The consequences of Mr Osborne: More deficit

Ann Pettifor takes Mr Osborne to task for the latest figures on borrowing that show his austerity plan is working the way he planned.

Ann Pettifor is the co-founder of the think tank PRIME

One has to feel sorry for the chancellor. Many mainstream economists – in both the City and academia –  backed him to the hilt: egging on his austerity policies, and boldly forecasting the rate at which the deficit would fall. The governor of the Bank of England caused controversy by endorsing the strategy. Markets greeted the austerity programme with euphoria. And No 10 was castigated for preparing a plan B.

Professor Chick and I were among the few to sound a warning, in our June, 2010 publication: “The economic consequences of Mr. Osborne” we insisted that once the private banking crisis had been transmitted to the real economy, fiscal consolidation would not ‘slash’ the government’s debt, but cause it to rise. Our argument was not based on ideological conviction, but on a century’s worth of macroeconomic evidence.

Today, those who shared our fears have been vindicated – even before the coalition’s deep, job-destroying spending cuts have been fully implemented. The announcement by the Office for National Statistics (ONS) that the deficit had widened dramatically in April by £10 billion -the largest April budget shortfall since monthly records began in 1993 – has been seized upon in shock by the chancellor’s friends in the media and the City. Without any apparent qualms, they have fallen over themselves to deplore the rise, and predict economic gloom.

Mr Osborne ought to choose his friends (and economic advisers) more carefully.

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37 Responses to “The consequences of Mr Osborne: More deficit”

  1. Broken OfBritain

    RT @leftfootfwd: The consequences of Mr Osborne: More deficit: writes @primeeconomics' @AnnPettifor

  2. dm

    The consequences of Mr Osborne: More deficit: writes @primeeconomics' @AnnPettifor

  3. Robin Wilson

    The consequences of Mr Osborne: More deficit: writes @primeeconomics' @AnnPettifor

  4. Liz K

    The consequences of Mr Osborne: More deficit: writes @primeeconomics' @AnnPettifor

  5. Michael

    The consequences of Mr Osborne: More deficit –

  6. bryan

    RT @leftfootfwd: The consequences of Mr Osborne: More deficit

  7. paulstpancras

    The consequences of Mr Osborne: More deficit –

  8. salardeen

    The consequences of Mr Osborne: More deficit –

  9. Ann Pettifor

    Mr Osborne's fair weather friends in the economics profession. Left Foot Forward.

  10. Prime Economics

    Mr Osborne's fair weather friends in the economics profession. Left Foot Forward.

  11. Clive Morgan

    The consequences of Mr Osborne: More deficit: writes @primeeconomics' @AnnPettifor

  12. Anon E Mouse

    Which is what I’ve been saying for over 12 months on this very fine blog.

    Thatcher claimed to be cutting and wasn’t. At least this now puts a lie to the doom merchants here, like the union dinosaurs, with their “Too much too fast” nonsense.

    In fact according to the Times on Sunday it said we were only cutting 2.2% which is less than many European countries. Just goes to show how inept the opposition are to keep the silly deficit denial going…

  13. dolly daydream

    The consequences of Mr Osborne: More deficit –

  14. Matt Tancock

    RT @leftfootfwd: The consequences of Mr Osborne: More deficit

  15. vicki whelan

    Mr Osborne's fair weather friends in the economics profession. Left Foot Forward.

  16. Jeni Acelas

    RT @leftfootfwd: The consequences of Mr Osborne: More deficit

  17. matthew fox

    Glad to see Anon E Mouse is still missing the point. Tax Revenues where down and spending is up.

    This is Osborne’s economy and it seems Conservative are running away from him.

  18. Tory Economics of the Madhouse

    Thatcher’s views on Osborne’s obsolete uber IMF 1970s third world economic policy would be thus: “Too much, too fast, too deep. No, no, no.”

    And she would be right. Funny old world where Ed Balls and Margaret Thatcher are singing from the same sing sheet.

  19. Kevin Richards

    Looks like its gone a bit pearshaped Mr Osborne-RT @leftfootfwd: The consequences of Mr Osborne: More deficit

  20. Kevin Richards

    Looks like its gone a bit pearshaped Mr Osborne-RT @leftfootfwd: The consequences of Mr Osborne: More deficit

  21. Mr. Sensible

    Mr Mouse, this extra spending isn’t going on services; they’re still being cut, but it is going on less useful stuff; less tax revenue and more unemployment benefit because more people are unemployed. Last week the claimant count went up again.

    This shows, yet again that the economic strategy is hurting but not working.

  22. georgie elliot

    RT @leftfootfwd: The consequences of Mr Osborne: More deficit: writes @primeeconomics' @AnnPettifor

  23. FatBloke on Tour

    Mr Mouse

    Any news on the large number of your extended family who work in the public sector – has anyone lost their job, had their hours cut, terms and conditions chopped?

    Good to see that your public persona is getting closer to reality – right wing mentalist dog boiler and not the TB groupie you pushed for so long.

    As for the economy, this is what you get when send a complete novice to do a real job – he is a wee boy in a man’s world and this is only the start. Interesting to find out if Dave the Rave’s political skills extend to bumping his chancellor and his economic policy while keeping his credibility and electoral vehicle above the fray?

    You have to ask, just what will it take to get rid of Sniffy?
    Double Dip recession / 3 million unemployment / rising deficit?

    Who would step up to offer the alternative?
    What would that alternative be?

  24. Ash

    “You have to ask, just what will it take to get rid of Sniffy?
    Double Dip recession / 3 million unemployment / rising deficit?”

    Alas, I fear nothing would be enough. He will keep his foot on the brake for the next four years, insisting the whole time that it is actually the accelerator and taking any bad news as evidence that he needs to push a bit harder.

  25. Anon E Mouse

    matthew fox – (As usual) you have completely missed my point. The tax take is down because, contrary to Gordon Browns assertions, the economic cycle has not been eradicated and now we are in a recession – the “bust” part of his comments.

    And the government are NOT cutting anything – it’s all talk:

    Look at your history – Thatcher said she was cutting and wasn’t. May I say that if you have nothing to contribute to this fine blog why not try that?

    Contributing nothing that is…

  26. Anon E Mouse

    FatBloke on Tour – Long time no blog.

    Missus in social services – no front line cuts in their office.

    Elder daughter still at the NHS dentist – no cuts.

    Younger daughter at local council – no cuts (but not recruiting for 18 months).

    Sister at the school board – no cuts. Parents retired as you know.

    Anyway what happened to the double dip recession you predicted?

  27. Mason Dixon, Autistic

    Mouse, despite having it carefully explained to you(and elsewhere on the web it has been carefully explained what is meant by ‘cuts’ and ‘front-loaded’), you still don’t get it. The Spectator does which is why they don’t report it, instead pushing that gibberish.

    If there were no cuts, people wouldn’t be losing their jobs; they’d have their pay rises frozen or slowed instead. But they are losing jobs: that is a cut. No amount of fiddling a five-year balance sheet changes that *front-loaded cut*. Services are being cut, spending is rising; there’s no contradiction. It is exactly as predicted that the cuts are being made to areas which are a false economy to cut; the Chancellor has tried to save money by cutting things that add value and save money.

    Your claim that tax receipts fell because of ‘recession’ collapses on itself unless what you are saying is that this is a double-dip recession; if that’s the case guess who and what caused that? Most agreed that the recession ended last year as the negative growth ended.

  28. Anon E Mouse

    Mason Dixon, Autistic – The government is NOT spending LESS than last year.

    It IS spending MORE year on year.

    Which part of that are you struggling to understand as you swallow the spin from this government about austerity?

    If Labour activists believe everything this government tells them then they will walk it at the next general election…

  29. Charles Wheeler

    But Osborne et al MUST know that ‘expansionary austerity’ is a chimera – which suggests that cutting back the public sector and the welfare state is higher up the agenda than cutting the deficit – indeed, were the govt. to reduce the deficit through growth it would undermine their project – which is a ‘small’, neoliberal state. The idea that they simply don’t understand that cutting jobs and wages leads to lower GDP is untenable.

    Unfortunately, the idea that corporate and financial interests are poorly served long-term by strangling the golden goose of mass consumption in favour of an economy geared to satisfying a small elite is low on the radar – as Keynes said, in the long-term we are all dead. The top 1% are making as much hay as they can before the next crash. Osborne is simply facilitating that process.

  30. Mason Dixon, Autistic

    “Which part of that are you struggling to understand as you swallow the spin from this government about austerity?”

    I dnn’t know Mouse, maybe the part where I said: “Services are being cut, spending is rising; there’s no contradiction”

    You seem to have missed it. Please explain why Spectator readers don’t understand that spending can rise while services are cut; it’s only a case of making the obvious leap that *spending on services is being and has been cut*.

  31. Anon E Mouse

    Mason Dixon, Autistic – I’m not sure if you are winding me up here or not.

    More money is being spent year on year on public services. There is more money being spent.

    This government is not reducing any deficit – it’s increasing it and Labour activists seem to be unable to see the truth.

    MORE MONEY IS NOT A CUT. This government is making a fool of you Mason Dixon, Autistic and you can’t see it…

    Is it

  32. FatBloke on Tour

    Mr Mouse

    I have been spending time at the Speccy preaching to the dog boilers and their thick editor – privately educated with an MOD subsidy – why Sniffy is wrong with all his talk about a expansionary fiscal contraction.

    Past six months have made it very easy for me, the AD / GB recovery has been blown off track by the dog boilers and all this before the real cuts kick in. Regarding the double dip, well that was once possible now heading towards probable and Q3+Q4 are now primetime in that respect. Not guaranteed but looking ever more likely as the lack of talent in government becomes ever more apparent.

    Dave the Rave is out of his depth.
    Sniffy has no clue about economics – the FT was right all those years ago.

    Good to see that you are now playing it straight, right wing economic mentalist and not the TB groupie pining for New Labour that you once claimed you were.

    Cuts to public services are on their way.
    Public services are different from public spending.
    Keeping people on the dole costs money.

    The deficit projections are getting larger with every passing quarter of stagnation, it will be a hard lesson to learn but you cannot thrift your way to economic salvation if all your trading partners are struggling and the plebs are all scared fartless about spending money because of all the shroud waving by Sniffy and the Dog Boilers.

    AD / GB had a plan and it was working.
    The muppets in charge do not have a clue.
    And all this with a media establishment blinded by class loyalties.
    The UK unfortunately does live in interesting times.

    Be afraid, very afraid.
    Or read the Speccy and then stick your head in the sand.

  33. Anon E Mouse

    Fat Bloke On Tour – Me not playing it straight?

    I have voted Labour my whole life until the best electoral asset the Labour Party has ever had was dumped on by the party and Britain’s most unpopular PM in history (unelected by the Labour Party and voters in fairness to both) was forced on the public.

    The election of Ed Miliband was a major mistake for Labour, compounded by the fact neither the PLP or party members voted for him – just the union dinosaurs.

    Alastair Darling I agree may have been realistic(ish) which is why he was dumped on by Gordon Brown but the fact there was only a difference of £2billion cuts over the parliament, coupled with the substantial point of this article regarding the government not actually cutting you seem to be ignoring.

    Anyway what about Ed Balls and his deficit denial….

  34. FatBloke on Tour

    Mr Mouse

    Blow it out yer erse.
    Loyal party voter and now all this tripe about debt and deficits.
    It doesn’t add up to me.

    £2bill difference over the parliament – no chance.

    Sniffy and the dog boilers are cutting spending on services, that is soldiers, teachers and policemen, the numbers are all out there so get used to it.

    AD / GB got the economy back on track, hard job which took ages but we managed to get through the Global Credit Crunch without the social carnage so beloved of Maggie and Sha**er.

    We have lost that and the economy has lost its way, growth is stagnating and inflation is up – what a record after 12 months calling the shots. Dave and Sniffy are out of their depth, EB called it right in 2009 with the boomerang forecasts coming out of the Treasury and he is right now regarding the slash and burn tactics of the upper middle class right wing dog boiling orthodox economic mentalists now in charge.

    The biggest deficit denier of all is Sniffy, no growth means no deficit reduction a basic point that he does not seem to understand.

  35. Anon E Mouse

    Fat Bloke On Tour – What about Ed Balls?


    PS. When is your tour coming to an end. You’re not Bob Dylan you know…

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