It is pleasing to report that, after the Autumn Statement by George Osborne, the public ratings of the Conservatives have fallen 3 points. And an enormous relief. I had an awful fear that the nonsense about tough but fair measures saving the nation might have a resonance with the masochistic side of the British voter (“It is thoroughly unpleasant, so it must be doing us good”).
Can we just go over the facts ?
Borrowing: Osborne is borrowing more than he predicted when coming to power. The budget deficit is falling, often due to luck and arithmetical fiddles, but not by much, and the National Debt is decisively bigger than when Labour were in power. His endless claims to be cutting down on tax evasion turn out to be flim-flam.
Growth. The UK may be predicted to recover a little, but the overall growth since the Coalition came to power has been below other countries, including the USA and many in the Eurozone. And Iceland, which correctly saw the recovery of the economy not the bribery of banks as the main task in hand. Our economy is 13% smaller than it would have been if the general trends from 1950 to 2007 had carried forward. There was in fact a modest recovery under way when Osborne took power, but he managed to choke that off pdq, as the New York Times makes clear:
“… after Osborne introduced his austerity drive, economic growth slowed down rather than speeding up. For 2010, the economy outperformed the official forecast, growing by 1.7 per cent, reflecting the fact that it had quite a big momentum when the new government took over. But in 2011, growth dropped to 1.1 per cent, and last year it fell to 0.2 per cent, leaving inflation-adjusted G.D.P. below the level it reached in 2007. How much of this dramatic shortfall in growth was due to Osborne’s policies, and how much was caused by other factors, such as the crisis in the Eurozone, Britain’s biggest trading partner? As always in economics, it’s hard to know for sure. A recent study by Òscar Jordà and Alan Taylor, two economists at the University of California at Davis, which employed some sophisticated statistical techniques, concluded that the shift to austerity was the main culprit, accounting for sixty per cent of the fall-off. “Without austerity,” Taylor wrote in an article presenting their results, “U.K. real output would now be steadily climbing above its 2007 peak, rather than being stuck two per cent below.”
Balance. Such recovery as exists is due, not to a revival in exports or investment but to a rise in consumption. Personal indebtedness is now approaching the levels of 2007. The New Economic Foundation said it straight:
“Rather than a recovery driven by business investment, household spending is largely responsible for our rising GDP. Household spending, as a share of all spending, has increased from 46.2% in 2011 to 46.9% today.
This is worrying because, as we know, average real earnings have fallen sharply. So the only way to explain the increase in household spending (given the decrease in household earnings) is that households must, in aggregate, be running down their savings, and borrowing more. And this is precisely what the data shows. Household savings are falling at their fast rate in forty years. After falling since the crash, unsecured lending – borrowing on credit cards and so on – has picked up consistently over the last year.” Little social housing is being built, and private house prices are taking off.
Employment has held up better than would be expected – maybe because people will take wage cuts rather than unemployment. But the claim to have raised private sector jobs is deceptive. All governments since the war have been able to make that claim, because the population is growing and, as a result, we need more haircuts and filing cabinets and paint and all the other stuff. And at least some of the ‘growth’ in private sector employment is statistical: for example, employees of technical and sixth form colleges have been recategorised from public to private sector.
Living standards. The average living standard is falling in a manner that has not happened since Victorian days. Since, in fact, the last experiment in utopian neo-liberalism the disastrous impact of which was described by Karl Polanyi’s masterpiece.
Productivity, the key to rising living standards is actually falling by 3%. For all the talk of austerity, we are not getting fit and lean. And the hopes of the future – scientific research and vocational skills – are both being cut to fill a void in the budget of the Department of Business and Skills, a title that brings a sad sigh. Education capital spending will be cut by 60%, funding for adults in further education by 40%.
Research credibility The idea that economies would be damaged unless the government cut back on spending was apparently backed by a research paper by Kenneth Rogoff and Carmen Reinhart. Osborne even referred to Rogoff as ‘Ken’ (obviously his mate) when explaining how it was the reason behind his policies. Except that a graduate student looked into the paper and found that it was full of mathematical errors, spreadsheet problems and bizarre choices of data. Once that is taken into account, the evidence does not back the claimed conclusions at all.
As the days pass, more of the facts come out. Even the Sunday Times, which has had a rather discreditable record in pushing the pro-austerity line, had to lead with a front page story this week saying that consumers would bear the brunt of the continued obsessive austerity. It’s easy for politicians to stand up in the House, make extravagant claims, jeer those who disagree (especially women who disagree), and then disappear to their clubs for a convivial evening that we may be sure does not involve food banks or disability tests. But as time passes, as the forecasts unravel, one hopes that the truth will make us all free of this rabble in the not so distant future.