On every test George Osborne set himself he’s failed – my Times article

For a Chancellor of the Exchequer to make a triumphalist and self-congratulatory speech is always risky, even when your economic plan has worked. Making that speech when your plan clearly hasn’t worked seems to me to be deeply foolish.

No wonder, then, that even ardent Conservative supporters were a little troubled yesterday by George Osborne’s brazen boast that his policies have been a success. For ordinary working families across Britain his words will have sounded complacent and out of touch.

Prices have now risen faster than wages for 37 of the 38 months since the general election. Working people are on average £1,500 a year worse off than in 2010. And two quarters of economic growth — welcome as they are — cannot undo the damage of three years of flatlining.

Of course, the next election will largely be fought on the future: which party is trusted to deliver growth and rising living standards for the majority, not just the few benefiting from the top-rate tax cut. But if the Chancellor wants to have a debate about the last three years, then I say bring it on.

Back in 2010 there was a recovery taking hold. The economy grew by almost 2 per cent in the first three quarters of that year, unemployment was falling and the deficit was coming in lower than forecast. But Mr Osborne gambled that immediate tax rises and deeper spending cuts would secure recovery and get the deficit down. I warned that, with a global hurricane brewing, the opposite was more likely to happen.

Three years on, it is clear to almost everyone that on every test the Chancellor set himself, he has failed. Yesterday’s rather desperate speech cannot airbrush out the past.

Mr Osborne expected growth to accelerate and our economy to have grown by 6.9 per cent by now. But the recovery was choked off and over that period our economy has grown by just 1.8 per cent. The result is that the central purpose of his economic policy — to balance the books in 2015 — is now in tatters. Slow growth means deficit reduction has stalled and the triple-A credit rating has been lost. The Chancellor was expecting the deficit to have fallen by now to £60 billion. It is stuck instead at £120 billion. And the national debt is now forecast to keep on rising until 2017.

Yesterday the Chancellor tried to claim that the failures of the past three years are nothing to do with him and all the fault of global factors beyond his control. But his arguments do not stack up. Since the autumn of 2010, we have seen one of the worst growth performances in the G20. Only Japan and Italy have fared worse, while Germany has grown twice as fast and the US more than three times more than the UK. If the last three years of flatlining growth are simply to do with external factors, then why has Britain done so much worse than other countries?

Our economy was always going to return to growth at some point. But even those of us who were pessimistic about the ability of our economy to withstand the fiscal hit that the Chancellor would throw at it did not expect the economy to flatline and underperform for as long as it has.

The question now is how much long-term damage has been caused, and how long it will take to catch up. We need 1.4 per cent growth each quarter between now and the election to regain the ground lost since 2010.
But that will now be harder to achieve because lost business investment and high long-term unemployment means our economy will now be permanently weaker. This failure will mean difficult decisions on spending for the next Labour government.

With stock markets jittery around the world and bank lending to small firms still falling here in Britain, it is foolish to take growth for granted. That is why I continue to agree with the IMF, which has urged the UK to act now to support recovery by bringing forward £10 billion of infrastructure investment. This would allow us to build 400,000 affordable homes, create more than half a million jobs and make our economy stronger and more balanced for the long term.

And as Ed Miliband will say today at the TUC, we need a recovery that benefits everyone, not just a few. That is why Labour wants to help to make work pay by introducing a lower 10p starting rate of tax, paid for by a mansion tax, and to repeat the tax on bank bonuses to pay for a compulsory jobs guarantee for young people.

The next general election will be won by the party with the policies to secure a strong and fair recovery that works for the many and not just a few. Not complacent boasts from a Chancellor whose plan has failed and left working people paying the price.

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Posted September 9th, 2013 by admin