Well, it is official now, the country has lurched into a double dip recession. Not since the 70’s have we seen such an event, or such a gloomy long term economic outlook. Of course those of us who live in the real world (unlike certain posh boys who don’t even know the price of milk) have known that we’ve been in recession pretty much since the day the Tory cuts started to bite.
While the Tory’s will try to blame labour for this double whammy recession, but the Torys are clearly at fault here. Indeed I would pin the bulk of the blame for the financial crisis on the deregulation undertaken by “the” Thatcher. The biggest mistake that labour made was that they were too chickshit scared of old labour name calling that they didn’t do the sensible thing and reverse these Tory polices.
As I’ve regularly pointed out in this column, yes we need to get the deficit down, but there’s a right way and a wrong way to go about doing this. Certainly austerity and cuts have to be part of any solution. But you need to cut things that are cut-able (i.e. that won’t cause severe economic hardship) and the cuts need to be timed appropriately. Cutting too fast and too hard, will have negative economic effects (i.e. lots of former civil servants on the dole, no longer paying tax or paying their rent/mortgages). Not least of those effects is the risk that everyone (both people and company’s), fearful that they’ll be next for the chop, stops or puts off major spending decisions (buying a house, ordering new machinery, hiring a new employee). This causes the brakes to come on to the economy, leading to a recession, which leads to reduced tax receipts and the deficit going up not down!
Casing point, if you’re on the motorway and it starts to get foggy, you won’t sit on your brakes in the the middle lane? No, you’d slow down gradually and make your way over to the outside lane. But with Osborne in the driving seat, that’s what we’ve done with the economy and got rammed up the arse by a truck for our trouble!
This is precisely what has happened in the EU, the IMF and the Germans forced various European governments to cut spending far too quickly and far too deeply, worsening an already dire crisis, nevermind the democratic and social implications of this policy. Had they taken a more longer term view, its likely many of the trouble eurozone economy’s would now be in recovery. I know people in Ireland who say, they’d love to start up a business, or buy a house but they fear what’s around the next corner, and are therefore sitting on any cash…or indeed they’ve transferred their cash out of the eurozone altogether, just in case it implodes!
Similarly the Tory cuts in Britain have slowed down the economy, undoing Gordon Brown’s best efforts and pushing us back into recession. For example, the Torys cut the subsidy to solar energy installers. The result? Hundreds laid off in this sector (they had up till then been recruiting heavily), and many major capital projects cancelled. Now while the Torys will claim they had to cut the subsidy, as solar panels have become increasingly cheap (and ultimately I would argue the industry need to assume one day it will have to live without subsidy), there is like I said, a time and a place. Phasing in such cuts over a lengthy time period would have ensured a soft landing for both the solar industry and exchequer. Instead, Osborne effectively killed off growth in this industry. Of course this may have something to do with pressure from the nuclear lobby, who fear that if renewable energy keeps growing at the current pace, there will be scant if anything much left for their (French built) reactors to do.
Personally, I’ve been humming and hawing about buying a house for sometime, but one thing that puts me off, is that I don’t know what the Tory’s have in store for us next. If there is a risk of me ending up unemployed, I don’t want to be paying a mortgage. If house prices take another nose dive, I don’t want to be left with negative equity.
And I’m quite sure many others reading this can come up with their own examples about how spending decisions were deferred or put off by themselves or employers.
Of course, we can’t cut our way out of a deficit crisis. In addition to some reasonable austerity measures, taxes have to be raised to compensate. Naturally those who’ve done well out of the boom, such as the ultra-rich, should pay the bulk of these new taxes (see my article the Patriot Tax for more). However, instead Osborne gave the mega rich a tax cut. Indeed, as I commented at the time of the last budget, it included few if any major new taxes, aside from one on Pasties (hint to Osborne, contrary to what you’re Bullingdon buddies think the working class don’t eat that many pasties for such a tax to solve the deficit). Key tax loop holes that benefit the landed gentry, such as the slipper farmers one were left wide open.
As our entry into recession shows, this Tory mantra that you can cut you’re way to a better tomorrow is simply not true. This blows away a founding myth of neo-liberal economic policy, and the political right.
Furthermore, it demonstrates that the economic policy of the present Tory government, while it might provide the illusion of deficit reduction, does no such thing. The Torys don’t care about the deficit (as I commented on before). All the present government is seeking to achieve is cuts to public services that do not benefit toff’s like them, while ensuring their rich upper class buddies pay even less of a share of the UK’s taxes as they do now. In essence its little short of class warfare!