The message could hardly be clearer. Whilst on the surface Labour did well, the real meaning of Thursday’s elections is that the public are utterly depressed, despairing at prolonged austerity, and unwilling to bother to vote when they can see no hope from any quarter of an escape from their deepening troubles. The mood across the whole electoral spectrum cries out for some inspiration which can lift their spirit towards some positive and achievable national goal to which they can aspire. None of the political parties at present provides any such vision, which is a tragedy because there is indeed such a scenario.
It is true that the Bank of England inflation report published two days ago is one of the gloomiest ever. It expects that the bounce artificially exaggerated by the Olympics will peter out, inflation is creeping up again (CPI to 2.7%, RPI to 3.2%), and any recovery has now been pushed back again till late in 2015 (i.e. not till after the election). Worse, under current policies, there are now no remedial policies left. After £375bn of quantitative easing (printing money) has failed to lift the economy, there is now no confidence that the further £50bn mooted will make any difference, and the risk of accelerating inflation and ultimate currency collapse along this route is now weighing more heavily than before. One of the rating agencies, Moody’s, is now openly talking about the possibility that Britain will lose its triple-A credit rating status if the country slides into a triple-dip. The meaning of that status – keeping borrowing costs low – was the sole benefit which Osborne has been able to claim for the agony of endless austerity. If the UK is de-rated next year, and there is still no sign of recovery, the Osborne strategy finally collapses ignominiously and comprehensively.
What is extraordinary, almost unbelievable, is that there is another strategy which which can perfectly well rescue Britain from its present predicament. The fact that it is almost wholly absent from public debate reflects three crucial aspects of the present political conjuncture – the fanatical Tory ideology with austerity as the cure for public deficits, the Tory fixation with shrinking the State and the public sector above all else, and the deeply cautious reluctance of the Labour Party to follow through on its convictions.
That alternative scenario is to acknowledge that the fundamental current problem is deficiency of aggregate demand and that with the private sector frozen in deep recession the stimulus required can only come from a major public sector works programme. It can be funded either from a tranche of QE monies or from taxing the super-rich or from miniscule borrowing at 0.5% base rate enough to generate a million jobs within 2 years. And so far from frightening the markets, it would deeply relieve them that at long last there was real light at the end of the tunnel.