George Osborne will stand up to deliver his eighth Budget as Chancellor this week. Just three months ago the headlines were about the end of austerity, as Osborne boasted of steady, stable growth and a rosy outlook for the foreseeable future.
I warned him in vain at the time that there were potential headwinds in the global economy which the Chancellor would do well to heed. He has claimed in the past that he was fixing the roof when the sun was shining. The flooded communities of Northern England are tribute to his utter failure to do so: cutting back on flood defences to save money in the short term.
Despite, or because of, this approach the deficit remains some £70bn above his original target, while the Government’s debt has skyrocketed from 53.5 per cent to more than 80 per cent of GDP under his watch.
Business investment has slumped again recently. Zero-hours contracts are at a record high. Wages remain below their 2008 levels. Manufacturing has still not recovered from the crash. Our current account deficit with the rest of the world has reached record highs.
Productivity growth, the essential ingredient in delivering rising living standards, has stagnated. The gap between the UK’s productivity and those of the Germany, the US and France is the widest it has been for a generation.
Osborne’s recovery, now faltering, was always built on sand. He has achieved almost nothing of the plans he announced back in 2010: of a rebalanced economy, growing healthily across the country, built on high-investment, high-productivity industry.
With storm clouds gathering, the legacy of Osborne’s multiple failures looms large. We live in an economy now more exposed and less able to cope with troubles in the rest of the world.
With unsecured household debt rising again, thousands of families could find themselves in financial difficulty.
All this explains why Osborne made a sudden switch from promising the world in November’s Autumn Statement, to warning of a “toxic cocktail of threats” by New Year.
The brutal truth is that he has no one now to blame but himself. Osborne has been in the job six years. It’s time to take a bit of responsibility. If he has difficulties today, they are troubles of his own making.
He has attempted to plug the holes in his own plans using the most vulnerable in our society. The cuts to the Personal Independence Payment (PIP) will hit more than 600,000 disabled people.
Even after years of cutting the public services of those least able or likely to fight back, this constitutes a new low. Labour will insist that he steps back from the brink.
The underlying problem is Osborne’s commitment to severe austerity. There is not a single credible economist to be found who will support his ludicrous target to generate a £10bn surplus by 2020.
Worst yet, by trying to target government investment for cuts alongside day-to-day spending, he’s undermining the performance and potential of our economy.
Government investment is scheduled to fall, as a share of GDP, in this Parliament. At a time when a growing coalition of voices, from the experts at the IMF and the OECD to business leaders and trade unions, are calling for greater government investment to head off the economic headwinds.
Osborne’s plans are entirely irresponsible. These is no economic justification for the Chancellor’s cuts. Instead, he has made a political choice to impose them. That has meant putting his own ambitions on the Tory leadership ahead of what is good for the country as a whole.
Labour’s new Fiscal Credibility Rule, drawn up with support from world-leading economists, means setting realistic, achievable targets for shrinking the government deficit on day-to-day spending.
At the same time, Labour’s new rule will give government the capacity to invest, and the flexibility to respond to economic conditions.
We need a new approach. It’s not too late to change course.Reuse content