The hundreds of thousands of teachers, nurses, firemen, students, families, environmentalists, and political activists who took to the streets of London on Saturday did so to express their support for an alternative to the failing economic policies of the Conservative-Liberal Democrat (“Con Dem”) Government.
Last year, Chancellor of the Exchequer George Osborne announced an £83 billion programme of public spending cuts — effectively speeding up the process of deficit reduction announced by the previous (Labour) Chancellor Alistair Darling.
Since then, the British economy has begun contracting again, unemployment has grown, and the credit ratings agencies have warned that slow growth could undermine Britain’s triple-A credit rating. To compound this, new research shows that rising inflation combined with losses to tax credits and universal entitlements mean that middle income families are set to lose 5 to 7 per cent of their disposable income next year.
But Osborne’s second Budget last week did nothing to moderate the pace of deficit reduction. Instead, he adopted the failed Reaganomics policies of the past including tax cuts for big business, cuts to employment protections, and — at odds with their claim to be the “greenest government ever” — a reduction in fuel duty. Despite dubbing his Budget a ‘Plan for Growth,’ the independent Office for Budget Responsibility judged that growth would be slower in 2011 and 2012 and that unemployment would be 200,000 higher than under previous estimates.
The cuts are rapidly losing public support with the polling agency YouGov finding that, “The proportion who feel it is good for the economy has fallen from 53% to 39% … Similarly those who feel it is being done fairly has fallen from 45% to 31%.” So what is the alternative? Labour’s shadow Chancellor, Ed Balls, writes for today’s Daily Mail:
There is a better way. We would be halving the deficit steadily over four years and putting jobs and growth first because getting the economy moving again and more people into work is the best way to get the deficit down.
Given the low cost of debt in the UK, key to this alternative is a properly funded National Investment Bank of the kind proposed by respected economists including Robert Skidelsky, Martin Wolf, and Gerald Holtham. And as well as slowing the pace of public spending cuts, the bankers that caused the crisis should make a greater contribution. The IMF has called for a trebling of the Government’s bank levy while an extension of the one-off bankers’ bonus tax would be a fair outcome.