and later cites "the deficit and debt left by Labour" as "the most obvious symptom of a much deeper economic malaise." On an inside page, in an article which could well have been written by Tory, Lorely Burt writes: "Our economy really is in a mess...You really can't underestimate how bad our debt situation is," and later, "(o)ur role as Liberal Democrats is to pick up the pieces... The first task is to reduce the deficit. By doing so , we can give confidence to businesses that they can invest in our economy without the worry of our becoming a financial basket case like Greece or Ireland."

Patiently in this blog I have tried to put the case that Britain’s debts are not historically high, that Labour’s expenditure was reasonably prudent up to 2008, the year of the crisis, and that the current deficit is a result of falling revenues arising from the recession rather than profligate expenditure. Above all, we are not Greece, are not and never have been in danger from “the markets,” who are, after all, largely institutions within our own economy , including many pension funds, lending to the our own government. The “savage cuts” are far from a matter of necessity but are ideologically driven. Liberal Democrats, as heirs to the party of Keynes and Beveridge, should be advocating pump priming rather than cuts. This case is supported by a group of distinguished economists and commentators , including including David Blanchflower, Martin Wolf, Joseph Stieglitz, and Paul Krugman.

Further support for this view appeared in yesterday's papers. No less than the Governor of the Bank of England, Mervyn King was reported as placing blame for the deficit not on Labour's profligacy but on the city and financial sector, and regretting that "(t)the price of this financial crisis is being borne by people who absolutely did not cause it." A correspondent in the Guardian, Barry Krushner, gave devastating detail on the real state of the economy. His letter is worth quoting in full:

* The Guardian, Wednesday 2 March 2011

George Osborne dissimulates. He knows that Ed Balls is at odds with Labour party policy on cuts, knowing that we have 12 to 13 years to pay off debt and deficit. But he also knows that our level of debt (less than 60% of GDP net of bank assets) is within Maastricht Treaty limits (60%) and lower than almost all OECD countries; that this debt is low by historical standards (we sustained debt at more than 100% of GDP for 20 years up until the early 1970s); that debt repayments (less than 3% of GDP) are lower than they were under Thatcher (5.15%) and Major (3.8%); that our deficit is partly created by a low overall tax-take (around 36% compared with the EU average of 40%). He knows this because these are official statistics (available on Google - mostly Office for National Statistics but also

He knows, therefore, that whereas our economy, dominated by manufacturing up to the early 1990s, delivered GDP growth of 2.5%, the financial sector since then has delivered growth rates of less than 1.5% – another element of structural deficit. He knows that, whereas public sector costs have risen year on year over the past 30 years, so has outsourcing to the private sector – currently at around 20% of total public sector resource. Though he may privately be content with Labour's failure to stem the concentration of wealth (the index of inequality rose under Labour – the Gini Coefficient up almost 5 points), Osbourne will be more circumspect that Labour borrowed less and repaid more debt than previous Conservative administrations (borrowing was roughly 50% less under Blair/Brown than it was under Major – more than twice Thatcher's debt repayments were made).

And his biggest dissimulation – under the continuing influence of the previous Labour administration, 2010 saw £20bn more than forecast wiped off the deficit as a result not of spending cuts but of "New Deal"-style growth stimulation. It is unremarkable that Osbourne can point to the OECD and IMF supporting cuts – they are the global advocates of public austerity. He does not mention the three Nobel prize-winning economists (Pissaredes, Stiglitz, Krugman) and Martin Wolf of the Financial Times, all of whom condemn this austerity policy as a serious historical error. Why not? Clearly because he wants no balanced public contestation over the sustainability of a public sector. The real question is why opposition parties and dissident Lib Dems allow this level of narrative control by the coalition government – "crisis", "unavoidable cuts", "Labour's fault". It's neither "middle" nor "muddle" nor an economic crisis – it's a crisis of democratic debate.

I have noticed that when, on BBC1's "Question Time" or Radio 4's "Any Questions," politicians "on message" quote the alleged "mess" left by Labour as a justification for current policies the audiences responds with a combination of a groan and a hiss. Apparently you can't fool all the people for too long a time. I hope that if these dissimulations are repeated at the Liberal Democrat Spring Conference next week they will be treated with similar derision.

A consequence of this hypocrisy as serious in the long run as the effects of the cuts on the quality of our society is the effect on the quality of our democracy. In the election we promised a new, more honest, politics. Distorting the record of the "last lot" is old politics, and we should be ashamed of using them, particularly as the deception serves not our, but the Tories', ideological ends.

No comments:

Post a Comment