What’s the answer, George?

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 cowardiceand 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?

17 Responses to “What’s the answer, George?”

  1. Ben Cooper

    RT @leftfootfwd What’s the answer, George? //is.gd/94Trd – V gd questions from @wdjstraw < a must read!

  2. Ellie Gellard

    George, Why do u continue to pursue a cuts-at-any-cost policy which puts you at odds with the IMF..? //is.gd/94Trd Great work @wdjstraw

  3. Chris Paul

    RT @BevaniteEllie: George, Why do u continue to pursue a cuts-at-any-cost policy which puts you at odds with the IMF..? //is.gd/94Trd Great work @wdjstraw

  4. Matthew Zarb-Cousin

    RT @BevaniteEllie: George, Why do u continue to pursue a cuts-at-any-cost policy which puts you at odds with the IMF..? //is.gd/94Trd Great work @wdjstraw

  5. Chris Paul

    RT @mydavidcameron: RT @leftfootfwd What’s the answer, George? //is.gd/94Trd << V gd questions from @wdjstraw

  6. MusicMP

    RT @BevaniteEllie: George, Why do u continue to pursue a cuts-at-any-cost policy which puts you at odds with the IMF..? //is.gd/94Trd Great work @wdjstraw

  7. Bill Kristol-Balls

    That’s 5 rather than 4 questions but Osborne being the fifth wheel that he is on economic matters probably won’t notice.

    Can I add a fifth (or sixth) –

    How do you manage to keep a straight face when telling the British public that they’ll be able to buy something they already own but at a bit of a discount?

  8. novocastrianrob

    RT @BevaniteEllie: George, Why do u continue to pursue a cuts-at-any-cost policy which puts you at odds with the IMF..? //is.gd/94Trd Great work @wdjstraw

  9. Will Straw

    Good spot, Bill. I’ve changed that – there were four questions in the November blog but we added one today on “which cuts?”.

  10. Bill Kristol-Balls

    Happy to help.

    How come this site doesn’t come up on the PoliticsHome wire anymore.

    Has that nice Lord Ashcroft started censoring you?

  11. Malcolm Evison

    RT @leftfootfwd: What’s the answer, George? //is.gd/94Trd – @wdjstraw asks some more questions of the shadow chancellor

  12. kevinrye

    RT @mydavidcameron RT @leftfootfwd What’s the answer, George? //is.gd/94Trd <<Georgie boy caption comp anyone?

  13. Political Scrapbook

    RT @leftfootfwd: What’s the answer, George? //is.gd/94Trd – @wdjstraw asks some more questions of the shadow chancellor

  14. Michael Burke

    Which cut do you intend to make that won’t depress overall economic demand, and lower long-run capacity and lower tax receipts?

  15. Mr. Sensible

    George Osborne is well and truely all over the place.

  16. SOCIALIST UNITY » AROUND THE BLOGS

    […] Which brings us nicely to a timely article about George Osborne’s economics from Left Foot Forward. […]

  17. Josh

    Oh please Mr Straw, please don’t use an economist or an institution of economics to justify fiscal and monetary expansionism. If you ask three economists the same question, you will get four answers. There are so many schools of economic though e.g. Keynesian, Post Keynesian, New Keynesian, Classical, Neo-Classical, Marxist, Austrian (I am an Austrian School economist) etc.

    What we can justify however is massive spending cuts and reducing the deficit as rapidly as possible. Not one of your contributors or you yourself has managed to counter my repudiation of the idea that deficit spending can help a depression economy. The deficit at the bottom end of fiscal year 1933, the last year of Hoover’s Presidency, stood at 4.5%, destroying the myth that Hoover was a Laissez Faire contractionist. During the first 3 years of New Deal, the deficit averaged 5.1%. Are you really suggesting a 0.6% difference between the deficits of Hoover and FDR meant the different between depression and recovery? If so, why did America not re-enter depression after WW2, when a deficit of 21.5% was turned into a surplus of 1.9% over two years, a swing of 2,320 basis points. According to Keynesian theory, this should have resulted in mass unemployment and depression. However, the post war recession lasted 8 months, compared to the decade long Depression, and unemployment peaked at 3.9%, compared to Depression levels that never fell below 14%. Deficit financed public spending does not increase aggregate demand because the government must take the money from the private sector. It is merely redistribution. The Keynesians retort that ‘crowding out’ theory only applies at full employment, but this ignores the tremendously complex capital structure of an economy, and the chains of production and supply needed in the production of even the simplest of goods. Ricardian Equivalance has also been proved right by this period of fiscal laxity, as the savings rate has jumped at its quickest rate since records began, to its highest level for nearly 20 years, at 8.6%.

    How is that for ‘evidence based analysis’ Mr Straw?

    I am still a fan of this blog, but I wish you would drop some of the pseudo-intellectualism and the ‘progressive’ mantle, because it is such a disgusting, pompous and self satisfied word. It reminds one of inverted snobbery and disdain for those who dare to question the socialist orthodoxy. You have given me a very large dartboard for me to practice through my intellectual darts at. This blog is like an open wound revealing a delicious, blood stained liver, and I am the venal vulture, circling my victim as I peck the liver and drink its blood.

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