George Osborne today claims that British business supports his “age of austerity” including cuts to public spending in 2010-11. Aside from the naked “supply siders” at the Institute of Directors, this is simply not the case.
“The voices of British business are now saying what we Conservatives have been saying: earlier action on the deficit is a key to securing the recovery. It is a huge vindication of our approach.
“There is an emerging consensus that Gordon Brown’s economic approach is simply not credible.”
But is this the case? The Confederation of British Industry’s letter to Alistair Darling talks only about the time period over which the budget should be returned to balance, not when the cuts should start. Could this be because in September, the CBI’s Director General, Richard Lambert, told the Today programme:
“the economy is too fragile right now for massive cuts in public spending so we think that the government should be giving a credible plan for getting fiscal conditions into shape.”
Meanwhile, as the Independent reports, a key economic adviser to the Tories, Sir Alan Budd, has criticised the Conservative’s approach:
“If you go too quickly then there is a risk that the recovery will be snuffed out and we will go back into a recession. I mean what the Americans say, ‘Remember 1937’.”
And Madeleine Bunting in today’s Guardian writes that:
A group of economic historians argue that the public debt is not historically high, or even particularly high compared with other developed nations. They even got support from a very unlikely quarter when two Goldman Sachs economists argued in a report that the public debt is not as “cataclysmic as some commentators suggest”.
While Ruth Sunderland in yesterday’s Observer devastatingly shows the failings of the private sector:
A paper from the Centre for Research in Socio-Cultural Change (Cresc) at the University of Manchester* has found that despite a decade of apparent economic boom, private-sector jobs were not generated in sufficient numbers to fill the gap left by traditional manufacturing.
This leaves only the Institute of Directors wholeheartedly supporting the Conservative’s desire to start the cuts in 2010-11. The IoD is, of course, an elite organisation for “business leaders” and hardly a voice for all of British business. But their “supply side” agenda could not be clearer. As well as cuts in 2010-11, they also want:
• a new corporation tax rate of 15 per cent
• a new fiscal target to reduce spending to 35 per cent of GDP by 2020-21
• abolishing Sure Start and Education Maintenance Allowances as part of £50bn of savings
These policies would leave Britain with corporate tax rates lower than any country in the OECD aside from Switzerland, and the basket cases of Iceland and Ireland. The fiscal target would see spending fall below the 39 per cent reached by the Thatcher government in the late-1980s. Perhaps the Conservatives should be tell us if this is their true agenda.
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