Some Economic Facts & Figures

The rightful hiatus over student fees has rather obscured some startling detail in last weeks report from the Coalition's very own Office of Budget Responsibility, the OBR. 

Thanks to the New Statesman for highlighting the following:

• economic growth will be higher than forecast this year (at 1.8% rather than 1.2%).  Impressive in the first 12 months after a savage recession.  Since there is an accepted lag between policy and effect, this is mostly due to Alistair Darling's fiscal stimulus
• growth next year and the year after has been revised down to 2.1% and 2.6% respectively.  Slower growth predicted as a result of Osborne economics.....
• whilst there is predicted drop in public sector job cuts from 490,000 to 330,000 this is based on a rapidly expanding private sector creating nearly £2m jobs.  Douglas Alexander has noted that in the last post recession period (1993-1996), the private sector struggled to create just 300,000 jobs
• by 2015, we are predicted to have a budget SURPLUS of £6bn.  Good housekeeping, but why on earth is there a need, therefore, to cut £7bn from university funding over the same period?  A cut that is the direct cause of the need to raise tuition fees.  I say again that its about idealogy not economics.

Britain already spends less as a percentage of its GDP on higher education than the rest of Europe (0.7% compared to 1.2% in France, 1.4% in Sweden, 0.9% in Germany) so this has to be about a deliberate policy to shift higher education funding from the state to the individual.  They are creating a market in education, along the lines of the US model.  Equal access for all will suffer as a result.

All useful facts to have at your fingertips when (a) there is no alternative or (b) its all Labour's fault are being advanced as the reason for every coalition policy......

Conspiracy theorists will say letting the LibDems cop the flack for a week is rather a good diversionary tactic from some pretty bad economic news.  Another answer to what the LibDems are for!

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Why Osborne is just Wrong!

In speech after speech at their Conference in Birmingham, the Tories argued that the coming programme of savage cuts in public spending is the only way. Its all Labour’s fault. A result of years and years of profligate spending . Labour’s fault for deciding to increase the deficit, and bail out the banks.  Labour's fault for cutting VAT and boosting public spending as the recession hit.

“…. because of the problem left by the previous government……” seems to be a mandatory part of every Coalition politician’s speech.

Labour politicians, not bankers, are responsible. Public sector workers and families with children across the country now need to pay the price. There is no choice. It’s the only way to keep the financial markets happy (and profitable).

What rubbish.

Yes, Labour spent money to invest in public services, like the NHS and the New Deal. But it mainly raised taxes to pay for it; the Windfall Tax on Utilities, National Insurance rises. Remember all the Tory complaints about “stealth taxes”? Tax income rose steadily on the back of economic growth.

When the global banking crisis hit in 2008, the UK had low inflation, low interest rates, low unemployment and the lowest net debt of any G7 economy.

In 2008, the Labour Government had to make the critical decisions on how to respond to the global financial crisis caused the big US and UK banks. We pumped money into the banks and the wider economy to protect jobs, support household finances and keep the small business economy working. Yes, a huge programme of public spending but it worked, avoiding a total collapse in our economy. Our approach was commended and then replicated by Governments around the world.

That’s where our huge spending deficit comes from.

Of course, we need to reduce that deficit, but we need to do it through a fair and long term programme which balances income from economic growth and taxation with reduced spending.

And for me “fairness” is making sure that financial speculators, investment bankers and tax avoiders pay their share before we start putting the burden on working class families with “too many” kids.

The lessons from history are stark. In 1925, 1931 and 1980, governments told us there was no alternative to massive cuts in public spending. The markets demanded it, to restore “confidence”. Recession, devastation for individual families and huge social unrest followed every time.

George Osborne, David Cameron and Nick Clegg are taking us down the same road again.

To quote from Ed Ball’s excellent Bloomberg speech back in August:

“For all George Osborne’s talk of ‘deficit-deniers’ – where is the real denial in British politics at the moment? We have a Chancellor who believes that he can slash public spending, raise VAT and cut benefits – he can take billions out of the economy and billions more out of people’s pockets, he can directly cut thousands of public sector jobs and private sector contracts, and none of this will have any impact on unemployment or growth. Against all the evidence, both contemporary and historical, he argues the private sector will somehow rush to fill the void left by government and consumer spending, and become the driver of jobs and growth.
 This is ‘growth-denial’ on a grand scale. It has about as much economic credibility as a Pyramid Scheme.”

Time to put the record straight. Step up Ed Milliband.

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