Clarity of purpose is a virtue. But stubbornness doesn’t necessarily win any plaudits when more flexibility is appropriate. The shock tactics of Osbornomics have now been fully embraced. The message is clear: this Coalition is not for turning.
In the run up to the Election the Conservatives and the Liberal Democrats adopted distinctive positions on the best approach to cutting the fiscal deficit. Despite Nick Clegg’s apparent secret conversion to the Conservative position of early and deep cuts, the LibDem manifesto commitments were directed at cutting in 2011/12 and after, and the rhetoric around budget reductions was to proceed at a pace that would not endanger economic recovery.
In the face of another slew of data about poor economic prospects this week, it is worth revisiting the LibDems’ original position on this issue. It is increasingly looking the more plausible and prudent of the two. If that position could to have any traction on the direction of policy as we head towards CSR then some of the most serious negative impacts of the current strategy might be mitigated.
Each day we seem to receive a warning about the wisdom of the current strategy or new data that are read as indicating that the current strategy is having a serious negative impact in the short term. These warnings are not emerging from the usual suspects only. It isn’t all special pleading. The head of HSBC expressed concern that there was danger that governments were ‘cutting into the muscle’ of the western world. Commentators monitoring confidence, activity and employment trends in the private sector report a deteriorating picture. There are signs that the housing market is weakening sharply in advance of expected rises in unemployment. Talking about the economy in this way is in itself important.
One issue we face is that our understanding of the economy and how it will respond to the Coalition strategy is rather less well-founded than it might first appear. Macroeconomic policy is a matter of judgement rather than science, as anyone who has read the minutes of the Monetary Policy Committee will see only too clearly.
The sort of models used by the Treasury and others to estimate the impact of policy interventions struggle to account adequately for more qualitative factors like household confidence and expectations about the future. There is limited room for hopes and fears, the reactions of consumers to unknown but possibly negative events, the ‘animal spirits’ that Keynes considered fundamentally shape the fate of investment and the economy more generally. The economy is not a well-oiled and predictable machine to be finely tuned, it is a much more organic and irrational beast. One illustration of this point is the current puzzle of the absence of UK exports. Simple theory suggests that, other things equal, the recent depreciation of the pound should lead to increased demand for exports. But this hasn’t happened yet. No one is entirely sure why.
It is clear that qualitative factors relating to emotion and confidence are fundamentally important in understanding the current economic situation. Many households already find their circumstances deteriorating as a result of cuts that are in train – cancellation of private sector contracts with the public sector and grants to the voluntary sector. The narrative of the near future is tailor-made to undermine confidence: swingeing public sector job cuts, restrictions in benefits, generally very choppy economic waters. It is not surprising that many are fearful. That leads households to hunker down and reduces effective demand. Rational private sector suppliers trim their sails accordingly.
The Conservatives believe that an automatic and predictable private sector revival will over the medium term and more than compensate for the short term pain. They have yet to explain quite how such a revival will occur in a context where both domestic and overseas demand is weak. The private sector is unlikely to step in when it is not obvious that there is demand for its services from either private or public sector.
Contrary views range from the position that we should expect a prolonged depression, as suggested by the NIESR recently, to the position that the fiscal contraction, when its full impact begins to be felt in the autumn, will trigger a genuine double dip recession. If that happens then it will have been largely self-inflicted. A firm but less savage approach to the deficit could have achieved the same goal without losing the confidence (there’s that word again) of the markets and without threatening to plunge the economy into territory not visited since the 1930s. In fact, an approach very like the one the Liberal Democrats advocated in the first place.
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58 Comments
Sadly, I suspect that all courses of action have great potential downside. The choices are all bleak.
“the LibDem manifesto commitments were directed at cutting in 2011/12 and after”
Er, no. What it actually said was:
“dealing with the deficit:
The health of the economy depends on the health of the country’s finances. Public borrowing has reached unsustainable levels, and needs to be brought under control to protect the country’s economic future.
A Liberal Democrat government will be straight with people about the tough choices ahead. Not only must waste be eliminated, but we must also be bold about finding big areas of spending that can be cut completely. That way we can control borrowing, protect the services people rely on most and still find some money to invest in building a fair future for everyone.
We have already identified over £15 billion of savings in government spending per year, vastly in excess of the £5 billion per year that we have set aside for additional spending commitments. All our spending commitments will be funded from this pool of identified savings, with all remaining savings used to reduce the deficit.
We must ensure the timing is right. If spending is cut too soon, it would undermine the much-needed recovery and cost jobs. We will base the timing of cuts on an objective assessment of economic conditions, not political
dogma. Our working assumption is that the economy will be in a stable enough condition to bear cuts from the beginning of 2011–12.”
YES it says that is the WORKING ASSUMPTION, but most importantly it also says we will base it on the objective assessment of economic conditions, not political dogma. If you listen to, say, the LBC election night podcast around the time when the markets open, and promptly crash in response to the Eurozone “situation”, how can you refuse to accept that this sort of crisis counts as “economic conditions” that require action?
Furthermore, the report which Vince Cable recently mentioned in his guardian interview clearly shows a lot of parallels to the emergency budget (so much so I could see Vince being peeved that Osborne seemed to have plagiarised it!): http://www.reform.co.uk/Research/ResearchArticles/tabid/82/smid/378/ArticleID/950/reftab/56/Default.aspx
Yes, Paul is correct. Even if we could guarantee that spending our way out of recession wouldnt cause a market-driven debt crisis, then the vast national debt that it built up would be a mill-stone around our neck for generations. After WWII that debt was dealt with by good growth as the west mechanised and used cheap oil. We wont have that luxury – cheap oil is gone and global growth will be concentrated in Asia. The only way to shift that debt will be to inflate it away – generations of inflation at 5% would be needed. Fine, if you own a house with a huge mortgage…but if you saved carefully for retirement it would destroy you. It would lead to a culture of debt and irresponsibility, much like, um, the one that just nearly destroyed us!
If we are to learn from history we should look at the early 30s following the 29 crash. The crash although dramatic did not cause the great depression the actions of govts around the world did. They all preached the perceived wisdom of balancing the books rather than acting to grow the economy. What happened was the deficits became harder to manage as cuts took place and a downward spiral was created deficit-cuts-deficits-cuts etc. The lives of millions were sent into destitution and in the end Hitler and the war succeeded in bringing about an explosion of govt activity which grew the economy. You need to understand Keynes and the multiplier effect to realise that the current coalition policies will be deeply damaging as they remove economic activity at a time of plentiful spare capacity. The last 12 months of growing activity are pure Keynes in action. Govt activity has enabled private sector activity to begin a recovery, this alone has started to slash the deficit from the predicted level of 12 months ago. Huhne and Warsi talked of Brown and Labour being wastefull, certainly the money could have been spent differently but without the dept we would be in a far worse position. We will not cut our way out of the deficit, unless you are prepared to bring countless millions to there knees for many years. We need to grow our way out and increase economic activity and reduce the debt over many many years. In 1945 debt to GDP stood at 250% today it is 68%, the position can be recovered. Prior to the coalition Lib Dems advocated a Keynes response which was sensible. Today they sound like people who refuse to learn from history.
Finally, an article on this.
And lest some Lib Dems want to rewrite history, as is the case with Andrea Gill above-
“Self evidently I think, we think, that merrily slashing now is an act of economic masochism, so if anyone had to rely on our support, we were involved in government, of course we would say no, do it sensibly.”- Nick Clegg.
Slashing public services may just about be bearable if it helped to revive the economy. It now seems increasingly clear that the coalition’s actions are going to make the economy worse. The bitter medicine might kill us, not cure us.
As for alternative courses of action, I’m still waiting to hear about the massive crackdown on tax avoidance (estimated to cost the economy £40 billion per year) that was a LibDem manifesto commitment. When is it going to start? Why are the government talking so tough about benefit fraudsters but not about the much larger sums lost through tax avoidance by the very rich?
@Mike – In what twisted, illogical world does quoting the full text of our party manifesto on the deficit, word for word, consist of “rewriting history”?
Just because there are many esp among Labour who simply assumed we actually meant to support them on their economic plans doesn’t make it so.
“If you listen to, say, the LBC election night podcast around the time when the markets open, and promptly crash in response to the Eurozone “situation”, how can you refuse to accept that this sort of crisis counts as “economic conditions” that require action?”
I’m not sure if basing long-term macro economic policy on short-term movements in the markets is such a great idea.
“And lest some Lib Dems want to rewrite history, as is the case with Andrea Gill above-”
Why rewrite history when you can rewrite the present ? – far from “merrily slashing now” the £6 billion spending cuts are tiny in terms of of both the budget deficit and the national debt.
The argument that all public spending is good is not Keynesian economics, it just stupidity. The line that the budget deficit run up by Labour represents in any way shape or form “investment” is detached from reality.
Building Schools for the Future for example is a typical case of Labour doing a Tory thing with more enthusiam than the Tories. It was a bad scheme with appaling value for money, a bit like other Labour pet projects e.g. replacing Trident, war in Iraq, the Millenium Dome
What pound devaluation?
only been going down against the dollar in the last 3 months, but up against the euro (our biggest export market) for many more, including the last 3.
MBoy
“Even if we could guarantee that spending our way out of recession wouldnt cause a market-driven debt crisis, then the vast national debt that it built up would be a mill-stone around our neck for generations.”
Of course, the whole point is that if the economy is pushed back into recession as a result of premature public spending cuts, then the national debt may actually be bigger than if spending had been cut more gradually.
The argument really isn’t that hard to follow. During the election campaign Nick Clegg said his eight-year-old son ought to be able to understand it!
The coalition itself admits this is being done with an eye on the next election in 5 years time.
It’s pure politics, maybe people will feel better about the cuts in years 4-5, who really knows, but i think myself that it’s wreckless, and pandering to the very people who caused these problems in the first place.
*Just because there are many esp among Labour who simply assumed we actually meant to support them on their economic plans doesn’t make it so.*
Yes, it was silly of so many people to actually believe what you were saying at the time.As so many senior Lib Dems have now stated ‘we changed our minds’ one wonders why you are clinging to the fig leaf of re-writing your pre election history.
How is the public supposed to hear “of course we would say no” and reasonably expect that the Lib Dems would be arguing *for* those early cuts? How is it honest for a party to be saying up to election day that the conditions for cuts aren’t right, and then argue for immediate cuts with Labour mere hours later? And then admit to have changed their minds before people went to vote! It’s disgusting, and it’s leading us down the wrong path.
How are people supposed to read on the website, writing about one of Nick Clegg’s speeches- ‘A clear statement “that the conditions will be right for cuts from 2011-12, but not before.”’ (https://www.libdemvoice.org/nick-clegg-winning-people-over-for-deficit-reduction-18388.html)
The articles on this site from before the election are hilarious in retrospect.
Thank you Alex M for your honest insights. We have the worst possible situation for recovery. A recession caused by ruling class greed and a Blue and Orange Tory government exercising its ideological hatred of the public sector and committed to finishing the decimation of the State begun and almost achieved by Thatcher. How I wish the World Statesman of the Year, Gordon Brown was back in charge, instead of the pygmies we have at present.
“Slashing public services may just about be bearable if it helped to revive the economy. It now seems increasingly clear that the coalition’s actions are going to make the economy worse.”
I agree with John, especially as there are plausible alternative courses of action. Contrary to the lies being peddled by this government, the situation it inherited was better than expected, £22bn better than Darling forecast last December. In that case, it might be argued that a few more cuts than Labour proposed could be safely made this year without wrecking the economy, but not cuts on the scale planned by Osborne.
Why, if the IMF thinks that £80bn of cuts would be enough, does Osborne propose £120bn? It must either for ideological reasons (shrinking the state) or to leave room for some tax cuts for the better off (probably IHT cuts and the scrapping of the 50% rate) before the next election. In the meantime, ordinary people have to suffer more than is necessary.
Then there is the question of what percentage cuts, what percentage tax rises? The Tories prefer mainly cuts, I seem to recall that Labour argued for 50-50. There is also the issue of what cuts and what tax rises, and there are plenty of interesting ideas in circulation. ‘The Coalition of Resistance’ has published its suggestions, and ‘Compass’ has examined them. Introducing a 50% Income Tax band at £100,000 would deliver £2.3bn, or an extra £0.5bn above and beyond the existing income from taxing revenues above £150,000. The same report suggested that £10 billion could be raised by abolishing tax havens and taxing ‘non doms’.
The annual cost of Afghanistan was about £2.5bn in 2009, although this cost would have to be drawn down slowly in order not to put the armed forces at risk. Trident costs £97bn over its 30-year life, which works out at £3.2bn per year. However, decommissioning Trident also comes with significant costs.
David Miliband has taken up Vince Cable’s idea of a Mansion Tax – a 1% levy on that part of a property’s value in excess of £2 million. A nice little earner, and impossible to avoid. If the rich owner moves abroad, the next owner will be liable. At best it would raise some revenue, at worst it would help to keep house prices down towards a more affordable level.
Labour MP Chuka Umunna sent his ideas to the Chancellor after being challenged to do so by Osborne;-
1. Increase the bank levy and exempt banks from the Corporation Tax cut. If we really are “all in this together”, it is only right that the financial services sector – where the economic crisis started – should pay its fair share. The levy is currently set to bring in some £2bn per year. Oxfam thinks it should be £20bn. Even the IMF is suggesting it should be £6bn.
2. Extend the tax on bankers’ bonuses, worth £2.5bn per year to the Treasury.
3. Reverse the decision not to raise National Insurance contributions for employers. NI is a progressive tax. As the IFS has shown, doing so would place the burden on those most able to pay and would raise £13.5bn over the parliament.
4. A Financial Activities Tax. Setting such a tax at just 2% would raise £2bn per year.
5. Join with the French and German governments and leading economists in backing a “Robin Hood” Financial Transactions Tax. Such a tax, applied in the UK, could raise tens of billions of pounds for the Exchequer.
All preferable to the pernicious ConDem cuts and VAT increase, and personally, I’d consider a 2p rise in Income Tax to be fairer than putting up VAT to 20%.
Um.
We don’t have a recession. It ended in January. Cute fantasy, but the UK, along with most of the world, is now back in (slow) growth.
If that actually happens then you might have a point. If it doesn’t happen then you’re just noise.
It doesn’t have to be either of those. The most obvious thing for it to be would be an honest recognition of the way UK government operations always overspend their budgets. If you plan £80bn of cuts then you might end up with £70bn after overspending, and be screwed. If you plan £120bn then later on you can relax a few of them and comfortably reach your target.
…flight of capital to other countries with lower tax rates, most likely. Income tax is the easiest thing in the world to relocate – you don’t even have to move any existing assets, just book the income in a different country. You’d have more luck going after taxes on corporations or investments, which are at least hard to move.
I’m fascinated to hear how you propose to accomplish that. No government has ever successfully got rid of tax havens, and many have tried.
“World Statesman of the Year”
pfnargh! snork! o, gasps for breath!
Thanks for that!
Wipes eyes.
Gratitude!
@Andrew Suffield: Stock Tory talking points against policies the Lib Dems used to pretend to believe in. Too funny.
Poster 1: Argues that Action A is likely to have undesirable consequence B. (You don’t need to know any more detail than that.)
Andrew Suffield: “If that actually happens then you might have a point. If it doesn’t happen then you’re just noise.”
Dear Andrew, all economic policy planning involves trying to forecast the future, and then optimising your policy in the way you believe is most likely to optimise the future. You are attacking Poster 1 for the mere act of engaging in economic policy planning. You are ridiculing him for trying to predict the future. You are ignoring the fact that one cannot do otherwise if one wishes to engage in economic debate.
“You’re just noise” is (a) a contravention of this site’s personal abuse policy, (b) just about the most fatuous comment I’ve read here for a very long time!
Andrea Gil
“Just because there are many esp among Labour who simply assumed we actually meant to support them on their economic plans doesn’t make it so.”
Er .. but isn’t that exactly what Clegg said throughout the campaign and has been squirming about ever since, having unsuccessfully tried to dump the change of heart on the Bank of England and finally admitting he changed his mind before polling day but just forgot to tell anyone (including his own party it seems). I am loving the “new” politics and your posts are the funniest on here coming up with ever more fabulous explanations of why the Lib Dems are now supporting things they would have run a mile from in the past. Your credibility is zero but it’s very entertaining! Keep it up
@Andrea Gill Undoubtedly the Manifesto commitment was that “We will base the timing of cuts on an objective assessment of economic conditions, not political dogma.” My piece is largely the suggestion that it might be a good idea to return to that approach. If data are emerging that strongly suggest that the current strategy for deficit reduction is running too high a risk of undermining the slow recovery then the appropriate response is surely to reformulate policy on the basis of an objective assessment of economic conditions and not persist with the current strategy. To do otherwise would be to give the appearance of pursuing policy on the basis of political dogma.
The discussion of fiscal consolidation continues to be, at times, extremely coarse-grained. Either you’re signed up to the Coalition’s prescription of early and deep cuts or your some form of irresponsible spendthrift who wants to bankrupt our grandchildren. There is an infinite number of positions between those two extremes. It is perfectly possible (and necessary) to articulate a firm and credible stance on reducing the fiscal deficit that doesn’t require the apparently random slash and burn approach that is currently being employed. Indeed the LibDems did so before the election.
As Vince Cable wrote in his Reform paper of last September (p16):
“There are two broad approaches to the current fiscal crisis which reflect both party political differences and differences of economic philosophy; one is fairly relaxed and plays down the seriousness of the problem; the other is more apocalyptic and shades into hyperbolic language about “national bankruptcy”. As is often the case, Britain’s dialectical approach to debate and political allegiance obscures the fact that the truth is somewhere in the middle”.
Since then the Coalition LibDems have seemingly bought into the apocalyptic and the hyperbolic. Personally I think they’ve been sold a pup. The consequences of which we see playing out in front of us.
This isn’t the time (nor is there the space) to discuss the value or scientific credibility of economic growth forecasting. The Treasury has just revised their forecast downwards, towards the OBR’s measure. The macro-forecasting community tends to work on a ‘wisdom of crowds’ type approach: everyone makes an educated guess what’s going to happen and then seek some sort of central estimate of the most likely outcome. But those forecasts generally tend to be that economic activity is less volatile than it actually turns out to be in hindsight. So my personal view is that it is not just the Treasury but most current forecasts that are being optimistic, precisely because it is (technically) very hard to capture the more qualitative factors that drive the economy and to fully account for multiplier effects. It also depends on a bunch of other assumptions about the structural stability of the economy that can be debated. If we were to approach the problem from the perspective that the past is only a very imperfect guide to the future then we would treat all such modelling with considerable circumspection.
@ Paul McKeown
I assume you don’t realize that Gordon Brown was awarded the title of “World Statesman of the Year” and received the award from Henry Kissinger. However, I’m not surprised because hardly any mention of the award was made in the Blue Tory media and went either unnoted or unremarked upon by those television journalists who, it is alleged, provide us with news; presumably because they were afraid that celebrating the award would affect the General Election chances of their Blue and Orange Tory friends. Where there was comment it was of the snide and derisive kind. Rather similar to yours, in fact. Gordon Brown was a genius who enabled us to continue having a banking system. Can you really imagine Cameron, Clegg, Osborne et al being awarded with “World Statesman of the Year” ? Gordon Brown was an unappreciated colossus, as will become apparent in due course but by then it will be too late.
@Alex M..A refreshingly insightful and piece Alex,thank you for your honesty.
to be honest the employment data and the fact that inflationary pressures are being felt in the economy indicate that the strategy may be having a more positive effect than people realise
@Alex M “My piece is largely the suggestion that it might be a good idea to return to that approach. ”
I do broadly agree there, and am a bit worried that the coalition isn’t making more of a point of the fact that at least according to OBR figures, their strategy preserves more public sector jobs in the first few years than Labour’s budget would have (due to pay freezes).
This is a perfect mechanism for adjusting the budget and cuts in response, should the public sector not have recovered sufficiently by then. Now, especially Clegg has emphasised after the emergency budget that, of course, there will be further budgets each year and thus there are further measures that can be taken (such as upping the tax threshold further etc) , but I would love to see Cable and Osborne point this out at some point, because if they signal this NOW, then Labour will not be able to point fingers and accuse them of more U-Turns later on.
D’uh, I of course meant “should the PRIVATE sector not have recovered…”
@Mike
From the article you posted, to prove that LD opposed cuts in all circumstances, did you even read it? I will quote the part on Timing for you below.
“That is why Vince Cable and I have set out five objective economic conditions that we will assess when judging when public spending should begin to be cut.
These are: the rate of growth; the level of unemployment; credit conditions; the extent of spare capacity in the economy and the cost of Government borrowing.
Our working assumption is that the conditions will be right for cuts from 2011-12, but not before.”
@MacK
I hadn’t forgotten. Who was it gave him the award again, Bono and Kissinger? What organisation was it again? Some mad award handed over by some bunch of deluded celebrity nitwits. Hardly the Nobel Prize for Economics, was it? As I recall it had everyone from Guardian journalists to BBC comedians guffawing with laughter in the autumn of last year.
Thanks for reminding me, it made my day.
Andrew
“If that actually happens then you might have a point. If it doesn’t happen then you’re just noise.”
No – the point I made is a valid one, however things turn out.
Read the comment I was responding to, then read my comment, then think about it, and I’m sure you’ll get it.
“just about the most fatuous comment I’ve read here for a very long time!”
That’s a bit unfair.
I’m not sure it’s even the most fatuous comment Andrew has made today.
@ Paul McKeown
I always try to make somebody’s day –which is why I keep posting on this excellent site.
@ david thorpe
“to be honest the employment data and the fact that inflationary pressures are being felt in the economy indicate that the strategy may be having a more positive effect than people realise”
Er — I think you’ll find that the unemployment figures covered the period from April to June, so the Blue and Orange Tories can hardly claim total credit for any reductions but Gordon Brown could. In fact, Red Rag, on his site, shows quite clearly why Labour’s falling unemployment levels have actually been arrested by the Blue and Orange Tories. His analysis shows too that when the unemployment statistics are reviewed as minutiae they are far less panglossian than the Blue and Orange Tories’ media friends have depicted. Why don’t you have a look? It’s the second or third item.
http://redrag1.blogspot.com/
As for your comment on the positive effects of inflation, I suppose that huge inflation levels and massive cutbacks in public spending will massage a lot of the deficit out of the system but it is the economic equivalent of amputating your leg to remove a verucca and the reason, I believe, that the Blue and Orange Tories will lose the next General Election.
@J Ro: And? Labour opposed cutting this year because they thought the economic circumstances didn’t warrant it equally as much as the Lib Dems. Labour didn’t say that cuts should wait til later because they’d read the runes or flipped a coin, it should be a given that economic policy depends on the state of the economy.
The fact is this- on the day that we voted they hadn’t said that, in their opinion, the situation had changed such that cuts should start this year. And then hours later they were arguing for it with Labour. Clegg tried to lie and say that he had changed his mind on the 15th of May days after the Lib Dem negotiating team were making cuts a condition with Labour, before admitting that he changed his mind before the election- possibly months before.
If they ever believed that cuts should wait until the economy was stronger, then they didn’t by the time we went to vote. By Clegg’s own admission. They just didn’t deign to inform the electorate that their view had changed.
I am completely certain that he was not engaging in any kind of economic policy planning. I am attacking him for throwing up unverifiable suggestions of unquantifiable risks and pretending that this was some kind of valid argument, rather than meaningless scaremongering.
Citation needed. (I don’t pay much attention to Tories, wouldn’t have noticed them saying any of that stuff – although it’s pretty basic economics, so I wouldn’t be surprised to find all three parties agreeing with some of it. There’s a reason that none of them proposed an income tax hike for rich people: everybody knows you just get less tax revenue if you do that)
“it should be a given that economic policy depends on the state of the economy. ”
under the conditions when the policy of timing of cuts was made, it wasnt in the LD opinion that this was the case for the Conservatives,
However, If you look at the crieria listed by the LD on timing of cuts, I think you have to admit, that not only had we had 2 quarters of growth since then, there had been the soverign debt crisis etc, the criteria of when to change was the reason they changed their minds.
I am unsure of what Nick and others could have done, I dont think them changing LD policy on their own without consent of the party would be appropiate, they had to publicly state the LD policy. the party did support the change in policy, as seen by the vote in favour of coalition, and the support of the special conference.
Most of all I support John. Whatever the economics of the situation, the pain should be seen to be shared and by emphasising attacks on benefit fraud before tax evasion is really, really bad politics. There should also be more noise about bankers bonuses.
Cutting an extra £6bn from the budget this year is very little when £120bn cuts are needed. No one seems to dispute the fact that the Government has been spending £5 for every £4 taken in Tax and even with the cuts proposed our debts will contine to rise for a few years yet. On the other hand no one is prepared to admit that a 25% cut in expenditure is planned over a 4 year period. If the spending review is comprehensive enough then the least important expenditure will be cut first and if things improve faster, the later cuts may not be needed at all. If it appears that we are heading for another recession, the Government could do a few good things, like building the Severn barrage and more high speed rail and loads of other ‘green’ things.. It could also save water by plugging all the leaks in our Victorian water distribution system.
The bank of England forecast does not predict another recession but what do they know? I’m sure most of the contributors to this Blog know much better than the bank and as G B Shaw said “If all the economists in the world were laid end to end they would still not reach a conclusion” or Henry Ford said “I don’t make predictions, especially about the future”
Let’s bash the Bankers a bit more and the benefit cheats a bit less and leave the economy to the economists
Andrew Suffield
“Citation needed.”
Does it ever occur to you that you may be spending too much time reading Wikipedia?
J Ro
Congratulations on the funniest answer so far to the question, “Why did Nick Clegg lie to the electorate about the timing of spending cuts?”
Your answer – “Because of the depth of his respect for the party’s democratic policy-making processes” – had me rolling about on the floor for several minutes. (At least, I think that was what did it.)
Come to think of it, it’s the _only_ answer to that question I’ve heard so far. Apart from Clegg’s own effort, of course – “Things were changing so fast during that three-month period that there just wasn’t enough time to be honest.”
@ Paul McKeown
“I hadn’t forgotten. Who was it gave him the award again, Bono and Kissinger? What organisation was it again? Some mad award handed over by some bunch of deluded celebrity nitwits. Hardly the Nobel Prize for Economics, was it? As I recall it had everyone from Guardian journalists to BBC comedians guffawing with laughter in the autumn of last year.
Thanks for reminding me, it made my day.”
The World Stateman of the Year Award was awarded to Gordon Brown last year by The Appeal
of Conscience foundation. It was not “some mad award handed over by some bunch of deluded clebrity nitwits” The Appeal of Conscience Foundation was founded in 1965 by Rabbi Arthur Schnieier, a Holocaust survivor who has devoted his life to overcoming the forces of hatred and intolerance. It is an inter-faith coalition of business people and religious leaders which campaigns for religious freedom and human rights and promotes peace, tolerance and ethnic conflict resolution. The foundation “believes that freedom, democracy and human rights are the fundamental values that give nations of the world their best hope for peace, security and shared prosperity. Values dear to the heart of every Liberal, I would have thought, even Orange Tories. The Appeal to Conscience Foundation praised Gordon Brown’s “Compassionate Leadership in dealing with the challenging issues facing humanity, his commitment to freedom, human dignity and the environment and for the major role he has played in helping to stabilise the world’s financial system.” No wonder the media buried Gordon’s achievement and belittled it to the point where even quite intelligent people believed that it was the equivalent of the wooden spoon.
For those who prefer the truth rather than right wing media bigotry here’s the Appeal to Conscience Foundation Link .
Appeal to Conscience Foundation
http://www.appealofconscience.org/
And this Guardian Journalist doesn’t seem to be guffawing!
http://www.guardian.co.uk/politics/2009/sep/23/gordon-brown-world-statesman
@Alex M
Thanks for your article. It’s good to read an LDV article which is critical of the coalition. It’s good to read a range of views from across the party.
It might be a little premature to say “I told you so”. Predicting the economy is an inexact science.
You mention “another slew of data about poor economic prospects”. Could you link to the data you mean?
It was only a few weeks ago that we were told the UK grew 1.1% in the second quarter. A few may have argued this meant the UK was well back onto recovery, but most agreed it was too early to tell.
In the same way, isn’t it premature to assume things have suddenly become a great deal worse?
“It might be a little premature to say “I told you so”. Predicting the economy is an inexact science.”
Actually, I think the most appealing aspect of Alex M’s article is the way he repeatedly acknowledges the uncertainties and inexactnesses. Quite unlike the idelogues like Osborne and Brown who think they know exactly what to do, ignore the changing empirical evidence as it unfolds, and rush headlong toward disaster whenever their big theoretical principles drift away from reality. The words “I told you so” don’t really fit in very well, because they are more often used by the dyed-in-the-wool ideologues whose mind is made up, and who spend all their time bending the world to fit their theories.
Cable’s approach, when he had the independence to think for himself, was the opposite. He was willing to change his approach to deal with a changing world. That’s what we need to get back to.
I agree with Alex M. Those great Liberals (of their time) Keynes and Beveridge must be turning in their graves. Remember, for example, Keynes and the “multiplier effect” and Beveridge’s “five freedoms” from want, ignorance, disease, idleness and squalor. They may be outdated terms but they are as relevant today as they were back in the 1940’s though I recognise the need to add a Green agenda and I personally support the idea of a “Citizens Income”.
@macK
once agisn you have completely misunderstood the point Im making.
Those figures are for a period when labour was in office, Im not denying that and nor do I believe that the coalition deserve any credit for them.
The point I making is that the date vindicates the coalition straegy in the future, which is predicated onr educing the size of the state with the private sector job creation picking up the clack.
Those figures show that the stimulus has had its effect which was somehting which the coailtion budget and macroeconomic strategy needed to happen in order to be successful
@J Ro: Your party had the chance to support the change after election (though were they ever going to vote against?) The voters didn’t. I don’t care if you Lib Dems are happy enough to have the leadership hide their intentions and then emotionally blacmmail you into going against what you campaigned on, that’s your business.
Voters didn’t get the chance to hear what your party intended with the result that early cuts are possibly going to tip us into a double dip recession, after the majority of the public voted for parties campaigning against early cuts.
the point I make in my comment above is one which I made in a blog entry a while back, when I made it then it was in response I think to growth figures and inflation figures.
Many people made the valid enough point that I was extrapolating a lot from just one or two pieces of data, but this unemploymnent data further backs up my point
No point listing the lies , half truths and brutal policies the lib dem leadership have been happy to go along with.
I handed over my precious vote.
I feel as if I’ve been raped.
@Helen
What were they supposed to do? Coalition with Labour? Labour didn’t want it, and their record on civil liberties and lack of compromise available on them made it a no no.
Confidence and Supply for Tories?
Forget it. We are a party that wants STV. To not enter a coalition would be hypocritical. Plus the fact we would be gearing up for another election now that only the Tories could afford to fight. The result would be Tories in majority and far far worse cuts.
This is the least worst solution as none of them were particularly appealing.
If Nick Clegg had decided all along he agreed with the brutality and speed of Cameron’s cuts he should have said so before the election. Please don’t ask what else he was supposed to do. Look at the sinking polls- the public and libdem voters don’t appreciate being lied to.
@Chris Mills
You don’t get it do you? People entrusted you with their vote to keep the Blue Tories out and now feel spiritually violated because you abandoned your policies for the Blue Tories’ policies which penalise the poor and the low paid and will make 600,000 unemployed. Reminds me of the old Groucho Marx joke: “Excuse me, I do have a set of principles you know —– But if you don’t like them, I’ve got another set!” The electorate will punish you by not granting you AV. And they won’t be making the mistake of voting for you again, especially as your Blue Tory chums have made sure you lose out in their gerrymandering of boundaries. It’s not true that Labour rejected your offer of coalition — the Orange Tories had already decided to form a coalition with the Blue Tories, which is why the Orange Tories disgracefully accused Gordon Brown of “Squatting in Downing Street.” Confidence and Supply was the only honourable route you should have chosen. The Orange Tories and Labour together could have exercised real restraint on the Blue Tories more insane policies. And It would have prevented you losing a myriad of your supporters to Labour who have now signed up thousands of ex liberal supporters as members.
Wouldn’t it be better to move some of this discussion on a little?
A formal coalition made sense back in May. It was also absolutely necessary to show a concerted commitment to dealing firmly with the fiscal position. Cameron’s Conservatives were selling something seemingly rather more moderate and less fanatical than Conservative administrations of the (relatively) recent past. He signed up to the agenda of the Equality Trust for goodness sake. Few, presumably outside the Tory high command and the left of the Labour party, would have predicted that the early moderate and inclusive rhetoric would be followed so rapidly by key parts of the agenda swinging quite so violently to the right.
My feeling is that many LibDems supported the Coalition in the belief that providing stable government was vital for the country, and there is a genuine view that we should all be in this together and share the pain of rectifying the mess that had been created. That the Conservative position on this issue is perhaps not so clearly oriented towards equity is, to me at least, extremely disappointing.
I’m sure the emerging punitive agenda involving stigmatising benefit recipients (including recent proposals such as allowing private sector bounty hunters to pursue benefit cheats using their personal data) and cuts to services that are most likely to affect the poor most directly make many deeply uncomfortable, particularly when there doesn’t appear to be such concerted and urgent action to address the bigger issue of tax evasion. The public sector cuts programme is, I would suggest, not adopting the priorities – or the degree of humanity and humility – that would have been applied if the Liberal Democrats had greater influence. The pursuit of hair-brained schemes like the Gove agenda, which are going to do nothing either to constrain public spending or promote equality of opportunity, is equally troubling.
Perhaps there has been naivety on the part of the LibDems. But that wasn’t really my point.
*Even if* a programme of early and deep cuts was seen as the best route to deal with the deficit in May/Jun, it is not sensible policy to stick to that approach come what may. It was a judgement in a particular context and in the light of information available at the time. If it looks like that was the wrong call then it needs to be revisited. Politicians ought to be willing to change direction in the light of evidence that the economy is reacting to the medicine in a different way to that which had been expected. To do otherwise is to put dogma ahead of the welfare of the population one has been entrusted to govern.
@George Kendall
Some of the things that I had in mind are below. The evidence is by no means unambiguous. But how it is read and narrated is important to how the economy evolves from here on through its impact on expectations.
Manufacturing prospects softening slightly, or holding up well in the absence of strong export demand, depending on your perspective. http://www.cips.org/aboutcips/news/details.aspx?id=311
Service sector prospects softening more noticeable:
http://www.guardian.co.uk/business/2010/aug/04/service-sector-growth-slows-cuts
http://www.cips.org/aboutcips/news/details.aspx?id=314
Impact of public sector cutbacks already being felt:
http://www.guardian.co.uk/business/2010/aug/10/public-spending-cuts-companies-affected
Unemployment – good recent figures, with concerns about composition and future prospects:
http://www.bbc.co.uk/news/business-10936574
http://www.guardian.co.uk/business/2010/aug/11/claimant-count-falls-unemployment
House prices softening:
http://www.bbc.co.uk/news/business-10915210
My point about economic forecasting as a matter of judgement rather than science is well illustrated by the tone of Mervyn King’s recent opening remarks on the BoE inflation report revising the Bank’s growth forecasts downward:
http://www.bankofengland.co.uk/publications/inflationreport/irspnote110810.pdf
The tone of economic growth forecasts from elsewhere is more negative, with private forecasters such as PwC advising that businesses should stress test their strategies against a double dip recession because they see the risks more on the down side.
I really do see a danger that in six months time maybe a year it will be Gorden Brown saying “well I did tell you there would be a double dip” and the Labour party will be saying “well we did save the economy look at the mess these guys have created it was on the mend when we left office”. I do anticipate being shouted down here but that will actually be irrelavant.
Helen makes a good point above betrayal or percieved betrayal will actually cost your party a lot.
@ Alex M
Have you listened to yourself. I never heard such sanctimonious drivel.
You are “uncomfortable”, tory policies are” disappointing”, “troubling”.
If you have the luxury of a job and a roof , then you could describe reactions that way- but how about the soon to be jobless, the people soon to be homeless- they will be much more than uncomfortable.
But it seems that libdems sticking with this mealy mouthed big society workhouse phliosophy are good at looking the other way.
There are lots like me who aren’t and who’ve joined Labour and you know what they say about converts , don’t you?
@ Helen
You can consider my views drivel, that’s entirely up to you. But they aren’t sanctimonious. All the things you list are genuinely a source of concern. I may not have expressed my views as forcefully as you might have liked. But I don’t think we’re disagreeing hugely on the substance of the situation.
I fervently wish that the current cuts agenda could be driven by a different set of priorities, which did not have such serious implications for the welfare of so many households. I don’t think we are disagreeing about that. That is what I was trying to say in my original piece, and the comment you didn’t think much of.
I don’t, personally, think that the Big Society is an idea with much content, other than being a cover for the withdrawal of the State from many very important activities without it being clear that there is anyone else able and/or willing to fill the gap. That doesn’t mean that the State should keep doing everything it’s doing, but that it is irresponsible just to stop and hope for the best. The most likely consequence of that is going to be inequity, and vulnerable people suffering because vital services are no longer there. But perhaps that is a debate for a different day and a different thread.
And I do not like the attempts to construct the problems the country faces in a way that stigmatises benefit recipients any more than it appears to you do when you refer to the workhouse.
@Alex M
Only just read your comment.
Thanks. Really appreciate the links.
I have read the article but it seems to downplay the possibility that mistakes did occur. Perhaps the Lib Dems just simply looked at the world through rose-tinted glasses, spured by a desire to think that the money exists for the social programmes they want.
Surely, the problems we face are not so unusual as to be completed unpredictable. Why was Lib Dem policy not formulated with this in mind?