Osborne age of austerity will hit middle income families

by | Feb 25, 2010 | Articles, Section: Article | 0 comments

Osborne told his audience: “A credible plan is not really credible unless you’re prepared to make a start on it this year”. An interesting definition of credible. I would argue that a plan is only credible if it includes some detail on how it is going to be achieved and in what time scales. So far the Conservatives have said they will cut the child tax credit and child trust fund, review the highest public sector pensions and the retirement age, and, of course, that huge money saver, putting up the price of a portion of chips in the House of Commons. The first two of these cuts might save £625 million. The others are not costed, and no further detail was provided last night. At the same time Osborne has been, at best, ambivalent about the tax increases introduced by Labour while proposing two tax cuts that would further increase the deficit – an increase in the inheritance threshold to £2 million, benefitting the richest 3,000 estates in the country and a tax cut for married couples. Osborne’s age of austerity seems to be austerity for families on middle incomes who rely on public services and an age of tax cuts for the wealthy. The budget deficit will be £178billion this year. Given the lack of substance last night, Osborne has a long way to go if he wants to be taken seriously on his deficit reducing credibility.

As well as his calls for a plan, Osborne said that his “aim will be to eliminate the bulk of the structural current budget deficit over a parliament”. I, for one, am not sure what the economic definition of ‘the bulk’ is. But, I assume that Osborne also wants to eliminate the cyclical deficit too as the economy recovers. Although given the serious risk that Osborne’s slash and burn approach would, if implemented, send us back in to recession, maybe he is saying that he will eliminate the structural, but not the cyclical deficit after all.

The important point is this. Osborne thinks he’s going to be chancellor in three months’ time. Being chancellor requires making tough decisions and the public, investors and business want to know that the person in charge of our public finances knows what he is doing and where he wants to go. Osborne went on at great lengths last night about creating an Office of Budget Responsibility to tell us all about the public finances. That’s all well and good, but we already know what the deficit is going to be this year and have Treasury projections for the future path of the deficit and government debt. Creating a quango to tell us the facts doesn’t mean that you don’t need to make decisions. Osborne seems to think that credibility is about institutions rather than decisions. It isn’t.

Contrast the Labour and Conservative approach. Alistair Darling has said that the budget deficit will be halved in four years, achieved through a combination of tax increases, spending cuts, and economic growth. The cuts will start next year, not this year, because, as the IMF reiterated yesterday, there is a risk that cutting now would jeopardise the fragile economic recovery. Nobody is being ‘complacent’ about the deficit, as Osborne asserts. But, Labour are not being complacent about the economic recovery or jobs either. You may not agree with Labour’s approach, but at least we know what it is.

Reducing ‘the bulk’ of the structural deficit is not the same as a plan, and the British public know that. That’s why the polls have narrowed – so close to an election people are demanding some substance to back up the spin that Cameron and Osborne have perfected. After Osborne’s Mais Lecture we still don’t know what the Conservatives’ economic strategy would be and that’s not good enough.

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Osborne age of austerity will hit middle income families

by | Feb 25, 2010 | The Economy | 0 comments

Osborne told his audience: “A credible plan is not really credible unless you’re prepared to make a start on it this year”. An interesting definition of credible. I would argue that a plan is only credible if it includes some detail on how it is going to be achieved and in what time scales. So far the Conservatives have said they will cut the child tax credit and child trust fund, review the highest public sector pensions and the retirement age, and, of course, that huge money saver, putting up the price of a portion of chips in the House of Commons. The first two of these cuts might save £625 million. The others are not costed, and no further detail was provided last night. At the same time Osborne has been, at best, ambivalent about the tax increases introduced by Labour while proposing two tax cuts that would further increase the deficit – an increase in the inheritance threshold to £2 million, benefitting the richest 3,000 estates in the country and a tax cut for married couples. Osborne’s age of austerity seems to be austerity for families on middle incomes who rely on public services and an age of tax cuts for the wealthy. The budget deficit will be £178billion this year. Given the lack of substance last night, Osborne has a long way to go if he wants to be taken seriously on his deficit reducing credibility.

As well as his calls for a plan, Osborne said that his “aim will be to eliminate the bulk of the structural current budget deficit over a parliament”. I, for one, am not sure what the economic definition of ‘the bulk’ is. But, I assume that Osborne also wants to eliminate the cyclical deficit too as the economy recovers. Although given the serious risk that Osborne’s slash and burn approach would, if implemented, send us back in to recession, maybe he is saying that he will eliminate the structural, but not the cyclical deficit after all.

The important point is this. Osborne thinks he’s going to be chancellor in three months’ time. Being chancellor requires making tough decisions and the public, investors and business want to know that the person in charge of our public finances knows what he is doing and where he wants to go. Osborne went on at great lengths last night about creating an Office of Budget Responsibility to tell us all about the public finances. That’s all well and good, but we already know what the deficit is going to be this year and have Treasury projections for the future path of the deficit and government debt. Creating a quango to tell us the facts doesn’t mean that you don’t need to make decisions. Osborne seems to think that credibility is about institutions rather than decisions. It isn’t.

Contrast the Labour and Conservative approach. Alistair Darling has said that the budget deficit will be halved in four years, achieved through a combination of tax increases, spending cuts, and economic growth. The cuts will start next year, not this year, because, as the IMF reiterated yesterday, there is a risk that cutting now would jeopardise the fragile economic recovery. Nobody is being ‘complacent’ about the deficit, as Osborne asserts. But, Labour are not being complacent about the economic recovery or jobs either. You may not agree with Labour’s approach, but at least we know what it is.

Reducing ‘the bulk’ of the structural deficit is not the same as a plan, and the British public know that. That’s why the polls have narrowed – so close to an election people are demanding some substance to back up the spin that Cameron and Osborne have perfected. After Osborne’s Mais Lecture we still don’t know what the Conservatives’ economic strategy would be and that’s not good enough.

Submit a Comment