I wouldn't argue against George Osborne's proposition that the public sector deficit is unsustainable. And there is certainly a case for reviewing public sector pensions - John Hutton is a good man for that job - and a pay freeze for public sector workers. Benefits need reform, in the direction that Labour had been moving, shifting the able-bodied from welfare to work (provided there are jobs and business opportunities in the economy). There may even be a need for the Tories to defy their pre-election commitment that there were no plans to do so and increase the general level of VAT (though an extension of the scope of VAT would be hugely regressive and politically very stupid).
However, what is most worrying about the narrative surrounding Tuesday's 'emergency' budget is the complete absence of any growth or jobs strategy, and the total lack of understanding of the interrelationship between the private and public sectors. The freezing of school building projects is crucifying the construction industry. The Nimbyist changes in housing rules will hardly help. The opposition to rail electrification or airport development suggests little understanding about the relationship between transport infrastructure and economic growth. The bizarre package of job cuts this week - including in Sheffield and in youth job programmes - shows a strange set of priorities.
So I share the concerns of those economists who argue that deep cuts without any jobs or growth strategy will depress the economy, depress growth, depress tax revenues and push up unemployment. The relish with which the Tory press has been treating the forthcoming budget has not been corrected by Osborne (despite his protestations of a belief in 'fairness' this morning) and the Liberal Democrats have utterly failed to moderate the Thatcherite enthusiasm that surrounds the whole exercise - Vince Cable has disappeared without trace.
Unless the coalition strikes a proper balance between necessary savings, tax increases and future jobs and growth, it will cause huge problems for the whole country in the future. In that, they are right to argue that we are all in this together.
Post a Comment