It is as though Liz Truss spent the Mourning Period asking herself how she could make herself appear stupider than Boris Johnson on the world stage.
She has gone to a summit in the United States, pushing her tax-cutting plan to boost the economy, saying “trickle-down” economics will work – at the same time as President Biden posted on Twitter: “I am sick of trickle-down economics. It has never worked.”
Worse still, she already knows her plan won’t work because she has economic forecasts telling her that. So her government is refusing to publish that information.
The BBC report mentioned in the clip can be found here.
Have YOU donated to my crowdfunding appeal, raising funds to fight false libel claims by TV celebrities who should know better? These court cases cost a lot of money so every penny will help ensure that wealth doesn’t beat justice.
No doubt some of you will scream that this post is overdramatizing, but the consequences of further fiscal consolidation (that’s austerity to most of us), as laid out in Professor Simon Wren-Lewis’s latest Mainly Macroarticle, seem undeniable.
He tells us the National Institute has used the model NIGEM to analyse the macroeconomic impact of the different political parties’ fiscal plans post-2015, which is published in the latest Review. (Chris Giles has a FT write-up.) The result: The more fiscal austerity you undertake, and if monetary policy fails to perfectly offset the impact on demand, the lower output will be.
You don’t need a crystal ball to see what this means, if we get another Conservative, or Tory-led, government. Lower output means a lower tax take, therefore less money to spend on the NHS and welfare benefits (areas like Defence and International Development will always have funds – we can’t let ourselves go defenceless and we must continue our programmes of cultural imperialism, after all).
So further Tory austerity instantly implies the imposition of even harsher standards of qualification for state benefits, pushing even more vulnerable, sick and disabled people off the books and into their graves. We’ve all known that voting Tory is an endorsement of state-sponsored suicide but it’s time we all owned up to it.
It means the sale of the National Health Service in England to private companies will be accelerated, with consequent impacts on the amount of grant funding for the health service in the other UK countries; the service will continue to worsen and even more deaths will be the result.
But the Tories will want to pretend to the media that all is well, which means an increased push to get people into part-time, temporary or zero-hours work, and an increased number of benefit claimants being funnelled into work activity programmes that, in fact, reduce the number of available jobs. The resulting low-pay economy is exactly what the Conservatives want; the workers will be kept down and the employers can pocket the profits.
Nobody in the government or even the Bank of England will tell you this because, it seems, they haven’t done any analysis and won’t make any such forecasts.
The Office for Budget Irresponsibility is not allowed to look at alternative fiscal policies in the short term and must therefore put the bravest possible face on what is offered to it – that is why every single forecast to come out of that organisation has been hopelessly optimistic.
We’re back to evidenceless policies again. The Tories are saying “everything will be okay”, because – for them – it will be. They and their rich friends will have loads of cash. Who cares that the entire infrastructure of the United Kingdom – and the British way of life – will be dismantled and disappearing from under them?
Think this is overexaggerating? Let’s go back to Prof Wren-Lewis and examine the Tories’ record. He writes: “If you go back to 2010, the OBR’s main forecast didn’t look too bad: the recovery was continuing, and interest rates were able to rise as a result.
“But good policy does not just look at central projections, but it also looks at risks. Then, the risks were asymmetric: if the recovery became too strong, interest rates could always rise further too cool things, but if the recovery did not happen, interest rates would be stuck at their lower bound and monetary policy would be unable to keep the recovery on track.
“In 2010 and beyond that downside risk came to pass [bolding mine], and the recovery was delayed. Fiscal policy put the economy in a position where it was particularly vulnerable to downside risks, which is why it was an entirely foreseeable mistake.
“Exactly this point applies to 2015 and beyond. The problem with further fiscal consolidation while interest rates remain at their lower bound is that it makes the economy much more vulnerable to downside risks.”
In other words, it seems Conservative policy, as set down by History graduate and towel-folder George Osborne, deliberately weakened this country’s ability to recover from the crash of 2008 and afterwards.
How secure is you job? How safe are your savings?
Do you really want to risk them on more Tory bungling?
I also suggested that the OBR was discredited by endorsing them. As the table below shows, I did the maths to show why that had to be the case (it wasn’t hard to do). And now, as the FT reports:
“Britain’s economic recovery has generated far less tax revenue than forecast, raising the prospect of even deeper spending cuts after the general election to balance the budget.
“The latest blow to the public finances was an admission from the Office of Budget Responsibility on Monday that income tax receipts – the biggest single source of government revenue – are likely to fall short of government targets this year, despite record levels of employment.”
Three immediate issues follow from this. The first is that the quality of Treasury forecasting is dire. No one in their right minds could have believed the levels of growth forecast in March 2014 as shown in this table, the data for which is taken straight from the March 2014 budget with my extrapolation of growth rates added:
It wasn’t just growth in tax revenues that was forecast, it was growth way beyond any underlying level of economic increase in activity that was suggested was going to happen this year, and that was always utterly implausible.
Second, we have to consider the possibility that the Treasury just lied when putting forward these growth projections. They are so ridiculous, that has to be the best possible explanation for them.
And we have to the consider that the OBR may have been complicit in this – because if it was truly independent it should have been flagging up how unlikely this revenue growth was in March, and not now.
And what does it all mean?
It means all Osborne’s economic claims are bunkum – but you should read Mr Murphy’s analysis at Tax Research UK.
This is not a good time to run a retail business – the effect of the Coalition’s benefit cuts will trickle up and bite our rich retailers and industrialists hard.
According to the BBC website, business activity was hit hard by last month’s exceptionally cold weather, with the number of people visiting shops down by more than five per cent.
For one person, this will have been an extremely pleasant piece of news, because for once he won’t have to explain himself.
That person is, of course, Gideon George Osborne.
For one month, he hasn’t been in the unenviable position of having to root around in the political undergrowth for a reason the economy has tanked – that isn’t related to his own hopelessly inadequate economic policies.
For one month only!
He will not have an excuse when the figures come in for April, worse than for March, as sane economic forecasters should expect.
Instinct says he will tell us the funeral of Margaret Thatcher will have something to do with it. He used the wedding of the Duke and Duchess of Cambridge as a shield – what goes for ‘matches’ must surely apply also to ‘dispatches’.
The real reason will be the effect of the huge benefit cuts, that will take £19 billion out of the economy over the next year, if commentators are to be believed.
That’s just in money terms. Add in a conservative estimate of the fiscal multiplier (the effect on the economy) and we’re staring into the black pit of a £30.4 billion loss. That would be £500 for every person in the UK, if we were all affected.
But the richest among us won’t be. It is on the poorest and least able to defend themselves that this hammer blow has fallen. The government has been giving money back to the richest, as we all know.
In fact, this show of support for his cosseted buddies might protect them from the storm that’s coming, and may therefore prove to be a shrewd move – but we must all remember that Osborne is not an intelligent man and good fortune coming to anyone as a result of his policies is pure chance.
Because the rich will be affected by the benefit cuts. Poor people have no choice but to spend the money they receive. They have to buy things they need and pay the bills, so it goes on food, heat, light, water, the rent, repairs and other necessaries. With less money available to them, they will not be spending as much in the shops, and will be more careful about how much gas, electricity and water they use, as well.
Who owns and runs the shops? Who owns the shares in the utility companies (now that the bulk of shares have been bought up from the middle-class speculators who bought them in the 1980s)?
After a few months of this, we’ll see what happens to their profit margins. My guess is that a £100,000 tax rebate won’t help very much.
The propaganda machine keeps spewing out nonsense, of course. Only last weekend we heard Francis Maude telling Jonathan Dimbleby and the Any Questions audience in Exeter: “The Coalition government, which is two parties which have come together from a different place, in the national interest, to do something quite big and difficult, which is to address the biggest budget deficit any country in the west had.”
It wasn’t the largest budget deficit of any western country – either by size or percentage of GDP. That was a flat-out lie and I wish Jimbles would pull him up on it.
The deficit in the United States is greater than ours in percentage terms; in money terms, it dwarfs the UK.
Across the whole world, Japan has the biggest deficit.
Strangely, you don’t hear the Japanese making a big fuss about it.
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