Tag Archives: Osborne

Uncomfortable Truths for Osborne’s Ideology Brigade

I make no apology for lifting this straight from the pages of the Guardian today (2 March) because I simply couldn’t rewrite these figures to make the point any clearer. There has been a complete lack of context in the debate over deficit reduction and without a solid factual base, it is impossible to make rational decisions over the action that must be taken. Therefore it is with huge gratitude to Barry Kushner that I replicate his letter here:

“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 ukpublicspending.co.uk).
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.”


Filed under Coalition, Economy