Osborne’s economic strategy has failed on all three promises – my Tribune column

Two years ago George Osborne set out his economic mission to “deal with our debts, set our country on a brighter economic course and show that we are all in this together”.

How things have changed. It’s now clear that on all these three counts the government’s economic strategy has failed.

First, on securing a brighter economic future, the government inherited an economy which was starting to grow strongly with unemployment falling month by month. But the recovery was fragile and, as we warned, cutting spending and raising taxes too far and too fast risked choking off that growth – especially as a global economic hurricane was brewing.

The Chancellor thought he knew better, but ever since his spending review the British economy has flatlined and has now been pushed into a double-dip recession. And let’s be clear: this is a recession made in Downing Street by David Cameron and George Osborne’s economic mistakes.

For all the attempts to blame the eurozone for what’s gone wrong here, the fact is Britain would have been in recession over a year ago if it was not for the positive contribution to the economy of exports to Europe and the rest of the world. Despite the problems in the single currency area, France, Germany and the eurozone as a whole are not in recession.

After trying to blame the snow, the Royal Wedding and then the eurozone, the Chancellor has run out of excuses for why his reckless and unfair policies have failed.

Second, on George Osborne’s claim that ‘we are all in this together’, the Budget exposed that as an empty slogan.

How can it be fair to give a £3 billion tax cut to the richest people in the country – worth over £40,000 for just 14,000 millionaires – while raising taxes on pensioners, families, pasties, church repairs and even charity donations?

When a family with children will lose an average of £511 from changes coming into effect this year, the Budget’s tax cut for those on over £150,000 showed just how out of touch the government has become.

And finally, the voters were promised that all the pain of deeper spending cuts and bigger tax rises would be worth it to get the deficit down.

Many people who voted Conservative in 2010 were prepared to go along with short term pain for long term gain. But slow growth and rising unemployment, with more people out of work on benefit rather than paying taxes, has meant billions more borrowing.

The government won’t now meet its key pledge to balance the books by 2015 and is set to borrow an extra £150 billion – borrowing to pay for economic failure, rather than borrowing to invest in the jobs of the future.

So with the government’s economic credibility now damaged, people are increasingly asking whether there is a better way.

Labour’s plan for jobs and growth would help to get our economy moving again and be a fairer and better way of getting the deficit down. It includes a tax on bank bonuses to fund 100,000 jobs for young people and 25,000 affordable homes, a temporary cut in VAT, a one year national insurance holiday for small firms taking on extra workers, and bringing forward infrastructure investment to strengthen the economy for the long-term.

Of course we cannot duck tough decisions on tax, spending and pay. But a balanced plan that puts jobs and growth first would be more successful in getting the deficit down over a period of four or five years than this government’s failed experiment.

If we fail to act now, we will pay a very heavy long term price. Who now doubts that the depth of the 1980s recession caused long-term damage? Manufacturing jobs and companies lost – never to return. Small businesses bankrupted – losing skills, ideas and potential. Adults and young people out of work for years, leaving a permanent scarring effect on their skills, their health, and their ability to work again.

That is why we need a change of course now. A prolonged period of high unemployment and slow growth will make the deficit worse not better and cause damage well beyond the two years of economic failure we have already seen.

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Posted May 18th, 2012 by Ed