On the day of George Osborne's Mais Lecture, the Conservative party's economic policy remains discredited. Left Foot Forward has 5 questions for him to answer.
On the day of George Osborne’s Mais Lecture, and as the IMF undermines his cuts-at-any-cost strategy, Left Foot Forward once again asks the Shadow Chancellor to come clean on his deficit reduction plan. We set out five key questions he must answer tonight.
On November 17th, in the run up to the pre-Budget Report, Left Foot Forward set out eight questions that George Osborne must answer. Frustratingly we are no closer to knowing the answers. Indeed, in relation to our questions on the UK’s deficit, the picture is more blurred than ever.
Just ten days ago, Osborne crowed about a letter from 20 economists to the Sunday Times:
“Crucially, these economic experts also say there is a compelling case for starting in 2010 and that there should be independent oversight of the forecasts — two arguments we Conservatives have been making with force for months now.
“It is clear today that the Conservative party is now speaking with the consensus of expert economic opinion and it is Gordon Brown who is threatening the British recovery.”
By the end of the week, 67 economists had written to the Financial Times setting out that “the timing of the measures should depend on the strength of the recovery” and that “it would be dangerous to reduce the government’s contribution to aggregate demand beyond the cuts already planned for 2010-11.” Then yesterday, the IMF intervened and wrote:
“Directors recognized that, for most advanced countries, some fiscal and monetary stimulus may need to be maintained well into 2010, and withdrawal could begin in 2011 if developments proceed as expected …
“Directors underscored that ensuring fiscal sustainability is a key priority, making it important for consolidation to begin once there is clear evidence of a self-sustaining recovery.”
David Cameron has described the Government’s IMF-supported spending plans as “moral cowardice” and has called for “some reduction in public spending plans in this coming financial year.” But according to Cathy Newman on Channel 4 Fact Check, on the measures already identified:
“The Tories would be lucky to save £625million (£400m absolute tops from Child Tax Credits and £225m for Child Trust Funds) – less than half of the predicted £1.5 billion pounds. But that’s giving them the benefit of the doubt.
“Once all our expert’s caveats are factored in, savings of just half a billion pounds are more realistic. The Conservatives still have some way to go to convince the electorate they can make debt that £178bn debt mountain.”
Meanwhile, the Tories claim that not starting to cut in 2010/11 would imperil the UK’s credit rating. At Davos, Cameron raised the spectre of Greece’s sovereign credit rating collapse. But Mervyn King said yesterday that he would be “immensely surprised” if Britain loses its top credit rating because of concerns about the budget deficit.
The Tories also talk about Britain’s “debt crisis” when the UK went into the recession with lower levels of debt than most other OECD countries. Indeed, Meanwhile, gilt yields are near record lows. Despite Osborne’s fears, the yield from 5-year British Government Securities (gilts) remain below 3 per cent – well below their long-run average.
And we should also recall that as well as opposing the nationalisation of Northern Rock and Bradford & Bingley, the Conservatives opposed the fiscal stimulus, including the £5 billion for jobs and training, which included the the Future Jobs Fund. This money has helped keep unemployment lower than in previous recessions.
Building on our earlier questions, George Osborne has some explaining to do tonight:
– Why do you continue to pursue a cuts-at-any-cost policy which puts you at odds with the IMF and a clear majority of public-facing economists?
– Which public spending cuts will you make in 2010-11 to match your rhetoric?
– Will you stop talking down the UK’s credit ratings?
– Will you stop describing Britain’s deficit as a “debt crisis” in light of international comparisons showing that Britain’s debt burden is neither large nor unsustainable?
– Will you admit that you were wrong to oppose the fiscal stimulus including the critical cash for jobs and training?Like this article? Sign up to Left Foot Forward's weekday email for the latest progressive news and comment - and support campaigning journalism by making a donation today.