Yesterday, I slept with Kenneth Clarke
There I was, tremulous fingers poised over the keyboard, ready to analyse the measures about to be announced, hints leaked for weeks to the press, grandiose titles still hanging in the air: “Britain is open for business”, “a budget for growth” etc. etc. What I got instead was a silly little speech. No real measures; no real ideas. I even nodded off a bit; my boredom and disappointment apparently shared by Kenneth Clarke.
Like a student in his finals, confronted with the one topic he was sure was not going to come up in the exam, Osborne bumbled along with aggressive but ultimately empty waffle, hoping the professor over at the Office for Budget Responsibility (OBR) wouldn’t notice.
Here is a summary of his exam answer:
Blah blah blah inherited yadda yadda tough measures blah inherited blah blah black hole yadda yadda difficult choices blah inherited inherited yadda yadda yadda left to us by the previous government. Blah. Inherited.
It is not often that, with my poxy post-graduate qualification in economics and eight years experience of market competition regulation, I watch the budget announcement and feel better qualified than the Chancellor of the Exchequer to delve into the figures. But it was true yesterday.
My frustration was compounded after the speech by LibDem MPs, spreading like a fungal infection across the lawn of the House in front of TV cameras, all of them claiming that this was a terrific budget with which they were fully in agreement. Even more annoying was the reaction from Labour politicians who were obviously issued with a three sentence party line and asked to stick to it closely. The intention, I’m sure, was to drive the message across. The result was that, for those of us following all the coverage, it became monotonous, uninspired, white noise. If you saw one interview involving a Tory, a LibDem and a Labour politician yesterday, then you saw them all.
The media decided to get all yabba-dabba-doo-ecstatic about the 1p cut in petrol. Despite the obvious hole in the argument being that it will not even come close to counteracting soaring prices and a huge rise in VAT. The London Evening Standard went as far as reporting it as a 6p cut (a 1p cut + non-implementation of a 1p rise + a delay of the accelerator worth 4p = petrol 6p cheaper). Who said economics was a dry, uncreative science?
Lord Jones jubilantly announced on the BBC: “And also of course, a public sector worker losing their job this summer, if there’s a small business down the road that now, because of today, thinks “I’ll employ ‘im” then this is good for the whole economy.” Excellent news. Only the OBR is fairly certain about nearly half a million public sector jobs going and not at all certain that what was announced will stimulate any additional job creation or growth. In fact they refused to revise their longer-term estimate up and actually adjusted their short-term estimate down.
This is what they said: “Higher-than-expected inflation is likely to squeeze household disposable income in the coming months and thereby weaken consumer spending growth. Recent data also show that the economy had less momentum than we expected entering 2011, even after adjusting for the temporary impact of December’s heavy snowfall. Largely reflecting these two factors, we have revised down our central forecast for economic growth in 2011 from 2.1 per cent to 1.7 per cent.“
The Institute for Fiscal Studies explains: “the fiscal forecasts have changed, and for the worse. Given the reductions in expected economic growth this year and next, that is not surprising. The Office for Budget Responsibility (OBR) was expecting total receipts to exceed non-investment spending by 0.3% of national income in 2015-16. It now expects a deficit of 0.2% of national income.“
Even more worrying, this morning oil companies are saying that yesterday’s measures will result in many thousands more unemployed. One of the biggest credit rating agencies warns that the UK’s AAA credit rating is in peril, because of sluggish growth forecasts.
On yesterday’s Newsnight, Norman Lamont described the budget t as “a lot of rather smallish initiatives” and Irwin Stelzer from the Hudson Institute as “Industrial-Policy-Light“. Ann Pettifor, of Economics’ firm PRIME, hit the nail on the head when she said that Osborne’s plan to rebalance the economy by having both a thriving financial and a productive manufacturing sector was self-defeating: “We can’t have the both, that’s the trouble, and he doesn’t see that” she said. “You can’t have a financial sector which is as big and dominant and powerful, that plays the master of the economy, while we are trying to build up a manufacturing sector that is not being helped by the banking sector“, she continued. “The problem companies are facing is not whether they are in or out of an enterprise zone, it is that the banks are not lending them money and when they do lend it is at very high rates of interest which are unsustainable and unrepayable“.
A small business owner being interviewed outside the House sensibly explained that, what she needed in order to not go belly-up was not tax cuts and schemes, but for people to stop worrying that they are about to lose their jobs so that they start spending their disposable income.
But not to worry, Gideon Oliver Osborne (that’s right, “George” was invented by him when he was 13 years old so that he wouldn’t sound so painfully posh) is re-introducing Enterprise Zones; his little love-letter to Margaret Thatcher. Never mind that, as recent exhaustive studies have proved, EZs are incredibly expensive to introduce, take many years to work and even then their effects are very questionable. Never mind Irwin Seltzer’s point: “Enterprise zones are ridiculous. You’re going to have Boris Johnson picking an area in London that he thinks has huge potential for growth. His qualifications for that are minimal.” Never mind Heseltine’s recent evidence to a Committee looking at possible EZs in Northern Ireland, where he admitted that they were essentially a political instrument for taking control of land and building projects away from Labour-run councils. Never mind that the Conservative Secretary of State for Scotland Allan Stewart said in 1993 that EZs are “to be used only in exceptional circumstances, where the costs can be justified and where there are no alternative, more cost-effective measures available.“
Look what Simon Hughes, a current member of the cabinet, thought of EZs back then: “Leaving things to a rigged market while giving no thought to the strategic objectives means condemning the coal industry to an extremely difficult and lesser future. Eighteen thousand jobs are at risk in the House’s decision tonight. If we condemn the coal industry tonight we will spend, according to the Select Committee, about £2 billion trying to rehabilitate skilled workers who do not want enterprise zones tomorrow, because they want work today.” Hear, hear Mr Hughes. Did you repeat these concerns in recent cabinet meetings? Or do you no longer give a toss?
So the government’s plans are having the exact opposite effect than was intended. When entering no.10 Cameron warned us that we were in for a lot of pain, but that this was necessary in order to stimulate growth, fight unemployment, reduce inflation, preserve our AAA credit rating and reduce the deficit. A year on, every single of those indicators, that he himself identified as the key to judging his success, is looking as gloomy as a 30s Paramount Pictures horror. But we are still feeling the pain and it is about to get worse. Their reaction? Erm… None. Even right-wing commentators are condemning their complete lack of ideas.
So, the only and most powerful news for me yesterday, was the image itself: Osborne, great-grandson of a Baronet, flanked by Clegg on his right, great-grandson of a Baron, and shiny, happy Cameron on his left, also great-grandson of a Baronet; all of them Oxford- or Cambridge-educated; all of them worth millions in personal fortune; all of them with sprawling country estates. Three arrogant, inexperienced, immature, spoilt boys, who have never been told “no” in their lives; three lads who have no family members in danger of suffering from their universally condemned handling of the economy; three cock-sure caballeros, too arrogant to listen to everyone – but everyone – who says they have got it wrong and have put our economy in reverse; three aristocrats concerned only with saving face. The Lords giveth and the Lords taketh away.
Osborne even had the nerve to mention Ireland in his speech! Four years ago he was saying that their programme of deregulation and cutting corporate taxation was a shining example to us all. Now he cites Ireland as a cautionary tale, but persists in following the exact programme that made their economy implode.
So, now it comes to marking yesterday’s exam answer by master Osborne. I look at the exploding inflation and unemployment, the gloomy growth forecasts, the artless attempt to manipulate supply-side when the problem is a lack of demand. I look at the perilous state of our credit rating, the increase in borrowing, repayments and deficit. Most importantly, I look at the growing misery of the people he is meant to be helping, and I have to say:
Terribly sorry, Gideon Oliver, but it is a FAIL.