Thursday, 26 November 2015

Tory U-turns: a matter of relief, but with questions of responsibility and irresponsibility.

George Osborne, Chancellor of the Exchequer in Britain’s Tory government, produced a spending review on 25 November that does a complete U-turn on two heavily trailed and highly unpopular measures.

On his way to making those announcements, he repeated the claim he’s advanced frequently in the past, that any difficulties the economy is facing are the fault of the previous Labour government. As his opposite number, the Labour spokesman on Finance, John McDonnell, pointed out, there comes a time when you have to stop blaming your predecessors and take responsibility yourself. Osborne has, after all, been in office for five and a half years. Back in 2010, he set targets by which to judge him, in particular eliminating the structural deficit in government spending by 2015, which he spectacularly failed to hit.

At the 2015 election, he persuaded a large number of voters to give him another chance to hit his targets by 2020, though it again looks as though he won’t make it. Indeed, I believe one prediction we can make about 2020 with some confidence, is that the Tories’ woes will not have been vanquished, and they’ll still be blaming them on Labour. Osborne, it seems, is never responsible.

Part of his irresponsibility will be continued austerity policies. And that’s despite the two U-turns he has just announced.

The first U-turn concerned cutting tax credits, vitally necessary to a great many people for whom the Tories claim to speak – the striving working poor. The Opposition parties and others had mounted a major campaign against the cuts. It’s a measure of the opponents’ success that they were able to convince a great many voters of their case, and a further measure of that success that Osborne, wily politician with well-tuned antennae, simply abandoned his proposal.

Osborne: a wily politician but not so hot on responsibility
Secondly, he has dropped plans for further cuts to the police, a position made deeply unpopular by the Paris terror attacks.

Smart moves by a clever operator. And most welcome: I supported the opposition to both cuts, and it’s with sincere relief that I greet their abandonment. But there’s no reason to reduce the pressure on Osborne, all the same. For two reasons.

Firstly, it would be deeply foolish to think that he isn’t going to sneak them back in. That’s already happening with tax credits. That particular support is being phased out to be replaced by the new system of Universal Credit – which Osborne has already cut. So as people are moved over to the new arrangements, many will face cuts of £2000 a year and more – around 10% of their earned income – that we were complaining about before.

So the opposition has to continue. Otherwise all we’ll have bought is a little time.

And secondly, there’s the justification Osborne has used for his U-turns. The Office for Budget Responsibility has revised its forecasts of future government revenue. It is on the strength of those forecasts that the government felt it could afford to reverse its cuts. But the Guardian was absolutely right to quote the comment by the great American economist, J K Galbraith, on the subject:

The only function of economic forecasting is to make astrology look respectable.

George Osborne has taken a gamble on the economy turning out as the forecasters have suggested it might. Not on money in the bank, but on money he hopes to see flow in later.

Now I’m very much in favour of seeing growth stimulating increased government revenue, so that the constant cuts associated with austerity can end. But it strikes me that a government that is constantly quoting little common place phrases of everyday life as though they constituted analysis of an economic policy for a nation – “the country has maxed out its credit card”, “we inherited an economy on the brink of bankruptcy”, “we’re fixing the roof while the weather’s good” – would at least admit that it’s taken to spending today, money it has at best an uncertain chance of earning tomorrow.

It’s particularly striking in this context that the Office for Budget Responsibility doesn’t have a good track record in economic forecasting. Of course, it doesn’t have to take responsibility for any budgetary decision taken by the government.

But then, it seems George Osborne doesn’t feel the need to either. And he’s taking those decisions. With cheerful irresponsibility.

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