The case for abandoning austerity is a no-brainer, mathematically, financially and politically

Labour needs a game-changer to settle the result of the next election once and for all.   As it happens it has the perfect opportunity ready to hand.   Osborne is foolhardy enough to announce 6 months before the election that he intends to impose further cuts of £25bn to get on track to eliminate the structural deficit by 2019, which an FT analysis suggests may have to be nearly double that, or around £48bn.   This is an utterly reckless pledge which Labour should be exploiting for all its worth – as opposed to the actual silence with which it greeted this faux pas.   There are 4 powerful reasons for Labour to go on the attack.

The mathematics show that there’s not a snowball’s hope in hell that Osborne’s latest de’marche can wipe out the deficit by 2019.   Alastair Darling’s expansionary budgets in 2009-10 reduced the deficit (i.e. public sector net borrowing) from 10.2% of GDP to 6.9% within 2 years.   Under Osborne’s public spending cuts the deficit increased to 7.2% in 2012-3, and only reduced last year to 5.7% because of the unexpected economic growth that only began in early 2013.   However, that growth which has been so extravagantly talked up by Osborne and the Tory press is now rapidly deflating: in the second quarter of this year growth was reported of 0.9% and in the third quarter 0.7%, and the signs are clear that in the fourth quarter it will be just 0.5%.   The deficit is set to rise again.

Financially, we were told that austerity was necessary to cut the budget deficit.   Since it is not now actually reducing the deficit – it’s likely to rise this year to just over £100bn – there’s no rationale for continuing with prolonged austerity.   The only reason that Osborne is persisting with austerity is, not to cut the deficit, but to carry through the real Tory objective of shrinking the State and withering the public sector, to get back to the Tory dominance of the 1930s.   If Labour now repudiated austerity in favour of the far more effective way of cutting the deficit through public investment to expand the economy out of stagnation, generate real jobs, increase household incomes after a decade of steep decline, it would be a game changer at the election.

Politically there couldn’t be a better moment to strike.   For all the manic talking up the recovery by the Tories, only 1 in 7 adults , according to a Populus poll last week, say they feel the benefit of a recovery where they live.   If 86% of the population have not felt any recovery in their own circumstances despite a 9% real terms fall in average wages, then Labour’s message that it will abandon austerity in favour of genuine and sustainable growth would be music to their ears.

There’s one further benefit for Labour here.   Cameron & co. continually lambast Labour for leaving behind an economic mess.   Time to poke them in the eye with the facts: the Labour government in their 11 years before the crash (1997-2008) never ran a budget deficit bigger than 3.4% of GDP, yet the Tory government because it disastrously mismanaged the ERM from which it was unceremoniously pitched in 1992 ran budget deficits more than double that size in 1992-4.   So who was the economic incompetent and who was was the prudent manager of the nation’s finances?

7 thoughts on “The case for abandoning austerity is a no-brainer, mathematically, financially and politically

  1. Oh I do so hope that Ed Miliband and Ed Balls will follow your advice! It makes so much sense.

    Surely the electorate would go for this, especially when the reality (facts and figures) are explained to them nice and clearly. Labour really must put the record straight, that the Tories are making a mess of the economy in spite of all the pain they are inflicting on ordinary people, and that Labour has a plan that has already been proven to work (if they do intend to carry on from where Alistair Darling left off, as you suggest).

    Just think of all the jobs that would be created by expanding the economy! People would have more money to spend, which would definitely kick start the economy and create an upwards spiral instead of this awful downturn we’re now experiencing.

    We need more energy efficient houses; we need to repair our roads to high standard so they don’t fall apart every time there’s a flood or a bad winter; we need more doctors nurses, carers. We also need to catch up with the Germans when it comes to Green technology instead of importing solar panels etc. from them.

    I think many people are aware of the tax breaks the Tories have given to millionaires and find this grossly unfair, so this is another point that needs to be emphasised and repeated until it’s drummed home. After all, there are far fewer millionaires than the rest of the population, so this has to be a vote winner!

    I do hope Labour will put an end to austerity and that saying so will win them the election.

  2. It seems ed talk is bit of the others talk ed b but austerity wasnt for the elite they haven’t suffered one bit but the poor have paid that price for the rich not to suffer austerity you bang on about its if the banks wernt propt up by the poor it would have been the rich that suffered austerity but then it wasnt to be you sais labour held the country in good stead before they lost out to this lot then lets show the rest that this lot lied lied lied about it all only helping their rich mates to mint more monies sadly with blairites left in the party it isnt going to work has they want to protect their rich friends get rid of them start to build labour has it should be a party for those ninety nine percent who aint rich then perhaps we can build britain back to were jobs paid a decent wage and one didnt need to beg jeff3

  3. Typically I’ll have to completely agree with Jeffry Davies.

    You say all that of course you do; but once again Miliband and co are singing a very different tune indeed.

    Miliband entirely surrounded with, (many people would use the expression, has been, “captured,” by, or, is in thrall to,) the sad and moribund detritus of the still massively virulent and toxic Blair legacy; led by this country’s most unpopular public school boy, (a man complete non less with the added credential of having a brother employed in merchant banking,) the odious and sticky fingered Ed Balls.

    I actually took the time to read the full text of what the media are now rather euphemistically calling Ed Miliband’s, “fightback,” speech. It was pants; vapid, meaningless and patronising all in the same breath..

    For me Blair and his fellow travellers, (Balls, Milliband, Cooper, Umma, Burnham, even Alan Johnson and co,) still exemplify everything that is modern British politics at it’s absolute worst, in exactly the same way that people like Adolf Eichmann once did for many people involved in the Nuremberg war trials; middle class, middle brow, middle management, and completely without scruple, compassion remorse, guilt or shame.

    Men and women once described as exemplifying, “The sheer banality of evil.”

    I don’t seriously expect politicians to be paragons of virtue or living saints; I do expect from them, reasonable honesty, common sense and a modicum of decorum, (personal, sexual and financial,) people more or less like me, (but perhaps on a particularly good day.)

    What were being offered is the same party, (now being run as little more than political franchise for hire,) organisation and people that failed so conspicuously in Rochdale, Rotherham, Birmingham and at Mid Staff etc, and which initiated most of the vile policies for which the Tories are now and quite rightly so, being damned.

    Then there the also threat of the Great Charlatan himself, still lurking and muttering in the shadows like something nasty and unpleasant.

    As I’ve commented here previously, I’m still looking and increasingly desperately for any excuse at all to vote Labour at the next election, but so far, nothing springs to mind.

  4. But sadly nothing on the tories ruling befor it seems they dont want you to now this I dislike blair and brown for whot they did but they did run a tight ship better than their bigger brothers the torys hum I wonder do they like the truth of it you bet they dont otherwise the plebs would be baying jeff3

  5. David Gould:
    The definition given on your own link is:
    Quote: “What is the deficit? When the ONS talks about the deficit, they take a simple measure – the gap between what’s coming into the government in taxes and receipts versus what’s being spent. Most commentators look at net borrowing as the deficit figure, because it includes investment spending.”

    This is why austerity isn’t working, as due to Tory policies, some people have been given generous tax breaks whereas others aren’t earning enough to pay much tax (if any), so the amount of tax that’s required isn’t being generated.
    Businesses have suffered due to “lack of demand” which is due to so many people not being able to afford to buy anything bar their bare essentials (some can’t even afford these). So tax receipts from businesses have also dwindled. Many people also require welfare payments for unemployment or to make up for their poor wages, which also adds to the deficit.

    According to the graph on your own link, the Tories ran a deficit from before 1980 all the way through to 1996 (with the exception of 1988-9 when they had a very small surplus). In 1997 Labour halved the deficit they had inherited and continued in surplus until 2001. In the run up to the global crash (which was definitely NOT Labour’s fault!) they then ran a much smaller deficit than the Tories previously had in the 6 years prior to losing power (28.46 v 37.12).

    So the main point Mr Meacher made is entirely valid, i.e. that despite the Tories “continually lambasting Labour for leaving behind an economic mess” it’s clear that, on balance, over the last few decades the Tories have mismanaged the economy whereas Labour has managed to improve it.

    Labour also managed to run the economy well, without inflicting so much pain on the poorest and most disadvantaged in our society.

    I also remember Labour Chancellor Roy Jenkins inheriting a deficit from the previous Tory government and turning it into a surplus in the 1960s.

    Oh, and it was Norman Lamont, a Tory Chancellor of the Exchequer, who was splashed all over the papers because of an unpaid wine bill due to problems with his credit card.

    I know which party I’d prefer to have running the economy!

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