I spent much of yesterday marshalling my own thoughts on the consequences of the latest GDP figures (here is the link to my column) — not good, since you are asking. In the course of the day, I managed to speak with shadow chancellor, Ed Balls, about his views on the data and, more generally, on the coalition’s economic strategy.
Ed was on robust form as ever and I thought I’d share some of his insights below. I can’t do better than to quote him verbatim.
The outgoing head of the CBI, Richard Lambert, captured it well when he said: “Politics appears to have trumped economics on too many occasions over the past eight months.” There is no doubt that George Osborne is a highly skilled political strategist. But he is making the classic mistake of the past 100 years in believing that you can impose a political strategy on the British economy. Cutting too far and too fast may make political sense for the Tories but it simply isn’t working economically.
He then went on to suggest that this has all been drawn directly from Margaret Thatcher’s playbook.
The political strategy he is implementing is straight out of Margaret Thatcher’s 1980s manual: impose as much pain as you can straight after the election, raise taxes, cut spending, slash benefits, make people feel lucky to have a job, build up your war chest and then cut taxes just before the election, hope to win a majority and start all over again.
He is following Mrs. Thatcher’s strategy to the letter — right down to the immediate hike in VAT, even if it breaks a pre-election promise. But this strategy is irresponsible and dangerous. Two decades ago, our country paid a very high price because of the economic mistakes of the 1980s recession and the years of slow growth and rising unemployment that followed. Manufacturing capacity was lost permanently. A whole generation of young people saw their lives blighted by long-term unemployment.
Our society was divided, child poverty soared and our infrastructure decayed. Today, we see policies that are hitting women harder than men — and hitting families with children hardest of all. A standard-of-living squeeze, which will choke off growth. And we have seen growth flatline in the past six months, compared to growth of 1.8 per cent in the previous six months, before George Osborne tore up Labour’s plan to get the deficit down in a steadier way.
You can’t get the deficit down without strong growth, with people in work and paying taxes. So when I hear Osborne refuse even to countenance the idea of putting jobs and growth first, I can see no economic judgement at work at all — just a political gamble with the nation’s economy.
The shadow chancellor’s comments stand in sharp contrast to the Treasury’s bizarre claim, repeated by Osborne and Cameron, that the data release was “good news”, as the economy had “returned to growth”, when it clearly has not. It’s a strange old world when the only “positive” news that could be found was that sterling strengthened against the dollar and the euro, because some in the markets had priced in an even worse outcome. There are likely to be even worse days ahead.
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