‘Markets understand the need for more public investment in infrastructure.’ No, this is not a quotation from John Maynard Keynes. Neither is it a quotation from Paul Krugman. Remarkably, it is a quotation from an editorial in The Times on 26 January 2013. This is significant. The Times, which has been fairly positive towards the coalition government, went even further: ‘The government has relied so far on a mix of very loose monetary policy allied to tight fiscal policy. It hoped that cutting spending would gain the confidence of financial markets. That in itself, through the medium of low market interest rates, would help boost growth. The strategy is failing.’
For too long the coalition government has had it easy on the economy. It has been its excuse for excessive cuts in public spending across the board. Time and again, it has got away with pretending that household debt and national debt are one and the same, summed up in the economically misleading phrase of ‘the nation’s credit card’ which the chancellor George Osborne claimed the previous Labour government had spent to the maximum on. The Tory-Liberal Democrat line that the way out of a debt crisis is not to borrow more is being shown for the complete fallacy that it is.
The shadow chancellor, Ed Balls, has been right all along that the government has no strategy whatsoever for growth, and, nearly three years after taking office, the economy is stagnating. The government’s own austerity rhetoric is causing its own downfall. It is quite obviously discouraging consumers from spending. The first ‘austerity chancellor’, Stafford Cripps, who served in the Attlee government from 1947-50, used such language because, to turn around the balance of payments, he needed people to live spartan lifestyles, with tight rationing and a ban on foreign travel. That same rhetoric now is totally misguided.
Ironically, the one large long-term infrastructure project the coalition government is willing to commit to, High Speed Two, is the subject of much controversy among the rural Conservative Associations whose areas it cuts through. Beyond that, however, the chancellor has little to offer anyway. He has rigidly stuck to his so-called ‘Plan A’ even when it is obvious that it is failing on its own terms. Britain’s triple-A credit rating, so prized by him and the prime minister, is in danger of being downgraded. Using its maintenance as justification for the initial austerity binge now looks like a wafer-thin argument.
Throughout the 20th century, the Tories always claimed that they were the party of economic competence. Their modern-day equivalents are proving that they are precisely the opposite. Unfortunately, working people all over the country are paying the price, with job losses and business failures. Standards of living are falling, and people are feeling the pinch. This government has no answers, and the Liberal Democrat claim that their central purpose for being in coalition – to save the economy – rings hollow. The government is also running out of excuses. Ed Miliband’s riposte to the inaccurate ‘credit card’ metaphor turned out to be telling: you cannot pay off the balance without having a job.
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Nick Thomas-Symonds is the author of Attlee: A Life in Politics published by IB Tauris (2010). He writes the Labour history column for Progress tweets @NThomasSymonds
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