This isn’t 1997 and the Office for Budgetary Responsibility isn’t the Monetary Policy Committee.
The coalition government’s efforts to get independent legitimisation for their pre-determined cuts are very obviously just that. The much publicised downgrading of the growth figures rests largely, according to the OBR report, on a different estimation of the output gap – one of the more theoretical of the economic tools used to measure the spare capacity in the economy. This also affects the more pessimistic assessment of the size of the structural deficit.
These two sets of figures, combined with the well-known policy of the coalition to erase most of the deficit within one parliament, will drive the budget figures next week.
It’s a smokescreen.
So what do we do about it? Of course we know that cuts are needed, we would have made some ourselves. There’s nothing anti-Labour about managing public finances.
But we need to set down some markers:
• We need to challenge the theory. The Tories’ spending cuts will be based on some highly theoretical economic arguments. The OBR’s fan charts and its own admission of the high levels of uncertainty, do nothing to justify the belligerence with which George Osborne attacked the Labour record. Who wants their public services shattered because of someone’s theory about the size of the output gap?
• Clegg cannot justify savaging pensions on the basis of any new figures. There were warnings given from some of the economic think tanks to the treasury select committee during the last parliament that any tighter fiscal policy would necessitate some hard decisions on pensions.
• We need to support progressive tax policies. We cannot allow a hidden shift back from purse to wallet. Gordon Brown provided some real advances for women – tax credits with their childcare element and pensions credits with disability and carers elements to name but two. Ending winter fuel allowances or concessionary bus fares for the 60 to 65 year olds would hit women pensioners disproportionately. Erosion of access to working tax credits can also remove access to support for childcare – the Tories have never understood the childcare element of tax credits – and affect the ability of women to go to work and have careers.
And we need to recognise hidden risks to the poor. An increase in VAT would be a rapid revenue raiser for the government, but can be regressive, unless matched with more support for those on low incomes. The £10,000 flat rate tax threshold will not deal with child poverty unless there is recognition for dependents. (The only upside of the abolition of the 10p tax rate was that it allowed for a very substantial shift in funds to families with children).
The reasons the independence of the Bank of England was such a revolution was that the MPC was not just given the power to make independent forecasts. It was given a target – inflation – and a lever to control it – interest rates.
The Office for Budget Responsibility has been given no target and no power. It says that it judges it is reasonable to assume that “in the future the average error on our forecast will be zero.” However, even in this happy position, it will still not have the responsibility for making any decisions. That rests firmly around the necks of the coalition.
Of course it is a smokescreen, the Tories are using the deficeit to carry out their right wing ideologies. What else did we expect?
What pisses me off more is while these cuts ate taking place financiers are awarding themselves pay rises of 7% and bonuses have returned to the City but we in Labour are bleeting about Smokescreens if we are bleeting at all !
The only Labour politician who has emerged with any balls is Alistair Darling and before I vote for any candidate in the forthcoming leadership selection they have to perform against the Tories and in particular against these cuts. Enough of this Navel gazing.