Look Left – Osborne fails to learn the lessons of history

George Osborne delivered his second budget this week, against a backdrop of high unemployment, rising inflation and a lack of growth.

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 • George Osborne delivered his second budget this week, against a backdrop of high unemployment, rising inflation and a lack of growth.

There was little to cheer for students, the poor, those on low-to-middle incomes, people in a job, people without a job… basically everyone, save for big businesses who will benefit from the chancellor’s slashing of corporation tax – depriving the Treasury of £11.2bn over the next four years, money which could be spent on, well, you get the picture… “all in it together”? Hardly.

Left Foot Forward’s team of experts, having previewed the budget, looked in detail at various impacts of it: the distributional analysis (see below for more); the impact of planning changes; the impact on the environment; on jobs and employment; and on universities; as well as taking apart the Tory-led spin on Osborne’s “tax cut“, as well as looking at the leading reaction to the budget on the blogs, in the papers, and across the nations.”

The best comment, as always it seems on these occasions, came from the Indy’s Johann Hari, who observed that Mr Osborne had utterly failed to learn the lessons of the Irish crash of the late 2000s or the depression of the thrities.

He wrote:

“There was a moment in the speech when it seemed for a second George had glimpsed where he has been going so badly wrong; and why every time he announces his policies Britain’s growth rate collapses further. He held up Ireland as a warning, an example of a nation descended into disaster.

“Could it be? Had he learned? Until now Osborne had held up Ireland as the “shining example” that he wanted Britain to emulate. Before the Great Crash of 2008 he said we should copy its model of tossing regulation for the rich onto a bonfire and reducing taxes on corporations so dramatically that the country was classed by some as a tax haven. “Look and learn from across the Irish Sea,” he boomed.

“Osborne can note Ireland’s collapse with sadness but he is still religiously following their example, as if it all worked out beautifully over there. the Budget was an enthusiastic mash-up of pre-Crash and post-Crash Irish policies. From before the Crash he took the idea of dramatically slashing restrictions on corporations and the super-rich in the belief that this unleashes the magical power of the market rather than implosion.

“From after the Crash he took the idea of making a panic-payoff of our debt his over-riding purpose. Never mind that our national debt has been higher as a proportion of GDP for 200 of the past 250 years. We don’t need to guess where this leads. We can simply, as Osborne recommended once, ‘look and learn from across the Irish Sea’…

“This was a Budget that abandoned everything we have learned about economics since the Great Depression of the 1930s. We discovered then that in a recession, consumers – quite rightly – cut their spending and save more. But if the Government does the same thing at the same time then nobody is spending and the recession gets worse. George is cheerfully doing just that while humming a rare old Irish ditty.

“What’s that terrible sound? It’s John Maynard Keynes spinning and howling in his grave.”

• Once again, the NHS was a major story this week, with this morning’s papers reporting the Institute for Fiscal Studies’s concerns the Tories may struggle to meet their pledge to increase NHS spending.

The IFS said:

“In terms of the government’s pledge to grow NHS spending in real terms year-on-year, this will now be only barely true between 2010-11 and 2011-12. If 2010-11 spending had not turned out less than planned, there would have been a small real cut in 2011-12. The government is sailing perilously close to the wind with respect to honouring this particular pledge.”

While shadow health secretary John Healey explained:

“The small print of the Budget confirms that David Cameron is letting the NHS down, and has broken his promise to protect the NHS.

“With the Office for Budget Responsibility’s new inflation forecasts, NHS England is in fact facing a real terms cut of £1bn. Real terms spending will fall next year and again the year after, and this will in fact be the first time since records began that the NHS in England has seen a real terms fall in spending for two years running.

“David Cameron is more concerned with his ideologically driven NHS reorganisation than keeping his promises on the health service – and if you add in his trick of double-counting social care budgets, David Cameron is cutting the NHS by a massive £1.8bn”

For a more graphic illustration of the government’s assault on the NHS, see this brilliant video, in which health secretary Andrew Lansley is politely told what he can do with his reforms.

• Internationally, Libya still dominates the airwaves. On Left Foot Forward this week, we have been looking at what the future holds for the country.

In our most recent feature, Frank Spring looked at the possibility of a divided Libya:

“If Qaddafi and the rebels both conclude that they cannot strike a decisive blow against the other, it is possible that Libya could divide into two states (as predicted in this publication), with a border possibly monitored by a UN peacekeeping force. The international force has some leverage to push the Qaddafi regime to this end if they choose to, as they can offer to lift the freeze on Libyan assets and resume the oil and gas trade that has been so central to the Libyan economy.

“This outcome would at least mean a large number of Libyans liberated from Qaddafi’s regime and, one can hope, a further flowering of democracy in the near east. Unfortunately, it would also mean large portions of Libya’s population would remain under the control of Qaddafi (succeeded, presumably, by one of his sons), in a regime that would likely be even more brutal for its recent trauma, and which might be keen to take revenge on the international community through a renewal of its support for terrorist organisations.

“The prospect of a divided Libya, between the Qaddafi-ruled bulk of the country and the rebel state in the northeast is a grim prospect indeed, particularly given the amount of trouble the Qaddafi-led Libya could create and the degree of scrutiny and attention it would require. Divided-state solutions can be sustainable – the Koreas and Ireland come to mind – but they are often characterised by periodic outbreaks of violence.

“If Libya splits in two the international community will likely be engaged in keeping peace, one way or another, for decades to come.”

Progressive of the week:

Shadow chancellor Ed Balls, who led the attack on the coalition’s budget this week, accusing George Osborne of “wrecking the British economy” and failing to help “hard-pressed families”, branding him a “brash and cocky gambler”.

He said:

“[Mr Osborne] didn’t tell you that the increase in VAT will cost a family with children an extra £450 this year… He didn’t tell you that while he’s cutting taxes for the banks this year, his cuts mean fewer police on the beat, longer NHS waiting times, and – in some places – the closure of Sure Start children’s centres…

“In Britain, we do have to make tough choices to get the deficit down. That does mean some fair tax rises and spending cuts – but George Osborne is going too far and too fast, and we’re paying the price in lost jobs and slower growth. That’s why we said he should repeat the bank bonus tax this year, and use the money raised to build more affordable homes, get more jobs for young people and help strengthen our economy for the future.

“That’s the right and fair thing to do, but George Osborne isn’t listening. He just doesn’t seem to get it. He doesn’t get how hard people are being hit by higher VAT and cuts in local services.”

Balls also stole the show in the budget debate in Parliament yesterday, one of the stand out moments being his polite rebuke to Tory backbencher and former Osborne adviser Matthew Hancok; see the video here.

Regressive of the week:

Far-right Daily Mail ‘journalist’ Richard Littlejohn, who this week surpassed even his own low standards with a diatribe about the Japanese earthquake and tsunami, writing – and I kid you not – “It doesn’t need our money… Anyone who has visited or worked in Japan will tell you it is like landing on another planet… They are militantly racist and in the past have been capable of great cruelty… Do you think the Japanese held a silent tribute for the victims of the London Transport bombings in 2005? Me neither…”

There’s much, much more vulgarity in his ‘article’; read it if you can stomach the bile. Far better to read Dominic Browne’s brilliant guide to “How to write a Richard Littlejohn column”, highlighting many of his earlier abhorrences and sending him up good and proper.

Littlejohn also whines about what he calls “modern Britain’s ghastly cult of sentimentality and vicarious grief”; rest assured, Dick, there’ll be no outbreaks of public mourning when you …

Evidence of the week:

The Horton-Reed post-budget distributional analysis of the coalition’s major direct and indirect tax changes, which showed that the combined impact of these tax measures was regressive – hitting people with the poorest net incomes hardest (adjusted for household size).

They explain:

“The VAT increase is a regressive tax change (at least, when the impact on living standards of a VAT increase is measured as a percentage of net income) because poorer households consume more (relative to their income) than do richer households. The size of the VAT increase (£11.5 billion by 2012-13) also outweighs the income tax cut (£4.7bn by 2012-13) while overall the NICs changes also increase revenue, and so the overall impact of the tax changes is to reduce household incomes.

“Overall the distributional impact of the tax changes is an ‘inverted U shape’ – with the poorest households and the richest households losing more than households in the middle…

“Overall, the tax changes introduced this year and next will increase the squeeze on Britain’s poorest families. Finally, it’s worth remembering that the swingeing cuts announced in the spending review will have the biggest negative impact on the living standards of the poorest families – as shown in previous analysis we conducted back in the Autumn.

“The Budget made no attempt to lessen these service cuts.”

Ed Jacobs’s Week outside Westminster:

Scotland: The start of campaigning ahead of May’s elections got underway as Holyrood was formally dissolved. As 20 MSPs prepared to stand down, one, the former first minister Jack McConnell, told the chamber:

“I particularly want to thank the people of Scotland for the opportunity that they gave me to lead their government and this country, for the honour of being first minister and for the privilege of being MSP for Motherwell and Wishaw.

“I hope that at the end of these 12 years more Scots walk a little taller, cringe a little less and occasionally have ideas above their station.”

Meanwhile, Lord Advocate Elish Angiolini warned of an “apocalypse” of alcohol-fuelled crime unless Scotland addresses its hard drinking culture. Speaking to the BBC she explained:

“From my own very narrow perspective, in terms of crime, there is a real apocalypse if we don’t actually get to grips with the acceleration of the consumption of alcohol.

“Alcohol is present in almost all violent crime. What I see now, in many cases, is both the accused and indeed victims purchasing very substantial quantities of very cheap alcohol. It is consumed on a night out in quantities which, quite frankly, are fatal. I suspect that if we could knock the alcohol problem on the head we would have a very significant reduction of crime in this country.”

Northern Ireland: As Stormont was dissolved after its first full term of office, Ulster Unionist Party leader Tom Elliott called for a unionist pact following May’s election to prevent Martin McGuinness becoming first minister should Sinn Fein be the largest party.

However, calling for an end to the fixation over political titles, Mr McGuinness argued:

“This is not about jobs for the boys and girls, this is about how we can improve the lives of people out there on our streets. Let there be no fixation with titles, let the fixation be that we have a battle to fight and that battle is around the economy.”

For the Democratic Unionist Party, meanwhile, first minister Peter Robinson responded:

“I have no doubt there are people who don’t want to see a Sinn Fein first minister and will lend us their votes during the course of this election to avoid that happening but I would rather be going forward to the people of Northern Ireland with a positive agenda.

“I go into an election to win. I want the DUP to be coming out on top. I’m not going to look at what happens if we fail. I think it’s fairly clear they are concerned that the unionist population is rallying around the DUP and they’re trying to undermine that.”

And Iain Paisley Senior, who is stepping down from the Northern Ireland Assembly, told BBC News:

“If you had told me 40 years ago that I would have attained what I have attained, I would have laughed at you. I’ve had a good innings and I’ve made good friends, and I’ve reconciled a lot of enemies too. I’m absolutely happy.”

Wales: Welsh Labour produced figures suggesting the Welsh Economy has lost more than £50 billion as a result of the UK government’s decisions not to proceed with the Severn Barrage, the defence training academy at St Athan and the Energy Island project on Anglesey. Shadow Welsh secretary Peter Hain said:

“The Tory-led government scrapped these three strategically important projects on a whim and can’t explain why. They were all backed by the private sector – scrapping them will not help reduce the deficit or save the taxpayer a penny. The government’s reckless decisions are stifling the recovery in Wales and are showing they have no plan for growth.”

Meanwhile, following the chancellor’s budget, Welsh secretary Cheryl Gillan claimed it had been good for Wales. Plaid Cymru, however, were not so convinced; Treasury spokesman, Jonathan Edwards argued:

“The UK fovernment should have focussed sensibly on growth first, rather than making severe cuts. The truth is that the UK government has no plan B, and worryingly there is a very real threat of a decade of economic stagnation.”

 


 

Tomorrow, the TUC’s March for the Alternative takes place, with hundreds of thousands of people set to take to the streets of London campaigning for jobs, growth and justice. For full details of the march, read Nigel Stanley’s guide.

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15 Responses to “Look Left – Osborne fails to learn the lessons of history”

  1. Jeevan Jones

    RT @leftfootfwd: Look Left – Osborne fails to learn the lessons of history reports @ShamikDas http://bit.ly/hsOulb

  2. Graham Galloway

    RT @leftfootfwd: Look Left – Osborne fails to learn the lessons of history reports @ShamikDas http://bit.ly/hsOulb

  3. william

    Osborne now faces credit rating crisis.Osborne fails to learn the lessons of history.Osborne’s party is now in government.Less than 30 percent of voters voted Labour.A blank sheet of paper from EM.Can we have some realism about the plight of of a financially and intellectually bankrupt once great movement?

  4. Stephen W

    Leftfootforward continues its gross partisan hackery. Instead of being an intelligent and independent voice for the left it seems determined to be an absolutely partisan anti-coalition hack-job.

    Johann Hari is an embarrassment. Ireland’s collapse was based on an awful housing bubble and banking crisis, just as Labour fostered and developed in this country.

    The Coalition’s spending cuts in this country are less than half the scale of those in Ireland.

    And lefties love so much going on about the lessons of the 1930’s, while happily pretending the 1970’s never happened. There was a reason we abandoned naive Keynesianism as a policy solution.

    Just blithely pretending that none of these issues even exists prove that neither you nor Johan Hari are interested in serious intellectual discussion, and are only engaging in superficial, emotive, partisan hackery.

  5. Andy

    Yep, Stephen W, I guess Nobel prize winner Paul Krugman, who takes exactly the same position as Hari on ireland & UK, is also “an embarasment.”

  6. Robert

    Blair dropped it did he not, and we are I think talking about a labour leader, mind you he could have been a plant by the Tories, I think he was.

  7. Kelvin John Edge

    RT @leftfootfwd: Look Left – Osborne fails to learn the lessons of history reports @ShamikDas http://bit.ly/hsOulb

  8. Chris

    Unfortunately, Gordon Brown failed to learn a lesson from history given by his predecessor James Callaghan in 1976.

    “We used to think that you could spend your way out of a recession and increase employment by cutting taxes and boosting government spending. I tell you in all candour that that option no longer exists, and in so far as it ever did exist, it only worked on each occasion since the war by injecting a bigger dose of inflation into the economy, followed by a higher level of unemployment as the next step.”

    If he’d had heeded those words – the final admission that Keynesianism doesn’t work – we wouldn’t be in so much debt now.

  9. Stephen W

    Wow Andy, that’s quite possibly the most direct and blatant appeal to authority that I’ve ever seen. No, Andy, having a Nobel prize does not make him infallible.

    And please note I did not say ALL criticism of the government was ridiculous, rather that any criticism that pretended major, looming issues like the ones I mentioned don’t exist is ridiculous.

    I mentioned clear and substantive issues. Making vague appeals to to authority figures (do you really want to bet there aren’t any Nobel economists who support the government’s position?) doesn’t make those issues just go away.

  10. Bertromavich Reibold

    Look Left – Osborne fails to learn the lessons of history: Wales: Welsh Labour produced figures suggesting the W… http://bit.ly/dMYAEU

  11. Mr. Sensible

    Stephen W, so was Vince Cable wrong on Keynesian economics?

    And the fact is Ireland started what we’re now doing; early cuts, very low Corporation Tax ETC and yet their economy is now well and truely bust.

    Now the ratings agencies are coming after Osborne.

    I found Richard Littlejohn’s comments on Japan nothing short of disgusting. But why should we expect anything less from that paper?

  12. Stephen W

    To be honest I think Vince Cable is wrong about many things.

    The point is that our cuts are both much later and half as deep as those in Ireland. This is a substantive difference. Pretending this difference does not exist does not make it go away. It just marks you out as ignorant.

  13. Budget 2011: Osborne's contempt for the nation's youth | Left Foot Forward

    […] he offered tax breaks for corporations, to help their profit margins; and even what scraps he did offer had nothing to […]

  14. Mr. Sensible

    Stephen W that might well be true, but the ratings agencies have effectively said that if growth continues to undershoot Osborne’s expectations we could lose our AAA rating.

  15. Richard

    “I mentioned clear and substantive issues.”

    Bollox Stephen W, you’re as superficial as trolls come.

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